Net Operating Income (NOI)
Definition
NOI is a property's rental and ancillary income minus operating expenses — property taxes, insurance, utilities, maintenance, property management — before debt service, income taxes, depreciation, and capital expenditures. It measures the asset's unlevered operating cash generation, independent of how it is financed or owned.
Because NOI excludes financing and corporate items, it is comparable across properties and owners, which is why it anchors the cap-rate valuation (value = NOI ÷ cap rate) and property-level underwriting. 'Same-store' NOI growth — the change for a constant pool of properties — is the standard organic-growth metric for REITs.
Watch the exclusions: leasing commissions, tenant improvements, and capex sit below NOI, so a property can show solid NOI while consuming heavy cash to retain tenants — one reason AFFO exists at the REIT level.
Why interviewers ask
NOI is the input for the cap-rate math interviewers love, and 'what's excluded from NOI?' is a common precision check — the answers (debt service, capex, D&A, corporate overhead) reveal whether you understand it as an unlevered, property-level metric. It's the real-estate parallel to EBITDA and appears in every RE group interview.
Related terms
Interviews don't test definitions — they test recall under pressure.
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