CHAPTER 14 Finding Out Your NOI our NOI and Why It is Important y It is Important
The building owner’s net operating income determines how successful a purchase it was and how successful the company is. Your Net Operating Income or NOI is the amount of income collected from a property after you subtract the operating expenses. If it sounds like a term for investors, that’s because it is. But it needs to be used for anyone owning a building, even if it is your company’s.
NOI EXPLAINED
This is how an investor determines if a property is a good investment or not. Doing the same thing with your company’s income will determine how much your investment affects your company’s financial standing. There is no standard for a good or acceptable NOI. It relates to how much income your company makes and how buying the property will affect that. Investors use it to compare and see if their rent they’re charging is pulling in enough money, but obviously that doesn’t apply to a company. Your NOI is usually calculated on a yearly basis. Calculate it by using the common formula in commercial real estate. Simply take your predicted income plus any income from renting out space and subtract the operating expenses and loan rate of the property.
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