NOI is net operating income. It is the profit left after expenses.

It is used in valuing a property. ROI also can be for comparing income to other properties in the area.

How to find it:

1. Firstly, we need our total gross potential income. This is accounting for all of the units, pet fees, and parking fees.
2. Take your total potential income (the max you would make under 100% occupancy), and subtract vacancy and credit loss. You will now have your gross operating income.
3. Next, we need all of the expenses added together. For example, this can include utilities, management, legal expenses, lawn maintenance, and so on.
4. Finally, it’s time to take the gross operating income and subtract the operating expenses. The resulting number is your NOI.

How to use NOI to calculate property values:

Simply take your NOI and divide it by the market cap rate. The market cap is a metric a company or property is valued by.

That’s the basics of net operating income. Be sure to subscribe so you can learn some more real estate fundamentals.