Net Operating Income (NOI)

Define the period and income before calculating NOI

Use supported property income and operating expenses for the same period and property scope. Identify rent and other included income, vacancy and collection assumptions, and costs such as property taxes, insurance, routine maintenance and management. Keep actual history separate from projections and avoid deducting a vacancy allowance twice when it is already reflected in the income used.

NOI is not the amount available for every obligation. Debt service, income taxes, depreciation and actual capital work require separate treatment in the wider analysis. State the reserve convention: the OCC commercial-lending handbook includes a replacement reserve in its operating analysis. That supervisory approach does not establish every lender's formula or every owner's reporting convention.

Original simplified illustration: $30,000 of defined annual property income minus $12,000 of included operating expenses gives $18,000 NOI. If debt payments are $12,000, the remaining $6,000 is still before other excluded costs and tax; it is not a promised distribution or return. Document all assumptions and compare consistent periods using the financial-statement guide. A higher NOI alone does not establish value, affordability or loan approval.