NOI vs. Cash Flow: What Is the Difference in an Apartment Deal?
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Net operating income (NOI) is a building's income minus its operating expenses, before any loan payments or capital spending; cash flow is what remains after debt service, reserves or capital expenditures, and partnership-level costs. NOI tells you what the property earns; cash flow tells you what can be paid to investors.
A worked example (hypothetical)
| Line | Amount |
|---|---|
| Effective gross income | $1,000,000 |
| Operating expenses | −$400,000 |
| Net operating income | $600,000 |
| Debt service (principal and interest) | −$380,000 |
| Replacement reserves | −$20,000 |
| Cash flow after debt service and reserves | $200,000 |
| Asset management fee | −$30,000 |
| Available to distribute | $170,000 |
On $2,500,000 of equity, the $170,000 is a 6.8% distribution rate, while the NOI at a 6% cap rate implies a $10,000,000 value.
Why can NOI rise while cash flow falls?
A floating-rate loan whose rate rises, an interest-only period that ends, a cash sweep or a bigger capital budget can all cut cash flow even as NOI grows. See NOI, where distributions come from, syndication reserves and DSCR loans.
How DoorRaise fits in
On DoorRaise, sponsors raise equity for apartment buildings from their friends and followers under Rule 506(b) or 506(c), and DoorRaise verifies that every investor is accredited before they sign, in both. Investors fund by wire into the deal's escrow account at Enterprise Bank & Trust, and quarterly distributions and updates are the default. DoorRaise does not hold investor money or give investment advice.
FAQ
Does NOI include the mortgage payment?
No. NOI is before debt service.
Is depreciation subtracted from NOI or cash flow?
Neither: depreciation is a tax deduction, not a cash cost.
Which matters more to a passive investor?
Cash flow for distributions; NOI for the value at sale.
Sources
This article is general information, not legal, tax or investment advice. Every investment can lose money, and distributions are not guaranteed. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.