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Investment
Net operating incomeNOI
Net operating income is the revenue a property generates after operating expenses but before mortgage payments, depreciation and income tax. Operating expenses include management, cleaning, utilities, insurance, supplies and routine maintenance.
How Net operating income is calculated
NOI = Operating revenue − Operating expenses
Why Net operating income matters for your revenue
NOI is the figure that determines whether a rental is genuinely profitable, and it is the input used for cap rate and yield. Two properties with identical bookings can produce very different NOI depending on their cost base.
Related terms
- Cap rateCap rate expresses a property's annual net operating income as a percentage of its value or purchase price. It allows investors to compare the income return of different assets independently of how each purchase was financed.
- Rental yieldRental yield is annual rental income as a percentage of property value. Gross yield uses income before costs; net yield uses income after operating expenses and is the more meaningful figure for comparing investments.
- Gross booking valueGross booking value is the total amount guests paid for confirmed stays in a period, before platform commission, management fees, cleaning costs, taxes and any other deduction. It is the top line of a property's performance.
- Management feeA management fee is what an operator charges to run a property, usually as a percentage of booking revenue, sometimes as a fixed monthly amount. What the fee includes — and what is billed separately — varies widely between operators.
Revenue Management at Pinnacle Path
Net operating income sits inside our revenue management work. See how we apply it market by market.