![]() ![]() How to Calculate Net Operating Income NOI measures a property’s ability to generate a profit from its operations. Since income taxes, loan interest and principal payments, capital expenditures (money spent on improvements or repairs), and amortization and depreciation (the gradual write-off of long-term assets) do not impact the potential of a company or real estate investment to make money, they are not included in NOI. Operating expenses commonly include property taxes, vendor and supplier costs, maintenance and repair, insurance, utilities, licenses, supplies, and overhead costs, such as expenses for accounting, attorneys and advertising. As a rule of thumb, an expense is considered an operating expense if not spending money on that cost would jeopardize the asset's ability to continue producing income. With NOI, a property’s gross income is everything it earns minus any losses due to vacancies. While NOI is most frequently used in the real estate industry, it can be used by any company that earns income from a property. NOI determines the revenue of a property by subtracting gross operating expenses from gross income. What Is Net Operating Income? Net operating income, or NOI, is a measurement used to determine the profitability of an income-producing property. EBITDA, how each one is calculated, their similarities and differences, and why they are important. NOI is used in real estate to evaluate income-producing properties, whereas EBITDA is most often used to compare companies’ profit-making potential. ![]() Net operating income (NOI) and earnings before interest, tax, depreciation, and amortization (EBITDA) are two similar metrics used to measure a company’s profitability based upon its core business operations. ![]()
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