Net Operating Income (NOI)
Definition
Net Operating Income (NOI) is the revenue a property generates after deducting all operating expenses.
Example
A commercial building generates $100,000 in annual rent. Operating expenses, including property taxes, insurance, and maintenance, total $40,000. The NOI is $100,000 - $40,000 = $60,000.
Exam Tip
Remember that NOI is *before* debt service and income taxes. Focus on operating expenses only.
Related Math Terms
Capitalization Rate (Cap Rate)
The capitalization rate (Cap Rate) is the rate of return on a real estate investment based on its expected income.
Property Value (based on Cap Rate)
In real estate, property value can be estimated by dividing the Net Operating Income (NOI) by the Capitalization Rate (Cap Rate).
Percentage to Decimal Conversion
Converting a percentage to a decimal involves dividing the percentage value by 100.
Monthly Interest Calculation
Monthly interest is the portion of the total annual interest that is paid or accrued each month.
Annual Interest Calculation
Annual interest is the total amount of interest charged on a loan or investment over a year.
Calculating Daily Rate
Daily rate calculation involves determining the cost or income per day by dividing the total amount by the number of days in the period (usually a year or a month). This is a fundamental step in proration.
Frequently Asked Questions
Test Your Math Knowledge
Practice with exam-style questions to make sure you can apply Net Operating Income (NOI) and other math concepts.