A property's rental and other income minus the cost of running it — measured before mortgage interest, income tax, depreciation and capital spending.
Published by Quintessentia Network Inc. · Updated 17 July 2026 · Sources & disclosures
Formula
NOI = Effective gross income − property operating expenses (before interest, income tax, depreciation, amortization and capex)
What it is
Net operating income, or NOI, is what a property earns from operating as a property. Start with the rent and other income a building actually collects, then subtract the costs of running it: property taxes, insurance, utilities, repairs, maintenance and on-site management. What is deliberately left out is everything that belongs to the owner rather than to the building — mortgage interest, income tax, depreciation and amortization, and spending on major capital improvements. NOI is not defined by accounting standards in Canada or the US; it is a measure that landlords and REITs construct and disclose themselves.
Why it matters
NOI isolates the earning power of the real estate itself. Because it stops before interest and tax, two owners of identical buildings report the same NOI even if one borrowed heavily and the other paid cash — which is why it is the standard input to the cap rate, where NOI is divided by property value. It also shows what the bottom line can hide: where buildings are carried at historical cost, large non-cash depreciation charges push net income down, so a property can be collecting real cash while reporting an accounting loss. The flip side is that NOI ignores real obligations — debt service and the capital a building needs to keep earning — so a high NOI is not the same thing as money available to investors.
How it's calculated
Take gross potential rent, subtract vacancy and collection losses, and add other property revenue such as parking, storage or costs recovered from tenants — that is effective gross income. From it subtract property-level operating expenses: property taxes, insurance, utilities, repairs and maintenance, and property management. Not deducted: mortgage interest or principal, income tax, depreciation, amortization and capital expenditures. REITs disclose NOI in quarterly filings and supplements, often alongside 'same-property NOI', which counts only the buildings owned in both periods so growth is not flattered by acquisitions.
Cross-border note. NOI is defined by neither US GAAP nor IFRS, and each regulator treats it as a non-standard measure needing reconciliation to a statutory figure: US issuers under SEC Regulation G and Item 10(e) of Regulation S-K, Canadian issuers under CSA National Instrument 52-112. Underneath sits a further difference: many Canadian REITs carry property at fair value under IFRS, while US REITs depreciate it under GAAP.
FAQ
Is NOI the same as profit?
No. NOI stops before mortgage interest, income tax, depreciation, amortization and capital spending, so it is a property-level operating figure rather than a bottom line. A building can post positive NOI while the owner still records a loss after debt service and depreciation. NOI answers 'what does this real estate earn?', not 'what did the owner keep?'
Why doesn't NOI subtract the mortgage?
Because NOI measures the building, not how it was paid for. Financing is the owner's choice: the same property could be bought with cash or with heavy debt, and the rent it collects and the cost of running it would be unchanged. Leaving interest out lets two properties be compared on operations alone. It also means NOI says nothing about whether the debt on a property is affordable.
Can two REITs calculate NOI differently?
Yes. Because no accounting standard defines it, issuers differ on details such as whether straight-line rent adjustments, lease termination fees, corporate overhead or property management fees are included. That is why both US and Canadian disclosure rules require a reconciliation back to a statutory measure. A comparison of NOI across two issuers is like-for-like only once each one's stated definition has been checked.