When checking NOI what would an appraiser not examine?

Question

BlackTom AI · Accepted Answer

When evaluating Net Operating Income (NOI), the focus is on the property's current income and operating expenses to determine profitability. 
Option: Functional obsolescence
- This choice asserts that functional obsolescence would not be examined when checking NOI. In practice, NOI analysis concentrates on factors that affect income and operating costs such as current rents, occupancy or vacancy, operating expenses, management fees, and property taxes. Functional obsolescence refers to a loss in value due to outdated design or features, which impacts overall property value rather than the ongoing income/expense stream used to compute NOI. Therefore, it is not a component typically evaluated within the NOI calculation itself. 
- Understanding this helps explain why outros alternatives (if present) would usually be considered in value analysis rather than in the NOI computation. 
- In short, a key distinction is that NOI is an income- and expense-based metric, while functional obsolescence is a valuation concept tied to depreciation of usefulness, not a direct input to NOI.

R E 411 B Practice Quiz 2

When checking NOI what would an appraiser not examine?

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