Net Operating Income (NOI): The Most Important Number for Landlords

Net Operating Income is the money your property makes after all operating expenses but BEFORE mortgage payments. It tells you if the property itself is profitable, regardless of how you financed it.

The Formula

NOI = Gross Income - Operating Expenses (not including mortgage)

Real-World Example

A duplex brings in $3,600/month ($43,200/year). Operating expenses: taxes $4,800, insurance $1,800, maintenance $3,000, vacancy reserve $2,160. Total expenses: $11,760. NOI: $43,200 - $11,760 = $31,440/year or $2,620/month.

The Bottom Line

If your NOI is negative, the property loses money regardless of your mortgage terms. If NOI is positive but cash flow is negative, your financing costs are too high.