What does NOI exclude?

Debt service, depreciation and amortization, capital expenditures such as a new roof or irrigation system, reserves for future replacements (unless a definition puts them above the line), income taxes, and the owner's entity-level costs such as a fund's or platform's asset management fee, audit and administration. Those all reduce what investors receive.

Is NOI the same as net income?

No. Net income is an accounting result that includes depreciation, interest, corporate overhead, impairments and gains on sales. Farmland Partners' 2025 Form 10-K, for example, reported net income of $32.2 million, down from $61.5 million, a figure that included $34.9 million of gains on farm sales and $17.8 million of impairments; the company presents adjusted funds from operations ($17.9 million) rather than an NOI figure.

How is NOI calculated for a leased farm?

Usually simply, because farm tenants bear most operating costs. Farmland Partners says its tenants are responsible for substantially all operating expenses, including maintenance, water usage and insurance, and that it generally bears only major capital improvements. Farm NOI is then cash rent, plus any variable rent, less the costs the landlord keeps, often property taxes and management.

Why can a platform's NOI look good while investors receive little?

Because entity-level costs, debt service and capital needs sit below NOI. AltStreet's Arrived review notes that taxes, insurance, maintenance and vacancy are the larger deductions for its single-family series, with platform fees on top; Lofty's property managers charge 5% to 30% of collected rent.

Net Operating Income

Real Assets & Fractional Structures

Definition

Net operating income (NOI) is a property's income from operations minus the costs of operating it, measured before financing, capital spending, depreciation and income taxes. It starts from effective gross income, which is scheduled rent after vacancy, concessions and collection losses plus other property income such as fees, and subtracts recurring operating expenses: property taxes, insurance, repairs and maintenance, property management, utilities the owner pays, leasing costs and similar items. NOI is meant to describe what the property earns as an asset regardless of how it is financed or owned, which is why it is the numerator in a capitalization rate and the basis of lenders' coverage tests. It is not cash to investors: mortgage payments, capital replacements, reserves and the fees of the fund or platform that owns the property all come after it.

Why it matters

NOI is the number that real estate and farmland valuations are built on: divide it by a cap rate and you get a value, divide a price by it and you get a yield. That makes its definition the most consequential choice in any property pitch. A projected NOI 'at stabilization' rather than in place, a figure that leaves out management fees or a realistic vacancy allowance, or a farm NOI that ignores the landlord's share of property taxes can all raise an implied value or yield without anything being false. For fractional and tokenized property investors the second gap matters as much: NOI is earned by the property, but investors are paid after the property's debt, its capital needs and the platform's own fees. AltStreet rebuilds NOI from the documents for the properties it reviews and then walks it down to what investors actually receive.

Common misconceptions

•NOI is not cash flow to investors. Debt service, capital spending, reserves and entity fees come after it.
•NOI is not net income. Accounting net income includes depreciation, interest, overhead, impairments and sale gains.
•A projected or stabilized NOI is not the property's current NOI. Check which one a valuation uses.
•Excluding capital expenditures does not make them optional. A roof or irrigation system still has to be paid for.
•Leaving out vacancy or management because the owner self-manages or the unit is leased today overstates sustainable NOI.

Technical details

Worked bridge: a single-family rental

Gross potential rent: $2,000 a month x 12 = $24,000.

Less vacancy and credit loss at 5%: $1,200. Plus other income (pet and late fees): $300. Effective gross income: $23,100.

Operating expenses: property taxes $3,600; insurance $1,800; property management at 8% of effective gross income $1,848; repairs and maintenance $1,200; leasing and turnover $400. Total $8,848.

NOI: $23,100 minus $8,848 = $14,252.

Not deducted: mortgage payments, depreciation, a future roof, the owner's income taxes, and any platform or fund fees.

Worked bridge: a cash-rented farm

Cash rent: 160 acres x $300 an acre = $48,000.

Landlord-paid costs under a lease where the tenant bears operating expenses: property taxes $4,480 and liability insurance $600.

Farm NOI: $48,000 minus $5,080 = $42,920.

Below NOI: a farm manager's fee charged to the owning entity, debt service, and capital improvements such as drainage tile or irrigation, which Farmland Partners says owners generally bear.

What sits below NOI, in order

Capital expenditures and reserves for replacements.

Debt service: interest and principal.

Entity-level costs: asset management, administration, audit, legal and platform fees.

Income taxes, where the entity pays them.

What remains is distributable cash, the figure investors actually receive.

What issuers in AltStreet's reviews disclose

Lofty: one Everett, Washington property was valued 'at stabilization' assuming NOI of $268,089 a year, a projected rather than in-place figure.

Farmland Partners (2025 Form 10-K): rental income $35.9 million and property operating expenses $5.6 million, with $11.7 million of general and administrative expense at the corporate level; it reports AFFO rather than NOI.

Ark7: its series' Form 1-Ks report rent and expenses but not occupancy or leasing status.

Streitwise: its NAV method cites capitalization rates and net operating income, with independent appraisals only 'in certain instances'.

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

How is net operating income calculated for a rental property?: Start with gross potential rent, subtract vacancy, concessions and uncollected rent, add other property income to reach effective gross income, then subtract operating expenses: property taxes, insurance, repairs and maintenance, management, owner-paid utilities and leasing costs. Do not subtract mortgage interest or principal, depreciation, capital improvements or income taxes.
What does NOI exclude?: Debt service, depreciation and amortization, capital expenditures such as a new roof or irrigation system, reserves for future replacements (unless a definition puts them above the line), income taxes, and the owner's entity-level costs such as a fund's or platform's asset management fee, audit and administration. Those all reduce what investors receive.
Is NOI the same as net income?: No. Net income is an accounting result that includes depreciation, interest, corporate overhead, impairments and gains on sales. Farmland Partners' 2025 Form 10-K, for example, reported net income of $32.2 million, down from $61.5 million, a figure that included $34.9 million of gains on farm sales and $17.8 million of impairments; the company presents adjusted funds from operations ($17.9 million) rather than an NOI figure.
How is NOI calculated for a leased farm?: Usually simply, because farm tenants bear most operating costs. Farmland Partners says its tenants are responsible for substantially all operating expenses, including maintenance, water usage and insurance, and that it generally bears only major capital improvements. Farm NOI is then cash rent, plus any variable rent, less the costs the landlord keeps, often property taxes and management.
Why can a platform's NOI look good while investors receive little?: Because entity-level costs, debt service and capital needs sit below NOI. AltStreet's Arrived review notes that taxes, insurance, maintenance and vacancy are the larger deductions for its single-family series, with platform fees on top; Lofty's property managers charge 5% to 30% of collected rent.