Net Operating Income
Net Operating Income (NOI) for leased properties is determined using assumptions about expected occupancy levels and “normal” leasing rates of a building. The NOI is Gross Operating Income (GOI)
less Operating Expenses.
NOI = GOI - Operating Expenses
where:
GOI of a property is Gross Potential Income (GPI) minus Vacancy and Credit Loss.
To determine the operating expenses of a property total the costs for council tax, utility bills, legal and administrative fees, management and letting fees, loan interest, renewals and maintenance, service charges etc.
Now subtract the operating expenses from the GOI to arrive at the NOI. Using the example of a property with a GOI of $70,000 and operating expenses of $20,000, the NOI would be:
$70,000 - $30,000 = $20,000 in NOI
