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What is Net Operating Income?

Net Operating Income or (NOI) is the gross operating income (GOI) of a property after the operating expenses (OI)  have been deducted, but before the income taxes and interest are deducted.

To explain this in more simple terms for you N00bs, it is the money you receive on a property minus all the expenses you have to pay - maintenance, marketing, management, repairs and supplies are examples of expenses you may incur.  Whatever is left over is the net or actual income that is realized.

Here’s the formula:

#1.  Determine the Gross Operating Income (GOI) = Gross Potential Income (GPI) – Vacancy

#2.  Determine the Operating Expenses (OE)

#3.  Subtract the OI from the GOI = NOI

Example:

 
Gross Operating Income (GOI)                 $64,300
Operating Expenses (OI)                    -    $43,500
                                                  ---------------------
Net Operating Income (NOI)                    $20,800

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