Net Operating Income (NOI) is a fundamental financial metric in real estate investment that measures the profitability of an income-generating property. It represents the property’s total potential income from rents and other sources, minus the operating expenses required to maintain and operate the property. NOI is a key indicator of a property’s ability to generate income before accounting for financing and tax considerations.

Calculated by subtracting operating expenses from the property’s gross rental income, NOI provides investors with a clear understanding of the property’s cash flow potential. This metric is crucial for assessing the financial performance and sustainability of an investment property. A positive NOI indicates that the property is generating income, while a negative NOI signals potential financial challenges.

Investors use NOI for various purposes, including property valuation, financial analysis, and comparison of investment opportunities. It allows them to evaluate the income-generating potential of a property independent of its financing structure and tax implications. In summary, Net Operating Income serves as a foundational metric in real estate investment, offering valuable insights into the operational profitability of a property and aiding investors in making informed decisions.