Home / Glossary / NOI (Net Operating Income)
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
Definition
Net Operating Income is calculated by subtracting all operating expenses from gross rental income. Operating expenses include property management, maintenance, insurance, property taxes, and vacancy allowance — but not mortgage payments, depreciation, or income taxes. NOI is the single most important number in evaluating a rental property's financial performance. It serves as the numerator in both the cap rate and DSCR calculations. Increasing NOI through rent growth or expense reduction directly improves your property's value and debt coverage. Investors should verify NOI using actual financials rather than relying on pro forma projections.
How This Relates to DSCR Loans
NOI is the income figure used to calculate your DSCR. A higher NOI means a higher DSCR, better loan pricing, and improved cash flow after debt service.
Related Terms
DSCR (Debt Service Coverage Ratio)
A ratio that measures whether a property's rental income covers its debt payments.
Cap Rate
The ratio of a property's net operating income to its market value, used to estimate return potential.
Operating Expenses
The ongoing costs of running a rental property, excluding mortgage payments and capital improvements.
Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
Compare rates from hundreds of lenders instantly. No personal info required.