Definition
Net operating income (NOI) is a property's income after operating expenses, before debt service, depreciation and income taxes. NOI = effective gross income − operating expenses.
What's included
Income: rent collected plus other income (fees, laundry, parking), minus vacancy and credit loss. Expenses: property taxes, insurance, utilities paid by the owner, repairs and maintenance, management, payroll, administrative costs, and usually replacement reserves.
What's excluded
Mortgage principal and interest, capital improvements (though reserves are often included), depreciation, and the owner's income taxes.
Why it matters
NOI drives value. At a 7% cap rate, every additional $1,000 of annual NOI adds roughly $14,300 of value — which is why expense control matters as much as rent growth.
This guide is general information, not legal, tax or financial advice. Talk to your own advisors about your situation.
Looking for your next Texas multifamily acquisition?
Your investment criteria stays private. We'll contact you when opportunities match.