Which expense is excluded from NOI?

Which expense is excluded from NOI?

• A. Operating expenses
• B. Depreciation
• C. Property management fees
• D. Maintenance

Answer: (B)

NOI shows how much cash a property generates from operating activities, so it includes actual cash expenses of running the property and excludes items that don’t involve cash in the period. Depreciation is a non-cash accounting deduction for tax purposes, representing the gradual write-off of the building’s cost, but it doesn’t represent an actual cash outlay in day-to-day operations. Because of that, depreciation is not included in NOI. The other items listed are real cash costs of operating the property (like maintenance or management fees), so they are part of NOI.

NOI shows how much cash a property generates from operating activities, so it includes actual cash expenses of running the property and excludes items that don’t involve cash in the period. Depreciation is a non-cash accounting deduction for tax purposes, representing the gradual write-off of the building’s cost, but it doesn’t represent an actual cash outlay in day-to-day operations. Because of that, depreciation is not included in NOI. The other items listed are real cash costs of operating the property (like maintenance or management fees), so they are part of NOI.