What is NOI?
Net Operating Income (NOI) is the annual income generated by a property after deducting operating expenses. It's the most fundamental metric in commercial real estate.
What's Included in Operating Expenses?
- Property taxes
- Insurance
- Maintenance & repairs
- Property management
- Utilities (if owner-paid)
- Marketing & advertising
What's NOT in Operating Expenses?
- Mortgage payments (debt service)
- Capital expenditures (roof, HVAC, etc.)
- Depreciation
- Income taxes
Why NOI Matters
NOI is used to calculate cap rate, DSCR, and property value. It's the starting point for all investment analysis.