Net Operating Income (NOI)

Net Operating Income (NOI)

Net Operating Income (NOI) is a profitability formula that is often used in real estate to measure a commercial property’s profit potential and financial health by calculating the income after operating expenses are deducted. In other words, it measures the amount of cash flows that a property has after all necessary expenses have been paid.
NOI = Operating Income – Operating Expenses

The NOI is one of the most important formulas you should know, because it’s also used in so many other calculations (such as cap rate, debt coverage ratio, etc.).