Net Operating Income (NOI)
Net Operating Income (NOI) is a measure of a property’s profitability, calculated by subtracting operating expenses from total revenue generated by the property. It excludes expenses like mortgage payments, capital expenditures, and taxes. NOI is commonly used in real estate to assess the performance of investment properties, helping investors determine the property's income-generating potential before financing costs.
Example
A real estate investor calculates the NOI of a rental property by subtracting operating expenses like maintenance and management fees from rental income.
Key points
• A measure of profitability for real estate properties, excluding financing and capital costs.
• Calculated as total revenue minus operating expenses.
• Used to assess the income-generating potential of investment properties.
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