NOI

Definition

Net Operating Income—the annual revenue from a property minus operating expenses, before debt service and taxes. The number that actually matters when evaluating investment properties.

Example Usage

The property generated $120,000 in rent but had an NOI of only $85,000 after expenses.

Origin

Acronym from commercial real estate financial analysis, standard in investment property evaluation

Fun Fact

NOI divided by purchase price gives you the cap rate—probably the most important metric in commercial real estate investing.

Source: Real estate investment analysis terminology

Related Terms

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quit claim deed

A deed transferring whatever interest the grantor has in property, if any, with zero warranties or guarantees. The 'I might own this, I might not, good luck!' document of real estate transfers.

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usufruct

The legal right to use and enjoy someone else's property without owning it, common in Louisiana and community property states. It's basically borrowing a house legally and permanently.

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usable square footage

The actual floor space a tenant can occupy, excluding common areas like lobbies and hallways. In commercial leases, this differs from rentable square footage through a multiplier that ensures you pay for space you can't actually use.

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ground lease

A long-term lease (often 99 years) where the tenant owns the building but rents the land beneath it, common for commercial properties and some condominiums. It's the real estate equivalent of building your castle on someone else's sand.

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down payment

The chunk of cash you fork over upfront when buying property, proving you have skin in the game beyond just promises and good intentions. It's the financial commitment that separates dreamers from homeowners.

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Intermediate

setback

The minimum required distance between a building and the property line or street, dictated by zoning laws. Your municipality's way of ensuring you can't build right up to the sidewalk.

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