Boston Neighborhoods With The Best NOI

For anyone looking to purchase an investment property for the first time, NOI (net operating income) is one of the fundamental equations you need to know to estimate its potential profitability. Net operating income in real estate is a financial breakdown of the total revenue that the property will generate in a year minus the normal operating expenses. In short, it’s an annual profit projection for investment properties.

In a competitive real estate market like Boston, it’s important to analyze a property based on NOI before you decide to purchase. Some properties may be priced too high to actualize any meaningful profit and can end up being a money pit for years to come. While it’s hard to generalize an entire neighborhood in terms of NOI, we can use median sales prices and average rent prices by neighborhood to get a general sense of which areas may provide the best opportunity for a profitable investment.

In order to calculate the NOI of a neighborhood, we’re projecting yearly operating expenses based on the mortgage payments of a standard loan taken out of the median sales price. We’re also accounting for the yearly property tax expenses based on the property tax rate of the area, and adding in the average homeowner’s insurance of that neighborhood. To calculate yearly revenue, we’re taking the average rent price of that neighborhood and multiplying by 12 months.