Net operating income (NOI)
A property's yearly income minus operating expenses, before mortgage payments and income taxes. It is the base number for cap rate and many commercial valuations.
Also called: NOI, net income
Related terms
The ongoing costs of running a property, such as taxes, insurance, repairs, management, utilities and HOA dues. They do not include mortgage payments or major capital improvements.
Net operating income divided by the property's price or value. It shows the yearly return before financing and is used to compare properties and estimate value.
A property's net operating income divided by its annual loan payments. A ratio above 1.0 means income covers the debt; lenders usually set a minimum, often around 1.2 to 1.25 for commercial loans.
A property's income and expense statement for the most recent 12 months, month by month. Buyers and lenders use it with the rent roll to judge actual net operating income.
Valuing a property based on the income it produces, often by dividing net operating income by a cap rate. It is used mainly for rentals and commercial property.