Before you buy any income property anywhere in the world, run this one calculation.
Net Operating Income (NOI) is the foundation of commercial and residential real estate analysis.
Master this, and you'll evaluate deals faster and smarter than 90% of investors.
The Formula:
NOI = Gross Rental Income − Operating Expenses
What's included in Operating Expenses:
→ Property management fees
→ Maintenance and repairs
→ Property insurance
→ Property taxes
→ Utilities paid by landlord
→ Vacancy allowance (typically 5–10% of gross income)
What's NOT included:
→ Mortgage payments (debt service)
→ Depreciation
→ Income tax
Example:
Property in Nairobi, Johannesburg, Manchester, or Houston — the math works the same:
Gross annual rent: $48,000
Operating expenses: $16,000
NOI = $32,000
Now you can calculate:
→ Cap Rate = NOI ÷ Property Value
→ Whether the income justifies the price
→ How the deal compares to alternatives
Two properties. Same price. Different NOIs.
The one with the higher NOI wins. Every time.
What operating expense do investors most commonly underestimate in your market?
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