Net operating incomeNOI
Gross rental income less direct operating expenses (rates, insurance, building management, maintenance), before debt service, depreciation, and capital expenditure.
Formula
WhereGross income is fully-let, market-rent income. Operating expenses are recoverable and non-recoverable opex.
Why it matters
NOI is the income an asset throws off after running costs. It drives cap rate, yield on cost, and stabilised value, which is to say it drives every income-asset feasibility (build-to-rent, hotel, childcare, retirement, healthcare).
Worked example
A 100-unit build-to-rent project with $4,200,000 of gross stabilised rent, plus $180,000 of ancillary income, less $1,160,000 of operating expenses.
NOI = $3,220,000.
Related terms
Connected ideas in the glossary.
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