What Is Net Operating Income?
Net operating income is a property's total income from rent and other sources, minus operating expenses, before accounting for debt service (mortgage payments).
Formula
NOI = Gross Rental Income − Operating Expenses
Example
A property with $30,000 in annual rental income and $10,500 in operating expenses has an NOI of $19,500.
Why It Matters
NOI is the input used to calculate cap rate and is a core measure of a rental property's profitability independent of financing.