What does net operating income (NOI) refer to in property management?

Net operating income (NOI) in property management refers specifically to the income generated from property operations after deducting all operating expenses but before deducting financing costs and taxes. This figure is critical for assessing the profitability of a property, as it provides a clear view of the operational efficiency by showing the revenue that is available to cover debt service and provide a return on investment.

The calculation of NOI typically includes the total income generated from the property, such as rents and any other income sources, from which you subtract all operating expenses like property management fees, maintenance, utilities, and property taxes. This allows property managers and investors to gauge how well a property is performing, and evaluate its capacity to generate profits over time. Understanding NOI is essential in decisions regarding property acquisition, valuation, and financial management, making it a fundamental concept in property management.