1. What is Net Operating Income?

Net Operating Income (NOI) is a key financial metric in real estate that represents the property's profitability before financing costs and taxes. It measures the property's ability to generate income from operations.

2. How Does the Calculator Work?

The calculator uses the NOI formula:

Where:

• \( \text{Rental Income} \) — Total income from property rentals (USD)
• \( \text{Operating Expenses} \) — All costs associated with operating the property (USD)

Explanation: NOI provides a clear picture of a property's operational efficiency by excluding financing costs, depreciation, and taxes from the calculation.

3. Importance of NOI Calculation

Details: NOI is crucial for real estate investors to assess property performance, determine property value through capitalization rates, compare different investment opportunities, and make informed buying/selling decisions.

4. Using the Calculator

Tips: Enter rental income and operating expenses in USD. Both values must be non-negative. The calculator will compute the net operating income, which indicates the property's operational profitability.

5. Frequently Asked Questions (FAQ)

Q1: What is included in rental income?
A: Rental income includes all revenue from tenant rents, parking fees, laundry income, vending machine revenue, and any other income generated by the property.

Q2: What are typical operating expenses?
A: Operating expenses include property management fees, maintenance and repairs, utilities, property taxes, insurance, landscaping, and other day-to-day operational costs.

Q3: What is a good NOI for real estate?
A: A good NOI depends on the property type and location. Generally, higher NOI indicates better performance. Investors often look for properties with NOI that provides adequate return on investment.

Q4: How is NOI used in property valuation?
A: NOI is used in the income approach to valuation through capitalization rates: Property Value = NOI ÷ Cap Rate. This makes NOI a critical factor in determining property worth.

Q5: Does NOI include mortgage payments?
A: No, NOI excludes mortgage payments, interest, depreciation, and capital expenditures. It focuses solely on the property's operational performance before financing costs.