Net Operating Income (NOI)

Net Operating Income Definition

Net operating income is a profitability metric calculated by subtracting a property’s operating expenses from its total revenues.


The net operating income (NOI) of a property is a comprehensive metric used for determining the profitability of income-producing real estate investments. NOI is nearly identical to EBITDA (the gold standard measure of a company’s profitability in the investment world), but is specific to real estate. Like EBITDA, it does not include the servicing of debt facilities (e.g. interest payments), income taxes, depreciation or amortization. Property taxes are included in NOI, as they are considered part of a property’s operating costs (unlike income taxes).

Because NOI includes all of a property’s income (this includes non-rental income, such as parking fees, vending machines etc) relative to operating costs, it gives a complete picture of a property’s profitability. Because of this, lenders will heavily consider a property’s NOI when underwriting against a property.


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