NOI represents the money that remains after operating expenses are subtracted from effective gross income. A property that produces a positive net operating income indicates that effective gross income exceeds its operating expenses. Conversely, a negative net operating income would mean the property’s expenses exceed its effective gross income and that the owner would likely need to provide additional cash for the property to sustain itself.
A common goal of most Property Managers is to work diligently to help ensure that the net operating income remains positive and steadily increases over time. Net operating income is not only a critical measure of the property’s ability to pay its bills but is one of the components often used in calculating a property’s investment value.
