What impact would an increase in the operational expenses have on the overall operating income?

An increase in operational expenses directly reduces the overall operating income. Operating income is calculated by subtracting operating expenses from gross income. Therefore, when expenses rise—whether from increased maintenance costs, higher utility bills, or any other operational costs—the total amount allocated for such expenses increases, leaving less income after these costs are deducted. Consequently, this leads to a decrease in the operating income, illustrating how closely operating expenses affect profitability.

Understanding this relationship is crucial for appraisers when evaluating property performance, as it influences the appraisal outcome and the perceived value of an asset based on its income-generating capabilities.