What is the income (I) in this context?

• A. The annual net income that an income-producing property produces
• B. The down payment
• C. The selling price
• D. The amount invested

Answer: (A)

Income in this context means the annual net income the property earns from rents and other operating sources after operating expenses. This is the net operating income used in real estate metrics like capitalization rate and value, and it is before debt service (mortgage payments) and taxes. For example, if a property brings in $100,000 in gross rents and has $25,000 in operating expenses, the income is $75,000. This distinguishes it from costs like the down payment, the selling price, or the total amount invested, which are outlays rather than earnings.