{"id":6764,"date":"2018-02-22T05:20:51","date_gmt":"2018-02-22T05:20:51","guid":{"rendered":"http:\/\/www.realestatewords.com\/?page_id=6764"},"modified":"2023-12-27T11:57:14","modified_gmt":"2023-12-27T11:57:14","slug":"net-operating-income","status":"publish","type":"page","link":"https:\/\/www.realestatewords.com\/net-operating-income\/","title":{"rendered":"Net Operating Income (NOI)"},"content":{"rendered":"

Net Operating Income Definition<\/h2>\n

Net operating income is a profitability metric calculated by subtracting a property<\/a>\u2019s operating expenses<\/a> from its total revenues.<\/p>\n

Explanation<\/h2>\n

The net operating income (NOI) of a property is a comprehensive metric used for determining the profitability of income-producing real estate<\/a> investments. NOI is nearly identical to EBITDA (the gold standard measure of a company\u2019s 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<\/a> payments), income taxes, depreciation<\/a> or amortization<\/a>. Property taxes<\/a> are included in NOI, as they are considered part of a property\u2019s operating costs (unlike income taxes<\/a>).<\/p>\n

Because NOI includes all of a property\u2019s 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\u2019s profitability. Because of this, lenders<\/a> will heavily consider a property\u2019s NOI when underwriting<\/a> against a property.<\/p>\n

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