# Net Operating Income

*Real Estate — Finicade finance glossary*

Net operating income is rental revenue minus operating expenses, before mortgage payments, tax and depreciation. Excluding financing is the point: NOI measures the property, not the buyer's balance sheet, so two investors bidding on the same building compute the same NOI. The number is easy to flatter by understating vacancy, management and maintenance reserves, which is why buyers rebuild it from actuals.

**Formula:** `NOI = Gross rental income − Vacancy − Operating expenses`

**Also known as:** NOI, net operating income formula

**Related terms:** [Cap Rate](https://finicade.com/glossary/cap-rate), [Vacancy Rate](https://finicade.com/glossary/vacancy-rate), [Commercial Real Estate](https://finicade.com/glossary/commercial-real-estate), [Debt Service Coverage Ratio](https://finicade.com/glossary/debt-service-coverage-ratio), [Pro Forma](https://finicade.com/glossary/pro-forma)

Source: https://finicade.com/glossary/net-operating-income