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Net Operating Income (NOI) is a key real estate metric representing a property's annual income after deducting all operating expenses, but before accounting for debt service, income taxes, and capital expenditures.
Net Operating Income Margin is a profitability ratio that expresses Net Operating Income (NOI) as a percentage of Effective Gross Income (EGI), indicating how efficiently a property generates profit from its operations before debt service and taxes.
Annual Property Operating Data (APOD) is a detailed financial statement that summarizes a property's income and expenses over a 12-month period, culminating in its Net Operating Income (NOI). It is a critical tool for evaluating the profitability and investment potential of real estate.
Add-backs are expenses identified on a property's financial statements that are not considered ongoing operational costs for a prospective new owner, and are therefore 'added back' to the Net Operating Income (NOI) to reflect the property's true profitability.
The Capitalization Rate (Cap Rate) is a real estate valuation metric used to estimate the potential rate of return on an investment property, calculated by dividing its Net Operating Income (NOI) by its current market value.
The Debt Service Coverage Ratio (DSCR) is a financial metric used in commercial real estate lending to assess a property's ability to generate sufficient Net Operating Income (NOI) to cover its annual mortgage debt payments.
A real estate investment strategy focused on acquiring underperforming properties and increasing their value through renovations, operational improvements, or repositioning to boost Net Operating Income (NOI).
Debt Yield is a commercial real estate lending metric calculated as a property's Net Operating Income (NOI) divided by the total loan amount, used to assess a loan's risk by measuring the property's income-generating capacity relative to the debt, independent of interest rates.
Return on Cost (ROC) is a real estate metric that measures the projected Net Operating Income (NOI) of a stabilized property against its total development or value-add cost, providing a forward-looking assessment of profitability for new projects.
Cap rate compression occurs when the capitalization rate for investment properties decreases, indicating that property values are rising faster than their net operating income (NOI), often driven by increased demand or lower interest rates.
Bad debt expense is the portion of accounts receivable, such as unpaid rent, that a real estate investor determines is uncollectible. It represents an estimated loss from revenues that will not be recovered, directly impacting a property's profitability.