CCIM Institute CI 101 – Financial Analysis for Commercial
Investment Real Estate Comprehensive Practice
Examination –2026 Update TOTAL QUESTIONS: 150
SECTION 1: NOI COMPONENTS & DEFINITIONS
(Questions 1-25)
1. What are the four basic components of Net Operating Income (NOI)?
A) Gross Rental Income, Property Taxes, Insurance, Utilities
B) Potential Rental Income, Vacancy and Credit Losses, Other Income, Operating Expenses
C) Net Rental Income, Capital Expenditures, Depreciation, Financing Costs
D) Effective Rental Income, Reserves for Replacement, Tenant Improvements, Lease
Commissions
ANSWER: B
RATIONALE: The four components are: 1) Potential Rental Income (PRI) – the maximum
rental revenue if 100% occupied at market rates; 2) Vacancy and credit losses – reduction for
expected non-occupancy or non-payment; 3) Other income – ancillary revenue (parking,
laundry, vending); and 4) Operating expenses – costs of running the property (utilities,
maintenance, insurance, property taxes).
2. What does PRI stand for?
A) Price Return Index
B) Potential Rental Income
C) Property Rent Index
D) Projected Revenue Indicator
ANSWER: B
RATIONALE: PRI is the maximum rental revenue a property could generate if it were 100%
occupied at market rental rates.
3. What does ERI stand for?
A) Effective Rental Income
B) Estimated Rent Index
C) Equity Return Indicator
D) Expense Ratio Index
ANSWER: A
RATIONALE: ERI (Effective Rental Income) is the rental income expected after subtracting
anticipated vacancy and credit losses from Potential Rental Income (PRI).
4. In what property/tenant scenario does PRI equal NOI?
, A) A multi-tenant office building with pass-through operating expenses
B) A retail center where tenants pay percentage rent
C) A property with one tenant under a long-term, absolute NNN (triple-net) lease
D) A residential apartment complex with all utilities included
ANSWER: C
RATIONALE: In an absolute NNN lease, the tenant pays all operating expenses, so NOI (PRI
– vacancy/credit losses + other income – operating expenses) effectively equals PRI.
5. What tool is used to determine a property‘s Potential Rental Income (PRI)?
A) Direct Capitalization
B) Discounted Cash Flow Analysis
C) Lease Analysis
D) Gross Rent Multiplier
ANSWER: C
RATIONALE: Lease analysis is used to determine a property’s PRI by examining the terms
and conditions of existing leases as well as current market rents.
6. Which of the following items are EXCLUDED from Operating Expenses in an NOI
calculation? (Select all that apply.)
A) Interest and principal on debt
B) Depreciation (cost recovery)
C) Capital expenditures
D) Property insurance
ANSWER: A, B, C
RATIONALE: Interest and principal on debt, depreciation, and capital expenditures are
excluded from operating expenses. These are expenses of ownership or capital in nature, not
recurring operating outlays. Property insurance is included in operating expenses.
7. True or False: Depreciation is included in Operating Expenses.
ANSWER: False
RATIONALE: Depreciation is a non-cash expense and is excluded from operating expenses.
It is deducted for tax purposes but not as an operating expense.
8. True or False: Principal and interest on debt financing are included in Operating Expenses.
ANSWER: False
RATIONALE: Debt service is an expense of ownership, not a property operating expense.
9. True or False: Capital Expenditures are included in Operating Expenses.
, ANSWER: False
RATIONALE: Capital expenditures are written off over a period of years (depreciated) and are
not considered recurring operating expenses.
10. True or False: Income Taxes are included in Operating Expenses.
ANSWER: False
RATIONALE: Income taxes are based on ownership structure and are not property operating
expenses.
11. True or False: Reserves for Replacement are included in Operating Expenses.
ANSWER: False
RATIONALE: Reserves for replacement are a budgeted set-aside for future capital
expenditures and are not part of annual operating expenses.
12. True or False: Tenant Improvements (TI) are included in Operating Expenses.
ANSWER: False
RATIONALE: Tenant improvements are capital expenditures amortized over time, not
operating expenses.
13. True or False: Repairs and Maintenance are included in Operating Expenses.
ANSWER: True
RATIONALE: Routine repairs and maintenance are recurring costs of operating a property
and are included in operating expenses.
