NOI Explained: Net Operating Income in Real Estate Investing
When you’re looking at a rental property, the rent number isn’t the whole story. What really decides if a deal is good or not is NOI, Net Operating Income, the actual profit a property generates after paying all operating expenses but before financing costs. Also known as operating income, it’s the number lenders and investors use to compare properties across cities, property types, and markets. It doesn’t care if you paid cash or took a mortgage. It doesn’t care about your personal tax rate. It just tells you: how much cash does this building make on its own?
Think of NOI like your car’s fuel efficiency. You don’t judge a car by how much gas it holds—you judge it by how far it goes on a full tank. Same with a rental property. A $3,000 monthly rent sounds great, but if property taxes are $800, insurance is $300, repairs hit $400, and you pay $500 for management, your NOI is only $1,000. That’s the real number. That’s what tells you if you’re making money or just covering costs. And it’s the same number used to calculate cap rates, which is how investors measure return without debt. Without knowing NOI, you’re guessing. With it, you’re making decisions.
NOI doesn’t include your mortgage payment, your personal income taxes, or depreciation. Those are finance and accounting moves, not property performance moves. If you’re comparing two buildings—one in Virginia with low taxes and one in Utah with high land costs—NOI levels the playing field. It shows you which one actually earns more from tenants, not which one has a lower loan payment. That’s why real estate agents and investors always ask for NOI before they even look at the price. And that’s why every post in this collection, from rental property profit to property cash flow, ties back to this one number.
You’ll find guides here on how to calculate NOI correctly, what expenses to include (and which ones to ignore), how it changes when you switch from long-term rentals to short-term lets, and why some markets deliver higher NOI even with lower rents. Whether you’re a first-time buyer in India wondering if a 2-room resale is worth it, or an investor looking at commercial spaces in the UK, NOI is the filter that separates noise from truth.
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- August 4 2025
- Archer Hollings
- 0 Comments