Net Operating Income (NOI) is the difference between Total Income and Total Operating Expenses and is commonly used by real estate investors.
Net Operating Income (NOI) is a financial metric that is commonly used in real estate investing to evaluate the profitability of a property. It represents the income generated by the property after all operating expenses have been subtracted.
To calculate NOI, the total income generated by the property is subtracted from the total operating expenses. This includes expenses such as property taxes, insurance, utilities, repairs and maintenance, management fees, and other operating expenses.
Formula: Net Operating Income (NOI) = Total Income - Total Operating Expenses
NOI is an important metric because it helps investors understand the cash flow potential of a property. It can be used to evaluate the financial performance of a property and compare it to other similar properties in the same market.
In addition, lenders often use NOI to evaluate the ability of a property to generate sufficient income to cover its operating expenses and debt service. A higher NOI indicates a more profitable property that is more likely to generate sufficient cash flow to cover its debt obligations.
Overall, Net Operating Income (NOI) is a key metric in real estate investing that provides insight into the profitability of a property and its ability to generate income.
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