14. True or False: Property insurance is included in Operating Expenses.
ANSWER: True
RATIONALE: Property insurance is a standard operating expense for any income-producing
property.
15. True or False: Utilities are included in Operating Expenses.
ANSWER: True
RATIONALE: Utility costs are recurring operating expenses.
16. What is the formula for Net Operating Income (NOI)?
A) NOI = Potential Rental Income – Vacancy & Credit Losses + Other Income – Operating
Expenses
B) NOI = Gross Rental Income – Property Taxes – Insurance
C) NOI = Effective Rental Income – Capital Expenditures
, D) NOI = Net Rental Income – Depreciation – Financing Costs
ANSWER: A
RATIONALE: This formula captures all revenue sources and deducts only operating
expenses, excluding financing costs and non-cash expenses.
17. Which of the following would be considered "Other Income" in an NOI calculation?
A) Laundry machine revenue
B) Vending machine income
C) Parking fees
D) All of the above
ANSWER: D
RATIONALE: Other income includes any ancillary revenue generated from the property
beyond base rent, such as laundry, vending, parking, and storage fees.
18. True or False: Leasing commissions are included in Operating Expenses.
ANSWER: False
RATIONALE: Leasing commissions are not operating expenses; they are included in Cash
Flow Before Taxes as they are one-time costs associated with securing tenants.
19. What is Potential Rental Income (PRI) also known as?
A) Gross Scheduled Income
B) Net Effective Rent
C) Base Rental Revenue
D) Market Rent Potential
ANSWER: A
RATIONALE: PRI is often referred to as Gross Scheduled Income – the total rent that would
be collected if every unit were occupied at the scheduled rental rate.
20. A property has Potential Rental Income of $500,000, vacancy and credit losses of $25,000,
other income of $10,000, and operating expenses of $200,000. What is the NOI?
A) $285,000
B) $300,000
C) $310,000
D) $275,000
ANSWER: A
RATIONALE: NOI = PRI – vacancy/credit losses + other income – operating expenses =
$500,000 – $25,000 + $10,000 – $200,000 = $285,000.
21. Which of the following is considered a "pass-through" expense in commercial leases?
Investment Real Estate Comprehensive Practice
Examination –2026 Update TOTAL QUESTIONS: 150
SECTION 1: NOI COMPONENTS & DEFINITIONS
(Questions 1-25)
1. What are the four basic components of Net Operating Income (NOI)?
A) Gross Rental Income, Property Taxes, Insurance, Utilities
B) Potential Rental Income, Vacancy and Credit Losses, Other Income, Operating Expenses
C) Net Rental Income, Capital Expenditures, Depreciation, Financing Costs
D) Effective Rental Income, Reserves for Replacement, Tenant Improvements, Lease
Commissions
ANSWER: B
RATIONALE: The four components are: 1) Potential Rental Income (PRI) – the maximum
rental revenue if 100% occupied at market rates; 2) Vacancy and credit losses – reduction for
expected non-occupancy or non-payment; 3) Other income – ancillary revenue (parking,
laundry, vending); and 4) Operating expenses – costs of running the property (utilities,
maintenance, insurance, property taxes).
2. What does PRI stand for?
A) Price Return Index
B) Potential Rental Income
C) Property Rent Index
D) Projected Revenue Indicator
ANSWER: B
RATIONALE: PRI is the maximum rental revenue a property could generate if it were 100%
occupied at market rental rates.
3. What does ERI stand for?
A) Effective Rental Income
B) Estimated Rent Index
C) Equity Return Indicator
D) Expense Ratio Index
ANSWER: A
RATIONALE: ERI (Effective Rental Income) is the rental income expected after subtracting
anticipated vacancy and credit losses from Potential Rental Income (PRI).
4. In what property/tenant scenario does PRI equal NOI?
, A) A multi-tenant office building with pass-through operating expenses
B) A retail center where tenants pay percentage rent
C) A property with one tenant under a long-term, absolute NNN (triple-net) lease
D) A residential apartment complex with all utilities included
ANSWER: C
RATIONALE: In an absolute NNN lease, the tenant pays all operating expenses, so NOI (PRI
– vacancy/credit losses + other income – operating expenses) effectively equals PRI.
