NOI (Net Operating Income)
A rental property’s income after vacancy and operating expenses, before mortgage payments, capital expenditures, depreciation or income taxes.
NOI = gross operating income (rent collected after vacancy and credit loss, plus other income such as parking or laundry fees) minus operating expenses such as property taxes, insurance, repairs, management fees and utilities. It deliberately excludes debt service, capital expenditures and depreciation, since those depend on how a particular buyer finances and depreciates the property rather than on how the property performs operationally.
NOI is the input every income-property metric is built from: cap rate divides it by price, debt yield and DSCR compare it with the loan, and it is the numerator behind a property’s value in an income approach to appraisal.
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