Net Operating Income (NOI)

Gross income minus operating expenses, BEFORE debt service.

Definition

NOI measures a property's earning power independent of how it's financed. It includes all income (rent, laundry, parking) minus all operating expenses (taxes, insurance, management, maintenance, vacancy) but explicitly excludes mortgage payments. This makes it useful for comparing properties with different financing structures.

Formula

NOI = Gross Rental Income - Operating Expenses

Operating Expenses include: property tax, insurance, management fees, maintenance, vacancy allowance, utilities (if owner-paid), HOA

Related Terms

Debt Service Coverage Ratio (DSCR)

Net operating income divided by debt payments — can the property pay its own mortgage?

Capitalization Rate (Cap Rate)

NOI divided by property value — the property's return if bought all-cash.

Vacancy Rate

Percentage of time a rental property sits empty between tenants.

Educational content only. Consult a CPA or attorney for advice specific to your situation.