NOI is a measure of how profitable a rental property is before you factor in mortgage payments or taxes. It’s calculated by subtracting all operating expenses (like property management, insurance, maintenance, and taxes) from gross rental income. Investors use NOI to evaluate the performance of a property and to calculate other key metrics like cap rate and debt coverage ratio. At Meridian, we use projected NOI in every pro forma to help buyers understand how each property performs without financing variables clouding the picture. It’s essential for comparing deals on an apples-to-apples basis.
