Investing, especially in real estate, involves the use of various financial metrics to assess the profitability and performance of an investment. One such critical metric is the Net Operating Income, commonly known as NOI.

What is Net Operating Income (NOI)?

Net Operating Income is a calculation used in real estate to measure the profitability of income-generating properties. It represents the annual income generated by a property after taking into account all income collected from operations, and deducting all directly associated operating expenses.

How is NOI Calculated?

The formula for Net Operating Income is:

NOI = Gross Operating Income – Operating Expenses

For instance, if a rental property generates an annual income of $50,000 and has operating expenses such as property management, repairs, maintenance, property taxes, insurance etc. totaling $20,000, the NOI would be:

NOI = $50,000 (Income) - $20,000 (Expenses) = $30,000

NOI does not include capital expenditures (major repairs or improvements that increase the property value), debt service (mortgage payments), or income taxes.

Why is NOI Important?

NOI is a vital metric for investors because it provides an accurate and clear indication of the operational profitability of a property, excluding the impact of financing and capital structure. It helps in valuing the property, comparing investment opportunities, and assessing the financial health of income-generating properties.

Here at Vyzer, we aim to give you the tools and insights to manage your wealth effectively. Our platform enables you to see a complete picture of your investments and understand crucial metrics like NOI, empowering you to make informed financial decisions with confidence.