Net Operating Income (NOI) Calculator

Net Operating Income is the cornerstone metric of commercial real estate analysis. It represents income a property generates after operating expenses but before debt service and taxes.

NOI equals gross income minus vacancy and operating expenses. Operating expenses include management, maintenance, insurance, property taxes, and utilities—but NOT mortgage payments.

Investors and lenders use NOI to calculate cap rate, determine value, and assess debt coverage. Property value often equals NOI ÷ Cap Rate, making accurate NOI essential.

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How to Use This Calculator

1 Enter gross annual rental income
2 Enter vacancy and credit loss (typically 5-8%)
3 Enter total annual operating expenses
4 Click Calculate to see Net Operating Income
5 Use NOI for cap rate and property valuation

Formula

NOI = Gross Income - Vacancy Loss - Operating Expenses

Example Calculation

8-unit apartment building analysis

Inputs:

Gross Income: $96,000
Vacancy: 5% ($4,800)
Expenses: $38,000

Result:

NOI = $96,000 - $4,800 - $38,000 = $53,200/year

Pro Tips

Never include mortgage in operating expenses
NOI is used for cap rate and valuation
Be thorough with expense accounting

Important Considerations

• Capital expenditures are not operating expenses—track separately
• Stabilized NOI vs. trailing NOI may differ for value-add properties
• Pro forma NOI assumes optimal operations—verify assumptions

Frequently Asked Questions

Include: property taxes, insurance, maintenance, repairs, property management, utilities (landlord-paid), landscaping, pest control, legal fees, advertising, and administrative costs. Do NOT include mortgage, depreciation, or income taxes.

NOI measures property performance independent of financing. Different buyers use different loan terms, so excluding debt service allows apples-to-apples comparison. NOI shows what the property earns, regardless of how it's financed.

Property Value = NOI ÷ Cap Rate. If a property has $50,000 NOI and similar properties trade at 6% cap rates, the implied value is $50,000 ÷ 0.06 = $833,333. Increasing NOI directly increases property value.

Operating expense ratios vary: 35-45% is typical for apartments, 45-55% for older buildings or those with included utilities. The remaining percentage of gross income is your NOI margin.