Net Operating Income (NOI)

Definition:

Net Operating Income (NOI) is a calculation used to determine the profitability of an income-producing property. It’s the difference between a property’s gross income and its operating expenses, excluding any mortgage payments, taxes, or capital expenditures. NOI is a key metric in real estate investing because it helps investors assess the income generated by a property before financing costs.

🔍 Did You Know?
NOI is often used to calculate a property's value using the capitalization rate (Cap Rate). A higher NOI typically increases the value of a property.

Examples:

Example 1:
A rental property generates $100,000 in annual gross income. The operating expenses, including property management, maintenance, insurance, and utilities, total $40,000.
The NOI is:
[$100,000 - $40,000 = $60,000]

Example 2:
An investor owns an office building that brings in $500,000 in annual rental income. The operating expenses, which include property management, repairs, and utilities, total $200,000.
The NOI is:
[$500,000 - $200,000 = $300,000]

Why It’s Important:

NOI is crucial because it provides a clear picture of how much income a property generates after covering basic operating costs, but before financing and taxes. Investors use NOI to determine a property’s profitability and its potential to produce steady income. It’s also essential for calculating the Cap Rate, which is used to estimate property values.

Who Should Care:

  • Real estate investors evaluating the performance and profitability of rental properties.
  • Commercial property owners using NOI to assess the value and income potential of office buildings or multi-family properties.
  • Property managers responsible for maintaining profitability while managing operating expenses.

The open real estate company

Picket is on a mission to make real estate open, efficient, and fun for all

Try Picket
Picket Help Center
Picket Help Center Get practical, step-by-step answers to using Picket Quick start guide Create new account Add existing investments Invite team to collaborate Learn to use Picket Explore properties Buy & sell Analyze investments Research markets Team & Vendor Collaboration Create custom strategies More tutorials & content Picket Web ServicesOpen API Use Picket’

Create Your Picket Account

Real estate investors

Organize and grow your real estate portfolio

Create Account

Agents & local vendors

Claim your agent profile and get new leads

Claim Profile

Open {pricing} API

Already have your own system? No problem. Try Picket's API instead.

Developer Docs

Learn to use Picket