What is NOI?

Real Estate investing has a very long list of terms you need to know. And it seems like there are more abbreviations than you can count. One of the most important terms you need to know in real estate investing is the NOI, or the Net Operating Income.

The NOI is the result of calculating all the income a property generates and then deducting all the expenses that the property has, except debt service. So, this shows you how much income there is before you pay a mortgage or loan. If you do not have a mortgage or loan on the property, then this money you keep.

*One thing to note is the NOI does not include depreciation and is a pre-tax number.

You want your NOI to be as big as possible. The bigger the better! And if you see a negative NOI, then you need to be cautious. Hopefully you are getting a major discount if the property has a negative NOI.

The NOI is an important number because with it you will calculate other rates of return such as the cap rate.