◈ GLOSSARY · REAL ESTATE
NOI (Net Operating Income).
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
NOI is a property's gross rental income minus all operating expenses — taxes, insurance, maintenance, property management, vacancy allowance — but BEFORE mortgage payments, depreciation, and income tax. It's the property's earnings on an unleveraged basis. Watch out for sellers who quote NOI without a realistic vacancy reserve or who exclude capex.
◈ IN PRACTICE
Example
A 4-unit building collects $60,000/year in rent. Property tax $7,000, insurance $2,400, repairs $3,000, management 8% ($4,800), vacancy 5% ($3,000). NOI = $60,000 − $20,200 = $39,800.
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