Net Operating Income (NOI)
Gross rental income less direct operating expenses, before financing and tax
What is Net Operating Income (NOI)?
Net operating income is the income a property earns after operating costs, before financing and tax. It shows how much the property itself produces.
It is the basis of property valuation and a key measure of how well a property is managed.
How this KPI is measured
- Function
- Operations & Supply Chain
- Sub-function
- Property Management
- Industry
- Real Estate
- Type
- Lagging
- Impact
- Financial control
- Unit
- $
- Measurement frequency
- Monthly / Quarterly
- Formula
- Gross rental income − Operating expenses (excluding debt service)
How to calculate it
Subtract operating expenses, excluding debt payments, from gross rental income.
For example, if a property earns 250,000 in rent and has 90,000 of operating expenses, NOI is 160,000.
Include vacancy allowances, and exclude mortgage payments, depreciation and capital spending.
Where it is used
Valuing property
Base value on income.
Judging management
Track performance.
Planning investment
Estimate returns.
How to improve it
Tips and common mistakes
- Exclude financing costs so properties can be compared.
- Be consistent about capital versus operating costs.
- Watch collection and vacancy.
More Operations & Supply Chain kpi library
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