Net Operating Income – Formula for Success

When determining whether or not to pull the trigger on a property for income purposes it is important to know the actual Net Operating Income. The basic formula is this;

Gross Operating Income – Operating Expenses = NOI

TIP #1: When determining the GOI allow for a fair, historical vacancy rate and walk the neighborhood to be sure the rents being paid on this property are in line with other properties in the neighborhood.

TIP #2: Operating expenses are crucial to this formula. Account for everything. You may even ask for the seller’s Schedule E right up front to fish out the actual numbers.

Almost every reliable real estate caluculation for investment properties involves the NOI. Make sure you get it right!

For more details on figuring expenses feel free to email me or post a comment.