What does "net operating income" (NOI) represent?

Net Operating Income (NOI) represents the income from a property after all operating expenses have been deducted, but before financing costs and taxes are taken into account. It is a crucial metric in real estate investment as it enables investors to assess the profitability of a property based on its operational performance.

NOI is calculated by taking the total income generated by the property (which includes rental income and any additional income from services) and subtracting the operating expenses, such as property management fees, maintenance costs, property taxes, and insurance. This measure reflects the cash flow that a property generates from its operations, making it a fundamental concept for evaluating investment potential and for comparing the performance of different properties.

In summary, net operating income serves as a key indicator of operational efficiency and helps investors make informed decisions about property investments.