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Metrics
Net Operating Income (NOI)
A property’s annual income minus all operating expenses, before mortgage payments and capex.
Definition
NOI is the annual cash flow a rental property generates after operating expenses (taxes, insurance, property management, maintenance, vacancy reserve) but before debt service and capital expenditures. NOI is used to calculate cap rate and is the primary underwriting metric for commercial and rental real estate.
Example
Gross rent $24,000 − taxes $2,800 − insurance $900 − management $2,400 − maintenance $1,200 − vacancy reserve $1,200 = NOI $15,500.
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