What is Net Operating Income (NOI)?

A profitability calculation based on a property’s revenue-generating ability. It reflects the income from a property after operating expenses have been deducted but before tax.

Where have you heard about Net Operating Income (NOI)?

NOI is typically used in the real estate industry to assess the financial health of a property and determine whether it’s a good investment.

What you need to know about Net Operating Income (NOI).

To calculate NOI, you first work out the gross operating income, which is the potential income minus any losses from vacancies or credit loss. Deduct operating expenses from the gross operating income to get the net operating income.

The gross income will include rent and other charges such as parking fees and service charges. Operating expenses may include maintenance costs, insurance and other fees. NOI excludes financing or tax costs incurred by the investor.

Although NOI provides one measure of profitability, future cash flows, including the need for large repairs, should also be considered when making an investment decision.

Find out more about Net Operating Income (NOI).

NOI is most commonly used in real estate, however, a similar calculation of profitability can be used to assess a company’s financial health. Read our guide to earnings before interest, taxes and depreciation to find out more.