What is NOI (net operating income)?
Definition
Net operating income (NOI) is a property's gross rental income minus its operating expenses — taxes, insurance, HOA, management, maintenance and vacancy — but before mortgage payments, capital expenditures and income tax. It's the income the property itself produces.
Formula
NOI = Gross rental income − Operating expenses (excl. debt service)
Example
Worked example
Gross rent of $36,000/yr, operating expenses of $12,000/yr → NOI = 36,000 − 12,000 = $24,000/yr. (Example figures.)
How ReSharpe calculates this
ReSharpe builds NOI from the listing's real property taxes and HOA, realistic South Florida insurance, and a vacancy and management allowance you control — with gross rent calibrated to real closed leases. It then feeds NOI into cap rate and the full deal analysis.
Related: Cap rate · DSCR · Cash-on-cash
Frequently asked questions
- Does NOI include the mortgage?
- No. NOI is calculated before debt service (your mortgage). It also excludes capital expenditures, depreciation and income taxes. That's what makes it useful for comparing properties independent of how each is financed.
- What expenses are in NOI?
- Operating expenses: property taxes, insurance, HOA dues, management, maintenance, vacancy allowance and utilities you pay. Not the mortgage, not capex, not depreciation.
See these numbers computed on a real South Florida listing.
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