Definition
A building's effective income (rents minus vacancy) minus its operating expenses, before the mortgage, depreciation and income tax.
The calculation
- Potential gross income: all rents over 12 months, plus other income (parking, laundry).
- Minus vacancy and bad debts: that gives effective income.
- Minus operating expenses: municipal and school taxes, insurance, heat and electricity paid by the owner, maintenance and repairs, management, snow removal and other running costs.
The result is the NOI. It leaves out mortgage payments, depreciation and income tax. It's the basis of the cap rate and the debt service coverage ratio.
Not the same as taxable income
The net rental income reported on form T776 and the Québec TP-128 is not the NOI: interest on borrowed money is deducted there, as is capital cost allowance if you claim it. NOI judges the building itself, regardless of its financing and your tax situation, which is why it's used to compare buildings for sale. The plex return calculator works it out from your figures.
Learn more
Glossary terms
Official sources
General information, not legal advice
This page summarizes the rules in force in Québec on the update date shown, for information only. It does not replace advice from a lawyer, notary or accountant, nor the official texts: when in doubt, rely on the sources above and on the Tribunal administratif du logement.