Your Net Operating Income (NOI) is not your Return On Investment (ROI). It's an important tool for finding a value of an income generating asset.

All assets will have some sort of expense associated with the property; from taxes to the landscaper and hydro.

For this example, we are going to review a 20 unit apartment building in depth.

Firstly, you need to find the total annual income for the property including other sources of income such as laundry facilities, parking, storage, lockers, etc.


As you can see in the image/graphic above; we have calculated the Gross Monthly Rental income from the residential units as well as other income (laundry) to arrive at a total GROSS Monthly and Annual income.

The next step is to calculate the operating expenses that any owner would be required to pay to.


Now that we know the detailed operating expenses for the previous 12 months; we can calculate the Net Operating Income (NOI) of a property.

To do this you subtract the Annual Operating Expenses from the Gross Annual Income.

As you can see, it's not complicated to calculate once you know what to do. If you have the core components (the Gross Income and the Operating Expenses), you can easily determine the Net Operating Income. 

With the NOI you can then find out the Capitalisation Rate (Cap Rate) of a property. 

The one thing I left out was Vacancy/Bad Debt as that changes by region, city, etc.