NOI, or Net Operating Income, is a key metric used in commercial real estate to evaluate a property’s profitability before financing and tax expenses. It’s calculated by subtracting the property’s operating expenses from its gross operating income. Operating expenses include costs such as maintenance, property management fees, insurance, and property taxes, but exclude financing costs (mortgage payments) and capital expenditures. A higher NOI indicates a more profitable property, making it a critical figure for investors assessing potential investments.
