Real Estate Metrics 101: Issue 2

💼 Net Operating Income (NOI)

NOI is your property's total income after operating expenses, but before mortgage payments and taxes.

Why it matters:

• Determines a property's value using Cap Rate.

• Helps you evaluate profitability before financing enters the picture.

🧠 Pro Tip: Always verify NOI numbers - sellers may understate expenses.

🛠️ Operating Expense Ratio (OER)

This measures how much of your income goes toward running the property.

Why it matters:

• A lower OER usually means more efficient operations.

• High OER? Time to check for maintenance bloat, vacancies, or mismanagement.

🧮 Gross Rent Multiplier (GRM)

A simple ratio of property price to gross rental income.

Why it matters:

• Great for quick comparisons.

• Use it as a screening tool, not a final decision-maker.

🚦 Example: A GRM of 8 vs. 12 means the property with 8 could offer faster payback - but dig deeper before jumping in.

📌 Next up: We’ll shift gears and talk financing - specifically, how to evaluate whether a deal can comfortably handle debt.

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