NOI and cash flow are related, but they are not interchangeable.
Net operating income
NOI starts with property income and subtracts normal operating expenses such as vacancy, property taxes, insurance, management, routine maintenance and other recurring property costs. Mortgage principal and interest are generally excluded.
Example: If a property produces $18,000 of effective annual income and has $7,000 of operating expenses, NOI is $11,000.
Cash flow
Cash flow considers what happens after financing. If annual debt service is $8,000, the same property would produce roughly $3,000 before owner-level taxes and extraordinary capital items.
Use realistic expenses
The fastest way to create a misleading NOI is to omit management, vacancy, repairs or insurance simply because the expense did not occur last month. Underwriting should reflect the economics of owning the property over time, not just the most convenient year.