NOI and EBITDA are cousins: both strip out financing and taxes to reveal operating performance. NOI belongs to real estate; EBITDA to businesses.
Side by side
| NOI | EBITDA | |
|---|---|---|
| Domain | Income property | Operating businesses |
| Starts from | Rental income | Net income (adds back items) |
| Excludes | Debt service, income tax, capex | Interest, taxes, depreciation, amortization |
| Valuation use | Value = NOI ÷ cap rate | Value = EBITDA × multiple |
| Watch out for | Pro formas hiding vacancy/management | “Adjusted EBITDA” with generous add-backs |
Strengths of each
NOI — strengths
- Standard for appraisals and lending
- Direct input to cap rate and DSCR
EBITDA — strengths
- Comparable across capital structures
- Standard for business sale pricing
Worked example
A 12-unit building with $57,000 NOI at a 6.5% cap is worth ~$877,000. A plumbing company with $430,000 EBITDA at 3.5× is worth ~$1.5M. Same logic, different vocabulary.
FAQ
Is NOI just real estate EBITDA?
Close — the main practical difference is that NOI conventions also exclude capital reserves, while business buyers scrutinize capex separately.
Why do both exclude depreciation?
Because it is a non-cash accounting entry; both metrics aim at cash operating performance.