Net operating income (NOI) is a fundamental real estate valuation method for real estate investors. NOI helps you calculate an investment property’s potential real estate revenue. The NOI formula is straightforward and easy to calculate, whether you need to predict potential rental income on an investment property, evaluate the purchase of a property, or consider raising rents to boost cash flow.
You deduct the operating expenses from the gross operating income (GOI) to calculate a property’s potential rental income. In other words, a property’s NOI is the difference between how much the property costs to operate and the amount of revenue it generates.
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