NOI Calculator

How to Use the NOI Calculator

Net operating income is the number every other commercial real estate metric is built on, so it is worth getting right. The calculator walks through it line by line.

Income

• Gross potential rent — the rent from every unit or suite at current lease rates for a full year.
• Vacancy rate — expected lost rent from empty space and bad debt.
• Other income — parking, laundry, storage, signage, late fees and expense reimbursements from tenants.

Expenses

• Property taxes and insurance — use the actual bills, and check whether a sale will trigger a tax reassessment in your county.
• Management fee — entered as a percentage. The calculator applies it to effective gross income, which is how most management contracts are written.
• Maintenance, utilities paid by the owner, and other expenses such as landscaping, snow removal, legal and accounting.

Worked Example

A 24-unit apartment building has $300,000 of gross potential rent, 6% vacancy and $12,000 of other income. Taxes are $36,000, insurance $9,000, management 4%, maintenance $15,000, owner-paid utilities $8,000 and other expenses $4,000.

The calculator also shows the operating expense ratio: $83,760 ÷ $294,000 = 28.5%. Ratios far below what similar properties run (often 35–50% for multifamily) usually mean an expense is missing.

What NOI Leaves Out — On Purpose

NOI excludes debt service, depreciation, capital expenditures and income taxes. That keeps it comparable from one owner to the next: two investors buying the same building with different loans would get the same NOI. Capital items like a new roof are tracked separately, which is why lenders add a reserve line when they underwrite.

Where to Take the Number Next

• Divide NOI by price in the cap rate calculator to value the property.
• Divide NOI by annual debt service in the DSCR calculator to see how much a lender will lend.
• Divide NOI by the loan amount in the debt yield calculator for the lender's other key test.

Questions About This Calculator

Should I use actual or pro forma figures? Use the trailing 12 months of actual income and expenses to value what exists today. Run pro forma numbers separately to see the upside, but don't pay for it up front.

Is the management fee charged on gross or collected rent? Most contracts charge it on collected income, which is effective gross income here. If yours charges on gross potential rent, enter a slightly higher percentage to match.

Can NOI be negative? Yes — during lease-up or heavy vacancy. A negative NOI means the property cannot cover its own operating costs before any mortgage.