Net Operating Income (NOI)
Definition
Net Operating Income (NOI) is the cash flow a property generates from rental operations, before any debt service is paid. It equals gross rental income (effective gross income after vacancy) minus operating expenses — property tax, insurance, property management, repairs and maintenance, utilities, HOA, reserves. NOI explicitly excludes mortgage payments, depreciation, and income tax. It is the numerator of the cap rate equation and the most important number on any income-property pro forma.
Formula
Worked example
A duplex grosses $48,000/yr in rent. Vacancy at 5% reduces effective income to $45,600. Operating expenses: $4,800 property tax + $2,400 insurance + $4,560 management (10% of effective rent) + $3,600 repairs/reserves = $15,360. NOI = $45,600 − $15,360 = $30,240.
How DealIntel uses it
DealIntel computes NOI on every BRRRR and Multi-Unit Conversion scenario using market-typical expense ratios, then stress-tests it against rent shock (-10%), expense shock (+15%), and vacancy shock (+5 percentage points). A deal that pencils only on the base case is flagged by the kill list.
Related terms
- Capitalization Rate · Cap RateThe annual unlevered return of an income property, expressed as a percentage of its value.
- Cash-on-Cash ReturnAnnual pre-tax cash flow divided by total cash invested — the levered yield on actual dollars committed.
- Debt-Service Coverage Ratio Loan · DSCRAn investment property loan qualified on the property's rental income rather than the borrower's W-2 income.
Matt Abadi is the founder of DealIntel. He leads the development of the platform's six-strategy underwriting engine, 25-point Kill List, and Monte-Carlo financial model — the institutional analysis stack DealIntel applies to every fix and flip deal. DealIntel was founded in 2025 with the central thesis that knowing when not to invest is the most valuable number on the page.