CandleFocus

Net Operating Income

Candlefocus Editor
Net Operating Income (NOI) is a metric used to measure the profitability of properties that produce income, such as rental homes and commercial properties. NOI is calculated by subtracting all operating expenses incurred on a property from all revenue generated on the property. These operating expenses can vary depending on the type of property, ranging from mortgage payments, real estate taxes, insurance, utilities, and maintenance. The NOI metric does not take into account capital expenditures, such as the cost of upgrading or replacing appliances, or increasing the property’s value.

Property owners can use NOI to determine if a rental property is worth the expense of owning and maintaining it. By looking at the NOI of a property, investors can get a better picture of the financial performance of the property and make more informed decisions about its future. Additionally, NOI can be used to compare properties and assess which ones provide the best returns on investment.

The NOI metric can also be manipulated in certain ways. Owners of income-producing properties can delay or accelerate income sources to their benefit and the results won’t be immediately apparent in the NOI calculation. This can allow the owner to increase their online NOI while decreasing the actuality of rental income.

Overall, NOI is a useful metric for measuring the profitability of income-producing properties. By tracking the NOI of a property, investors can make better decisions about when to purchase, rent, or sell a property and get a better understanding of its financial performance. However, experienced property owners should keep in mind that the NOI can be manipulated and taken in with a grain of salt.

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