What the heck is a NOI (Net Operating Income) and why it's Important

Okay so hopefully by now, you understand the benefits of House Hacking and ready to make some moves.  If not, check out our previous articles to recap.  So today is all about learning

1) What is the NOI
2) Why it’s important to understand as a House Hacker
3) Run some numbers so it all makes sense.  

Okay are you ready. Leggggoo!

What is the Net Operating Income (NOI)?

The Net Operating Income, known also as NOI, tells you the amount of money your house will generate before paying your mortgage and before income taxes.  So it’s basically your net rent.

The formula is really simple:
  1. Taking the amount of rent you Receive
  2. Subtract all the expenses related to operating the rental.

This could be, utilities that you pay, property management fees, vacancy fees, maintenance supplies, basically any expense that you pay out of pocket to operate your rental.  Keep in mind you can calculate the NOI on a monthly or yearly basis.

So why is this number important for house hackers?

Because it tells you how much of your mortgage payment will be covered by tenant’s rent each month.  When you are shopping for a house to hack, you probably have a good idea of how much you want your mortgage payment to be after the rental income, and a great way to determine that is figuring out the NOI.  Also, it makes it much easier to determine what properties will work and won’t work for your needs.  The numbers don’t lie.

When you are shopping, I highly recommend working with a House Hacking expert since they can run different scenarios for calculating the NOI based upon your goals.

Ahhhh yes, I remember long hair

Alright, so let’s get our math on and crunch some numbers

(Go to minute 1:52 in the video and you'll see an example)

So now that we know the NOI, find out from your lender how much your monthly mortgage payment would be.  Keep in mind this should include, principle, interest and any mortgage insurance, if required.  Once you have that number, let’s compare the two and see if how much your saving and if you’re getting paid to live in your house.

(Now go to minute 2:29 or just watch the whole video)

That’s so freaking awesome!!

I don’t know about you, but it’s a wonderful feeling when other people are paying for your housing expenses.  And even if you aren’t getting paid to liven your house yet, you still have the freedom to use the extra income to pay of debts (like your mortgage payment, student loans, ccs), make home improvements, travel, or whatever you feel like doing.

I hoped you found this helpful and if you did be sure to comment below. Thanks so much for watching and until next week, Happy House Hacking!

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