What is it?
Net operating income (NOI) is what a building earns minus the cost of running it. CMHC (Canada Mortgage and Housing Corporation) explains that the difference between gross operating income and operating costs is net operating income, and that essentially it is how much you can afford to pay for your mortgage.
What goes in and what comes out?
- In: rent, side income such as parking and storage, and operating costs collected from tenants.
- Out: money not received because of vacancy (vacancy loss), and the property tax, insurance, upkeep, repairs, and heat and water the owner pays.
- Not included: loan interest and principal, income tax, and capital spending on big projects (these are usually looked at separately).
How is it used?
Dividing NOI by the cap rate gives a rough value for the building (the income approach). Example: NOI of $100,000 and a 5% cap rate gives $2,000,000 (a made-up example).
Do not trust the seller’s NOI as given. Check it against the leases, bills and tax returns. The most common problems are missing operating costs and rents that may fall in future.
What the law and official sources say
Quotes are copied word for word. The "In plain words" lines are our explanation, not an official translation.
The difference between gross operating income and operating costs is net operating income (NOI). Essentially this is how much you can afford to pay for your mortgage.In plain wordsGross operating income minus operating costs is NOI, and essentially it is how much you can afford for the mortgage. The document is written for affordable-housing developers, but its explanation of NOI is general.
Source: assets.cmhc-schl.gc.ca/sf/project/cmhc/pdfs/content/en/equity_funding_en.pdf · checked Nov 2, 2026
Common questions
Does NOI include loan interest?
No. NOI is the building’s own income before any loan. Loan interest and principal are taken out of NOI separately to see cash flow.
Is NOI the same as net profit?
No. Net profit reflects items such as loan interest, taxes and depreciation. NOI looks only at running the building, so it is used to compare buildings.
Guides that use this term
Sources checked
- CMHC, Equity, Funding and Financing fact sheet · checked Nov 2, 2026