NOI vs EBITDA in Interviews: Real Estate vs Corporate Earnings
Clear interview answer for NOI vs EBITDA: what each includes, why REPE uses NOI, corporate parallels, and traps when someone mixes the metrics.
REPE · 4 min read
"Is NOI the same as EBITDA?" shows up in REPE interviews and in IB processes when real estate crosses the table. The honest answer is no. They are cousins. Both try to show operating earnings before financing and (often) before heavy non-cash charges, but the line items differ because a property is not a C-corp income statement.
The short answer
"NOI is property-level operating income: rental revenue after vacancy and concessions, minus operating expenses, before debt service, CapEx, and depreciation. EBITDA is corporate operating earnings before interest, taxes, depreciation, and amortization. For a pure property, NOI is the cleaner operating metric. For a real estate operating company with corporate overhead, you may see EBITDA or EBITDAre that sits above NOI."
Side-by-side
Starts from rent / EGI. Subtracts property opex (taxes, insurance, utilities, R&M, mgmt fee as defined). Stops before debt, CapEx, D&A.
Starts from operating profit build. Adds back D&A (and sometimes other items). Reflects company-level costs, not one asset's rent roll.
NOI build (what to recite)
Gross potential rent
If all units / space leased at asking or in-place rents per convention.
Minus vacancy, concessions, credit loss
Arrive at effective gross income (labels vary).
Minus operating expenses
Property taxes, insurance, utilities, repairs, payroll, management fee.
Equals NOI
Before debt service, tenant improvements, CapEx reserves, depreciation.
Interview NOI
NOI = Effective Gross Income - Operating Expenses
What NOI excludes (on purpose)
| Item | In NOI? | Where it shows up instead |
|---|---|---|
| Debt service (interest + principal) | No | Cash flow after debt service / BTCF |
| CapEx / reserves | Usually no | Below NOI; critical for returns |
| Tenant improvements / leasing commissions | Usually no | CapEx-like / leasing costs |
| Depreciation | No | Accounting only for taxable entities |
| Corporate overhead (opco) | No at property NOI | Company EBITDA / G&A |
Cap rates use NOI, multiples often use EBITDA
- Going-in cap rate ~ NOI / Purchase Price (define trailing vs forward NOI)
- EV / EBITDA is the corporate / PE cousin for whole companies
Do not say "cap rate is just the inverse of EV / EBITDA" without caveats. Cap rates are property market conventions tied to NOI. Corporate multiples embed growth, tax, and overhead differently. A 6% cap is not the same statement as a 16.7x EV / EBITDA on an opco with G&A and different growth.
When EBITDA shows up in real estate
- REITs and real estate opcos: EBITDA, EBITDAre, FFO, AFFO appear in public comps
- Propco / opco splits: property NOI feeds rent to opco; opco has its own EBITDA
- Hotels and some specialty assets: departmental profit vs NOI definitions get picky; ask for the house definition
Worked contrast
Property:
EGI 12.0
Operating expenses (4.5)
NOI 7.5
Debt service (3.0)
BTCF (simplified) 4.5
Same asset inside a small company that also has $1.0 of corporate G&A and $0.8 of D&A:
Rough "EBITDA-like" might start from NOI - G&A = 6.5
(then D&A addback depends on how you built EBIT)
The interview point: property NOI is not company EBITDA once overhead and structure appear.
Property NOI
7.5
After G&A
6.5
company view
After debt
4.5
not NOI
Follow-ups to prep
- Trailing vs forward NOI for exit capitalization
- Is replacement reserve above or below NOI in this OM?
- How does loss-to-lease affect NOI during value-add?
- Unlevered IRR uses property cash flows before financing; levered includes debt
If an interviewer says "NOI is just real estate EBITDA," agree that they are cousins, then correct the line items: property opex definitions, CapEx placement, and company G&A are the wedges that keep them from being identical.
Verbal 30 seconds
"NOI is property operating income after opex, before debt, CapEx, and D&A. EBITDA is a corporate metric before interest, tax, and D&A, and it can include company overhead. I capitalize NOI for property value. I do not treat NOI as FCF or as company EBITDA without naming the differences."
Practice drill
Open any multifamily OM summary. Rebuild NOI from GPR to NOI in six lines. Circle every line that is not in NOI. Say out loud where CapEx and debt service sit. Then explain in one sentence why a PE person saying EBITDA on a single asset is usually being loose with language.
Related
Continue with Cap Rate Interview Questions, Forward NOI and Exit Cap, Cap Rate Bridge, and EBITDA vs EBIT.
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