Net Operating Income (NOI)
The annual income generated by an investment property after deducting all operating expenses but before debt service and taxes. NOI = Gross Income - Operating Expenses. It does not include mortgage payments, capital expenditures, or depreciation.
Key Points
- Understanding net operating income (noi) is essential for evaluating real estate investments
- This metric helps investors compare opportunities objectively
- Our Free Snapshot tool automatically calculates relevant metrics for any property
Related Terms
Cap Rate
Capitalization rate is the ratio of a property's net operating income (NOI) to its current market value or purchase price. It's used to estimate the potential return on an investment property, independent of financing. Formula: Cap Rate = NOI / Property Value × 100.
Debt Service Coverage Ratio (DSCR)
A measure of a property's ability to cover its debt obligations. DSCR = NOI / Annual Debt Service. A DSCR of 1.25 means the property generates 25% more income than needed to pay the mortgage. Lenders typically require DSCR of 1.20-1.25 minimum.
Learn More
Dive deeper into real estate investing concepts with our comprehensive guides.
Browse All Guides