NOI

NOI is the input every core investment metric — cap rate, DSCR, cash-on-cash return — is built on, which is why verifying it is one of the first steps in diligence on any income-producing acquisition. NOI excludes mortgage payments, capital expenditures, depreciation, and income tax, isolating the property's operating performance independent of how it's financed or owned.

The most common valuation dispute in a sale process is not the cap rate but the NOI figure it's applied to: sellers sometimes present a pro forma NOI that assumes rent bumps, expense reductions, or lease-up that hasn't happened yet, while buyers underwrite to trailing actual NOI. Reconciling that gap — and understanding which NOI a quoted price or cap rate is based on — is central to negotiating price on any multi-tenant or value-add deal.

For net-leased single-tenant property, NOI calculation is comparatively simple since most expenses pass through to the tenant; for multi-tenant gross or modified gross assets, it requires a full operating statement review including vacancy, credit loss, and management fees.