CHAPTER 15Calculation 9: Net Operating Income
What It Means
Net operating income (NOI) is a property’s income after being reduced by vacancy and credit loss and all operating expenses. Mathematically, it is a property’s gross operating income less the sum of all operating expenses.
NOI represents a property’s profitability before consideration of taxes, financing, or recovery of capital. Perhaps easier is to think of it as the number of dollars a property returns in a given year if the property is purchased for all cash and if there is no consideration of income taxes or depreciation.