NOI In Real Estate Explained | FortuneBuilders

Abstract

What Is NOI In Real Estate? NOI in real estate is one of several metrics used by investors to determine how profitable a property is. Why Is NOI Important for Real Estate Investors? NOI is an important formula for real estate investors for two key reasons. What Expenses Are Included In NOI? The key to understanding the NOI real estate term is knowing which expenses are included and not. Whether it's groundskeeping, plumbing, or electrical work, any maintenance conducted on the subject property must be accounted for in its NOI. Legal Fees: Whether ownership of a subject property leads to litigation or a landlord hires an attorney to draft a lease, the money spent on legal fees is no different from any other expense. Utilities Not Paid By Tenants: In the event the owner elects to pay some or all of the utilities, their expense will impact the real estate NOI. For example, any sewage or waste fees paid by the landlord must be deducted from the income generated to identify the property's NOI. Property Taxes: Property taxes will vary from municipality to municipality, but they are nonetheless an important variable to factor into the NOI of a rental property. How To Improve NOI As I mentioned above, NOI can be used to evaluate both new and existing properties in your investment portfolio. What Is A Good NOI? NOI is a number that evaluates the revenues generated by a property relative to its expenses.