valuation
net operating income
Net operating income, or NOI, is a property's annual income after subtracting vacancy and collection losses and operating expenses from potential gross income. Operating expenses include taxes, insurance, maintenance, utilities, and management, but not mortgage payments, depreciation, or income taxes. NOI is divided by the capitalization rate to estimate value in the income approach.
- Exam tip
- Debt service is not an operating expense, so do not subtract mortgage payments when calculating NOI. Exams often include it as a distractor.
- Example
- Potential gross income of $120,000, minus $6,000 vacancy, minus $44,000 operating expenses, leaves NOI of $70,000.
Related terms & state variants
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Last verified: 2026-10-23