net operating income

Earnings Before Interest and Tax

A measure of a company's ability to produce income on its operations in a given year. It is calculated as the company's revenue less its expenses (such as overhead) but not subtracting its tax liability or interest paid on debt. It is important to note that EBIT does not account for one-off or otherwise unusual revenues and expenses, only recurring ones. EBIT represents cash available to pay off creditors in the event of liquidation and, as such, it is closely watched, especially when the company incurs little depreciation or amortization. It is also called operating profit.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

net operating income (NOI)

The foundation of almost all analyses of income-producing property such as apartments,office buildings,and retail space.The number is the result of taking all rental and other revenues from the property and then subtracting all reasonably necessary operating expenses.Loan payments do not count as expenses for purposes of the NOI.If you,as the owner,pay yourself a salary of $100,000 a year but your job could be filled by someone at $35,000 a year, it is legitimate to make that downward adjustment in the expenses when presenting figures to a potential purchaser or lender. On the other hand, if you take no salary, do all the office work, make all repairs, and mow the lawn, then you will have to estimate what those expenses would be if a third party owned the project and enter that number as an imputed expense.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.