NOI (Net Operating Income)

Category: finance

A calculation used to analyze the profitability of income-generating real estate investments.

NOI equals all revenue from the property, minus all reasonably necessary operating expenses. It is the "pure cash flow" of the building before taking debt payments (mortgage) or capital expenditures into account. It is the foundational metric for valuing commercial property.

Common Examples

• The property’s NOI increased by 10% this year due to lower vacancy rates and reduced utility expenses.
• Investors use NOI rather than gross revenue to determine the actual operating efficiency of a commercial asset.