Quick Definition

Net Operating Income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments, representing the total income a property generates minus all reasonably necessary operating expenses.

Formula

Examples

• 1A commercial property generates $500,000 in annual rental income and has operating expenses of $200,000. The NOI would be $300,000.
• 2An apartment complex earns $1 million from rents and incurs $600,000 in expenses like maintenance, property management, and taxes, resulting in an NOI of $400,000.
• 3A retail space has an annual income of $250,000 from leases and $50,000 in operating costs such as utilities and janitorial services, making the NOI $200,000.

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