Rental income minus operating expenses, before mortgage payments and income taxes.
NOI is the purest measure of what a property earns from operations. It excludes financing on purpose so two buyers with different loans can still compare the same building.
Formula: NOI = Effective Gross Income − Operating Expenses
Example: $96,000 rent − $5,000 vacancy − $34,000 expenses = $57,000 NOI.
FAQ
What is NOI in simple terms?
NOI is the purest measure of what a property earns from operations. It excludes financing on purpose so two buyers with different loans can still compare the same building.
How is it calculated?
NOI = Effective Gross Income − Operating Expenses. Example: $96,000 rent − $5,000 vacancy − $34,000 expenses = $57,000 NOI.