Platform · Glossary
NOI — Net Operating Income.
Gross rental income minus operating expenses, before debt service. The report's in-product tooltip is deliberately tight: "Net operating income before debt service."
NOI = Gross Income − Operating Expenses
Operating expenses include taxes, insurance, vacancy allowance, maintenance, management, utilities (if landlord-paid), and routine capital reserves. They do not include mortgage payments — debt service comes out of NOI further down the income statement.
Why NOI is computed before debt
NOI describes what the property itself produces, independent of how it was financed. A property generating $40,000 of NOI has that earning power whether you bought it with 100% cash, 25% down, or a creative seller-financed structure. Separating NOI from debt lets you compare deals on the property's merits, then layer financing on top.
What's frequently missed
The most common NOI mis-statements from sellers and pro formas:
- Vacancy treated as 0% when typical is 5–8%
- Maintenance estimated at $500/year per unit when realistic is closer to $1,500–$2,500
- Management ignored entirely when the property requires real management
- Capital reserves omitted, ignoring eventual roof, HVAC, and major-system replacements
A 7% cap rate on an aggressive NOI is often a 5% cap rate on a realistic NOI. 3Y reports model toward the conservative end as a default; adjust if you have property-specific reason to.