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Investment Property Net Operating IncomeNet operating income, or NOI, is one of the main indicators that reveals the financial performance of a rental property. As a landlord and investor, it is of primary concern because it directly affects the financial health and stability of your landlord business.
The NOI of an investment property is one of the main factors that determine its market value and cash flow. So, with that being said, lets describe the specifics of NOI…
Definition of NOI
The NOI is income from the rental property after all of its operating expenses have been deducted, but before deducting income taxes and financing expenses (mortgage Interest and Principal Payments).
The formula for NOI is:
NOI = gross rental income - operating expenses
Example: An investment property produces gross rental income of $85,000 during the year. The operating expenses incurred for this property are as follows:
Operating expenses:
Maintenance = $10,000 Total operating expenses = $45,000 NOI = $85,000 - $45,000 = $40,000
For more in-depth information on how to use NOI, visit The Landlord's Library book collection. It contains all the high-value information you'll ever need on the subject of residential landlording.
Return from Net Operating Income to
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