Net Operating Income (NOI)

Net operating income is what the rent leaves once vacancy and operating costs come out, with the mortgage payment not yet subtracted. It is the basis of the BRRRR hold-phase numbers: NOI minus the new loan's debt service is cash flow, NOI divided by debt service is the DSCR, and NOI divided by total project cost is the cap rate on cost.

On the default deal, $4,400 of rent with 5% vacancy is $50,160 collected. Taxes of $6,000, insurance of $2,500 and 18% of collected rent for maintenance, reserves and management bring NOI to about $32,630. Against $30,698 of debt service that is $1,933 of cash flow and a DSCR of 1.06.

NOI is what decides whether a BRRRR that returned the cash is also a rental worth owning. A property with $32,630 of NOI on a $391,350 project cost has an 8.3% cap rate on cost, healthy; the same NOI against a $375,000 loan at 7.25% barely clears the payment. On Wikipedia, the term points to earnings before interest and taxes, which is the company-level equivalent.