NOI
Net operating income
Net operating income is what a property earns after vacancy and operating expenses but before any mortgage payment, depreciation or income tax. It describes the building, not the buyer. Two investors bidding on the same duplex compute the same NOI even though one pays cash and the other borrows 80%, which is exactly why every valuation metric is built on it.
NOI = effective gross income − operating expenses
Worked example
The standard deal collects $31,065 after a 5% vacancy allowance and spends $11,755 running the building, so NOI is $19,310.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The noi calculator computes this from your own numbers and shows the arithmetic expanded. Net operating income built line by line from gross scheduled rent, and why the mortgage never appears in it.
Related terms
- Effective gross incomeEffective gross income is gross potential income minus vacancy and credit loss.
- Operating expensesOperating expenses are the recurring costs of running the property: taxes, insurance, management, maintenance, utilities the owner pays, HOA dues, and a reserve for capital replacement.
- Vacancy rateVacancy rate is the share of available rental capacity that sits empty over a measured period.
- Occupancy rateOccupancy rate is the complement of vacancy: the share of available capacity that is occupied, so 95% occupancy and 5% vacancy describe one fact from two sides.
Back to the full glossary — 21 terms with formulas and worked examples.