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Discover the formula and use of net operating income in a real estate analysis. Includes easy-to-follow examples so you can learn.

Net operating income plays a major role in real estate analysis. In this article, we will discuss its importance, see how its calculated, and then show you how real estate analysts use net operating income in various ways to determine rental property profitability

Net operating income (or NOI) is one of the most important calculations made during the analysis of any real estate investment because it represents the property’s potential income after all vacancy and operating expenses have been subtracted. In other words, net operating income virtually represents the income property’s productivity, or measure of cash flow.

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Learn all about cash-on-cash return, including its meaning, benefits and shortcomings, why real estate investors use it, and its formula.

In this real estate investing article, we want to discuss cash-on-cash return by exploring its meaning, benefits and shortcomings, popularity amongst real estate investors, and then the cash-on-cash formula alongside several examples.

So let’s get started.

The cash-on-cash return (or equity dividend rate) measures the ratio between a property’s anticipated first year’s cash flow before tax (CFBT) to the amount of initial cash investment made by the real estate investor to purchase the rental property.

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