Hello Peter Lee I suggest fallow Candice A. Donofrio good detailed response.

What Candice said.

The formula is I R V - income divided by value or income divided by cap rate. OR cap rate times value (to determine if the income is sufficient to justify the asking price)



You'll need to know the Net, first thing.
This means you'll need to know the income AND EXPENSES.

If you don't know the expenses outright, you'll need to create a proforma and determine the likely expenses for the property based on condition, taxes, advertising, management costs, vacancy rates, etc.

ONCE YOU KNOW these 2 things . . . you can determine cap rate for the property and the best purchase price.

EXAMPLE: 300k asking price, rents total 3000/month or 36k annually.

Your expenses are 12,000 a year so your NOI is 24k annually.
DIVIDE 24k by 300k and your figure is .08. 8 cap.
MULTIPLY 300k by 8% and you get 24,000. That's the net you'd need at that cap rate to justify the asking price.

In my area 8 cap would be fairly investor-friendly.
In Vegas that would be a golden unicorn . . .

If this is a RESIDENTIAL property, you would not use NOI as a rule.

If you Google your question, you get this answer.

Net operating income (NOI) is a commonly used figure to assess the profitability of a property. The calculation involves subtracting all operating expenses on the property from all the revenue generated from the property. The higher the revenues and the smaller the expenses, the more profitable a property is.

Candice gave you the easiest to remember - IRV.

IRV - The NOI divided by the Desired Rate of Return will Price the Property
ie. $24,000 / .10 =. $240,000 Value

Candice A. Donofrio has you covered with an easy to understand example. 

Generally not an issue for most agents, however if you are going to be providing this for your investment listings you will need to get it right or you could be opening yourself up to liability.

Study hard Peter Lee - the formulas tend to trip up a lot of people. I wish you all the best with obtaining your real estate license. 

I think Candice explained it best.  CCIM teaches one to use IRR.  

I do not use NOI I use CAP Rate.