Net Operating Income
(NOI) Calculator
Calculate the Net Operating Income for any commercial property investment. NOI is the fundamental metric for evaluating commercial real estate—it represents income after operating expenses but before debt service and capital expenditures.
Annual Income
Annual Operating Expenses
Purchase Price (Optional)
Enter Property Details
Fill in the income and expense information to calculate the Net Operating Income for your commercial property investment.
Understanding Net Operating Income
What is NOI?
Net Operating Income (NOI) is the total income generated by a property minus all operating expenses. It's the most important metric in commercial real estate because it represents the actual cash flow before financing costs. NOI excludes debt service (mortgage payments), capital expenditures, depreciation, and income taxes.
The NOI Formula
Effective Gross Income = Potential Gross Income - Vacancy & Collection Losses + Other Income
What's Included in Operating Expenses?
- •Property Taxes: Annual real estate taxes assessed by local government
- •Insurance: Property, liability, and umbrella coverage
- •Utilities: Water, sewer, electric, gas (if not tenant-paid)
- •Repairs & Maintenance: Routine repairs, landscaping, cleaning
- •Property Management: Typically 3-5% of gross revenue
What's NOT Included in NOI?
- ✕Debt service (mortgage principal and interest)
- ✕Capital expenditures (roof replacement, HVAC systems)
- ✕Depreciation and amortization
- ✕Income taxes
- ✕Tenant improvements and leasing commissions
NYC Cap Rate Benchmarks (2024)
Frequently Asked Questions
What is a good NOI for a commercial property?
A "good" NOI depends on the property type, location, and purchase price. What matters most is the relationship between NOI and price (cap rate). In NYC, investors typically target NOI that produces a 4-6% cap rate for stabilized properties. Higher NOI relative to price indicates better value.
How do I increase NOI on my property?
You can increase NOI by: (1) Raising rents to market rates, (2) Reducing vacancy through better marketing or tenant retention, (3) Adding ancillary income like parking or signage, (4) Reducing operating expenses through efficiency improvements, and (5) Billing back utilities or common area costs.
What's the difference between NOI and cash flow?
NOI measures property performance before financing, while cash flow includes debt service. Cash Flow = NOI - Debt Service. Two investors can buy the same property with different financing and have different cash flows, but the NOI remains constant. This makes NOI better for comparing properties.
How is NOI used in commercial real estate valuation?
NOI is the foundation of the income approach to valuation. Property Value = NOI ÷ Cap Rate. For example, a property with $500,000 NOI valued at a 5% cap rate would be worth $10,000,000. Lenders also use NOI to calculate Debt Service Coverage Ratio (DSCR) for loan underwriting.