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Net operating income (NOI) is used in the real estate market to determine the revenue that a property generates less operating expenses. NOI also determines a property's capitalization rate, or rate of return.
Real estate investors and lenders are primarily interested in a rental property’s NOI because it represents the amount of cash flow (or funds available) to pay the mortgage.
As a result, NOI impacts rental property market values, financing considerations, and a variety of real estate investment and holding period decisions.
A property may generate its revenue from rent, parking, utility submetering and servicing fees. A property's operating expenses include property maintenance fees, insurance, utility costs, property taxes and janitorial fees. These can be reduced with continuous commissioning.
In order to improve NOI, property
Net operating income (NOI) is simply the annual income generated by an income-producing property after taking into account all income collected from operations, and deducting all expenses incurred from operations.