Net Operating Income

Learn about net operating income (NOI) in Canadian real estate — what it is, how it’s calculated, and why it matters for investors and lenders.

Net Operating Income

August 08, 2025


What is Net Operating Income?

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.

Why Net Operating Income Matters in Real Estate

In Canadian real estate investing, NOI is a fundamental measure of a property's profitability and is used in valuation and lending decisions.



Key points:
  • Calculated as Gross Operating Income - Operating Expenses
  • Excludes mortgage payments and capital expenditures
  • Used to determine capitalization rates and property value



Understanding NOI helps investors evaluate performance and lenders assess loan eligibility.

Example of Net Operating Income in Action

The apartment building’s net operating income increased after reducing utility costs and raising rents.

Key Takeaways

  • Measures income after operating expenses
  • Excludes taxes, mortgage, and capital costs
  • Central to property valuation and investment analysis
  • Impacts lending and financing decisions
  • Indicates property cash flow performance

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

Leasehold Estate

A leasehold estate is an interest in real property where a tenant holds the right to use and occupy the property for a specified term under a lease. more

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