1. What Is Net Operating Income?

Net Operating Income (NOI) is a financial metric that represents the total income generated from a property or business after subtracting all necessary operating expenses. It's a key indicator of profitability before financing and tax costs are considered.

2. How NOI Is Calculated

The NOI formula is straightforward:

Where:

• Total Revenue — All income generated from operations (rental income, service fees, etc.)
• Operating Expenses — All costs required to operate the property/business (maintenance, utilities, insurance, etc.)

Note: NOI excludes capital expenditures, income taxes, interest payments, and depreciation.

3. Importance of NOI

Details: NOI is crucial for evaluating a property's profitability, determining its value (through cap rate analysis), and comparing investment opportunities. Lenders and investors heavily rely on NOI when making financing decisions.

4. Using the Calculator

Tips: Enter your total revenue and operating expenses in dollars. The calculator will automatically compute your NOI. Ensure all numbers are accurate for proper financial analysis.

5. Frequently Asked Questions (FAQ)

Q1: What's included in operating expenses?
A: Typical operating expenses include property taxes, insurance, maintenance, utilities, management fees, and repairs. It excludes mortgage payments and capital improvements.

Q2: How is NOI different from profit?
A: NOI shows operational profitability before financing and taxes, while net profit accounts for all expenses including interest and taxes.

Q3: Can NOI be negative?
A: Yes, if operating expenses exceed revenue. This indicates the operation is losing money at the fundamental level.

Q4: How often should NOI be calculated?
A: Typically calculated monthly for active management and annually for financial reporting and valuation.

Q5: What's a good NOI margin?
A: This varies by industry, but generally, higher is better. In real estate, 40-60% NOI margins are common for well-managed properties.