From my understanding, NOI is calculated as follows: NOI = Total income - total operating expenses
I am finding some contradicting information regarding what should and should not be included in operating expenses. Most resources say do not include taxes, yet most resources say property taxes ARE operating expenses.
What am I missing? Thanks in advance.
Taxes are an operating expense because you cannot "operate" the property without having to pay property taxes. Mortgage payments are generally not considered an operating expense because different people have access to different financing, and some might pay cash, so a mortgage is not required to operate the property.
Yes, property taxes are part of your expenses. Perhaps you are confusing this with loan principal payments, which are not tax deductible. Also, as mentioned, loan payments are not part of the NOI calculation.
@Jonathan Giglio I think the taxes being referred to are income taxes. Property taxes are definitely an operating expense.