Which factor is NOT typically considered when calculating net operating income?

Net operating income (NOI) is a key metric used in real estate to assess the profitability of a property. It is calculated by subtracting all operating expenses from the total income generated by the property. When calculating NOI, several factors are taken into account.

Fixed expenses are those costs that do not change with the occupancy levels, such as property taxes and insurance. Variable expenses fluctuate based on the operational activity, such as maintenance and repairs, which can also affect the NOI calculation.

Market rent refers to the income that could potentially be generated by the property based on current rental market conditions. This aspect is crucial, as it establishes the income side of the NOI calculation.

Annual debt service, on the other hand, refers to the total amount of money required to pay the mortgage on the property, including both principal and interest payments. This figure is not included when calculating net operating income, as NOI focuses solely on the property’s operational performance, excluding financing considerations.

Thus, the correct factor that is not typically considered when calculating net operating income is annual debt service.