What does NOI stand for in real estate terms?

In real estate, NOI stands for Net Operating Income. This term is crucial for real estate investors and property managers as it measures the profitability of an income-generating property. To calculate NOI, one takes the total revenue generated from the property, typically from rental income, and subtracts all operating expenses necessary to manage and maintain the property, such as property management fees, maintenance costs, property taxes, and insurance.

Using NOI helps investors and stakeholders analyze the performance of a real estate asset, compare it to other investments, and assess cash flow before financing and tax considerations come into play. By focusing solely on operating income, NOI provides a clearer picture of a property's operational efficiency and potential financial viability. Understanding this concept is fundamental for anyone involved in real estate investment or management as it aids in making informed decisions regarding property purchases, sales, and management strategies.