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How to Calculate Net Operating Income.
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How to Calculate Net Operating Income.

Rosemary Njeri

Net operating income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments.

NOI is one of several indicators used to determine whether or not a subject property will make a good investment.

NOI is also used in the debt coverage ratio, which tells lenders and investors whether a property’s income covers its operating expenses and debt payments.

Formula to calculate NOI.

 Calculate Net Operating Income.

Operating revenue is the revenue generated from day to day operations of a business.

Operating expenses include salaries and wages, property taxes.

Example:

A shoe making factory’s operating revenue’s value is $3,000. The total operating expenses are $ 600. Calculate the net operating income.

Calculate Net Operating Income.

Therefore, the value of the net operating income is $ 2,400.

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