Net operating income compared with Cash flow
| Decision point | Net operating income | Cash flow |
|---|---|---|
| Starts with | Operating income | NOI |
| Operating expenses | Subtracted | Already reflected through NOI |
| Mortgage payments | Excluded | Subtracted |
| Capital reserves | Usually shown separately | Often subtracted for sustainable cash flow |
| Best use | Cap rate, value, and debt coverage | Liquidity and investor distributions |
How the difference changes a deal
A rental with $17,760 NOI and $11,760 annual debt service produces $6,000 before other below-NOI cash items. The property can have respectable NOI while the chosen loan leaves thin cash flow.
A practical decision framework
- Keep debt service out of NOI so property operations remain comparable.
- Show replacement reserves explicitly when estimating spendable cash flow.
- Use the same time period and expense definitions throughout the model.
Frequently asked questions
Can NOI be positive while cash flow is negative?
Yes. Debt service and other below-NOI cash requirements can exceed positive NOI.
Does NOI equal EBITDA?
They are conceptually similar but not interchangeable. Real-estate NOI follows property-specific income and expense conventions.
Where does principal paydown belong?
Principal is part of debt service and reduces current cash flow, while also increasing equity. It is not an operating expense.
This guide is educational and does not provide investment, lending, tax, legal, or appraisal advice. Verify inputs and requirements for the specific property and jurisdiction.
Compare the strategies on the actual property.
PropLurk connects six underwriting models with one acquisition pipeline.