NOI

NOI = Effective Gross Income - Operating Expenses. It measures a property's income-generating ability independent of financing. NOI is the numerator in cap rate analysis (Cap Rate = NOI / Value) and the basis for commercial appraisals. A property generating $90,000 NOI at a 7.5% market cap rate is worth $1.2M. NOI does not include mortgage payments, depreciation, income taxes, or capital expenditures - it is purely an operating metric. For seller-financed acquisitions, NOI is the starting point: confirm the NOI supports the note payment, then confirm the post-improvement NOI supports the eventual refinance.