Net operating income (NOI) calculator.
NOI is the engine of every valuation — income after operating expenses, before financing and taxes. Enter your income and costs to get NOI, effective gross income, and your expense ratio.
What net operating income tells you
Net operating income is the single most important number in commercial real estate, because value flows directly from it. It is the property’s total income after operating expenses but before your mortgage, income taxes, depreciation, and capital projects. Start with gross rental income, subtract a realistic vacancy and credit-loss allowance to get effective gross income, add any other income like parking or signage, then subtract every operating expense the owner is responsible for.
Example. A small office building collects $300,000 in gross rent plus $12,000 of parking income. At a 5% vacancy allowance, effective gross income is $297,000. Subtract $90,000 of operating expenses and NOI is $207,000. At a 6.5% market cap rate, that NOI implies roughly a $3.18 million value — which is why sharpening the expense line matters so much.
Frequently asked questions
Buyers will rebuild this number. Better you do it first.
Understated vacancy, missing reserves and management priced at zero are the three adjustments that get made during diligence. Send me the property and I'll normalise it before a buyer does.
Estimates are for planning only and use simplified assumptions — not tax, legal, or investment advice. Verify with your lender, CPA, and a full broker analysis before acting.
Three lines buyers add that owners leave out
Net operating income looks like arithmetic and behaves like an argument. The disagreements are always in the same three places.
Vacancy and credit loss. A fully occupied building still gets underwritten with a vacancy factor, because tenants leave and buyers price for it. Presenting a zero is the fastest way to have your whole statement doubted.
Management. If you self-manage, your NOI includes free labour a buyer will have to pay for. It comes out at a market rate whether or not it is in your books.
Capital reserves. Roof, HVAC, parking lot resurfacing. These are not operating expenses, but a buyer sets money aside for them and reduces what they will pay accordingly.
Why a normalised NOI is worth more than a flattering one
An inflated NOI does not survive due diligence. It survives the offer, which feels like a win, and then it collapses in week four when the buyer's lender rebuilds it — at which point the price gets renegotiated from a position where you have already told your staff and your accountant.
A defensible NOI produces a lower headline and a deal that closes at the headline. Given that recorded tri-county sale volume has fallen roughly 46% since 2021, a retrade is expensive: the pool of replacement buyers is smaller than it was, and a building that has visibly failed one deal is harder to sell to the next.
Common questions
What is included in NOI?
All operating income less all operating expenses, before debt service, depreciation, income tax and capital expenditure. Property taxes, insurance, utilities, maintenance, management and a vacancy allowance belong in it; your mortgage payment does not.
Should NOI include a management fee if I manage the property myself?
Yes. A buyer will have to pay for management whether you did or not, so they will insert a market fee during underwriting. Leaving it out inflates NOI and the value derived from it.
Are capital expenditures part of NOI?
No, but they affect value. A roof replacement is a capital item rather than an operating expense, and buyers account for it by setting aside a reserve and reducing what they will pay. Ignoring the reserve overstates what the property is worth.