5. What tool is used to determine a property‘s Potential Rental Income (PRI)?
A) Direct Capitalization
B) Discounted Cash Flow Analysis
C) Lease Analysis
D) Gross Rent Multiplier
ANSWER: C
RATIONALE: Lease analysis is used to determine a property’s PRI by examining the terms
and conditions of existing leases as well as current market rents.
6. Which of the following items are EXCLUDED from Operating Expenses in an NOI
calculation? (Select all that apply.)
A) Interest and principal on debt
B) Depreciation (cost recovery)
C) Capital expenditures
D) Property insurance
ANSWER: A, B, C
RATIONALE: Interest and principal on debt, depreciation, and capital expenditures are
excluded from operating expenses. These are expenses of ownership or capital in nature, not
recurring operating outlays. Property insurance is included in operating expenses.
7. True or False: Depreciation is included in Operating Expenses.
ANSWER: False
RATIONALE: Depreciation is a non-cash expense and is excluded from operating expenses.
It is deducted for tax purposes but not as an operating expense.
8. True or False: Principal and interest on debt financing are included in Operating Expenses.
ANSWER: False
RATIONALE: Debt service is an expense of ownership, not a property operating expense.
9. True or False: Capital Expenditures are included in Operating Expenses.
, ANSWER: False
RATIONALE: Capital expenditures are written off over a period of years (depreciated) and are
not considered recurring operating expenses.
10. True or False: Income Taxes are included in Operating Expenses.
ANSWER: False
RATIONALE: Income taxes are based on ownership structure and are not property operating
expenses.
11. True or False: Reserves for Replacement are included in Operating Expenses.
ANSWER: False
RATIONALE: Reserves for replacement are a budgeted set-aside for future capital
expenditures and are not part of annual operating expenses.
12. True or False: Tenant Improvements (TI) are included in Operating Expenses.
ANSWER: False
RATIONALE: Tenant improvements are capital expenditures amortized over time, not
operating expenses.
13. True or False: Repairs and Maintenance are included in Operating Expenses.
ANSWER: True
RATIONALE: Routine repairs and maintenance are recurring costs of operating a property
and are included in operating expenses.
14. True or False: Property insurance is included in Operating Expenses.
ANSWER: True
RATIONALE: Property insurance is a standard operating expense for any income-producing
property.
15. True or False: Utilities are included in Operating Expenses.
ANSWER: True
RATIONALE: Utility costs are recurring operating expenses.
16. What is the formula for Net Operating Income (NOI)?
A) NOI = Potential Rental Income – Vacancy & Credit Losses + Other Income – Operating
Expenses
B) NOI = Gross Rental Income – Property Taxes – Insurance
C) NOI = Effective Rental Income – Capital Expenditures
, D) NOI = Net Rental Income – Depreciation – Financing Costs
ANSWER: A
RATIONALE: This formula captures all revenue sources and deducts only operating
expenses, excluding financing costs and non-cash expenses.
17. Which of the following would be considered "Other Income" in an NOI calculation?
A) Laundry machine revenue
B) Vending machine income
C) Parking fees
D) All of the above
ANSWER: D
RATIONALE: Other income includes any ancillary revenue generated from the property
beyond base rent, such as laundry, vending, parking, and storage fees.
18. True or False: Leasing commissions are included in Operating Expenses.
ANSWER: False
RATIONALE: Leasing commissions are not operating expenses; they are included in Cash
Flow Before Taxes as they are one-time costs associated with securing tenants.
19. What is Potential Rental Income (PRI) also known as?
A) Gross Scheduled Income
B) Net Effective Rent
C) Base Rental Revenue
D) Market Rent Potential
ANSWER: A
RATIONALE: PRI is often referred to as Gross Scheduled Income – the total rent that would
be collected if every unit were occupied at the scheduled rental rate.
20. A property has Potential Rental Income of $500,000, vacancy and credit losses of $25,000,
other income of $10,000, and operating expenses of $200,000. What is the NOI?
A) $285,000
B) $300,000
C) $310,000
D) $275,000
ANSWER: A
RATIONALE: NOI = PRI – vacancy/credit losses + other income – operating expenses =
$500,000 – $25,000 + $10,000 – $200,000 = $285,000.
21. Which of the following is considered a "pass-through" expense in commercial leases?
