NOI is a property's annual income minus its operating expenses, excluding debt service and depreciation. It is the single most important valuation input for LA multifamily.
Calculate NOI by starting with gross scheduled rent (sum of all monthly rents × 12), subtracting vacancy loss, and subtracting operating expenses. Operating expenses typically run 32–38% of effective gross income on stabilized LA multifamily. NOI is what you have left before paying the mortgage or accounting for tax depreciation.
Value equals NOI divided by cap rate. Every dollar of NOI flows directly into valuation. On a building at a 5% cap rate, every $1,000 of NOI improvement translates to $20,000 of sale price.
For LA multifamily in 2026, buyers reconcile stated NOI against tax return Schedule E. Discrepancies of 5%+ raise credibility questions. Clean NOI presentation — tying to tax returns, documenting reasonable operating expense ratios — is foundational pre-listing work.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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