Net Operating Income

Net Operating Income (NOI) shows how much money a property produces from its day-to-day operations after normal operating costs are paid. It is found by subtracting operating expenses from gross income because the result isolates the property’s operating performance before financing costs, taxes, and depreciation are considered. That makes it a useful measure of a property’s earning power on its own.

Use NOI when evaluating rental properties, comparing investment properties, or estimating how well a building is performing financially. It is especially helpful in real estate analysis before deciding on a purchase, refinance, or sale.

• Including mortgage payments in operating expenses
• Using net income instead of gross income in the formula
• Forgetting to subtract expenses such as maintenance, insurance, and management costs