NOI, or Net Operating Income, is how much money a property makes after all of its costs are taken into account. Property investors can use this metric to understand if their property is actually profitable. NOI is a critical metric for understanding a rental property profitability because it estimates the real dollar value of your investments.
\[ Gross \, operating \, income - Operating \, expenses = NOI \]
If a rental house brings in an annual GOI of $20,000 against operating expenses of $12,000, the NOI on that rental house is $8,000.
All of the revenue generated by the property, including fees from amenities goes into the calculation.
All of expenses from operations should also be factored into this.
Do not include mortgage and loan costs in the Net Operating Income calculation as these are not operating expenses.