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.

NOI is one of the most important calculations you’ll make in regard to any real estate investment. If you revisit Part I, Chapters 2 through 5 of this book, you’ll ...

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