Net operating income is the number every other commercial metric is built on, and this free NOI calculator gets you to it in seconds. Enter the property's income and its operating expenses and you will have your net operating income right away.
NOI is simply what a property earns after you pay to operate it, but before your loan payment and before income taxes. Get this number right and your cap rate, your value, and your debt coverage all fall into place. Get it wrong and every number after it is off. Here is the tool, then the formula and how I think about it.
NOI, in one line: net operating income is a property's income after operating expenses but before debt service and capital expenses. Formula: NOI = effective gross income minus operating expenses.
Why it matters: NOI drives your value (value = NOI divided by cap rate) and your loan sizing, so it is the first number I calculate on any deal.
The NOI Formula
The formula is NOI = effective gross income − operating expenses. Effective gross income is all the money the property collects, rent plus any reimbursements and other income, minus a realistic vacancy allowance. Operating expenses are the costs of running the building: property taxes, insurance, management, maintenance, utilities you cover, and reserves.
Two things people get wrong. First, do not subtract your mortgage. Debt service is not an operating expense, and leaving it out is what makes NOI comparable across deals no matter how each one is financed. Second, do not forget a vacancy factor and real reserves. A property that looks great at 100% occupancy with no reserves is not being underwritten honestly.
Here is a quick example. A building collects $200,000 in gross income, you carry a 5% vacancy allowance of $10,000, and operating expenses run $60,000. Effective gross income is $190,000, so NOI is $190,000 minus $60,000, or $130,000.
How to Use the NOI Calculator
Enter the annual income and the annual operating expenses and the calculator returns your NOI. The work is in getting honest inputs.
Pull the actual rent roll and trailing 12 months of expenses whenever you can, not the seller's pro forma. Add a vacancy allowance even if the building is full today. Include a management fee even if you plan to self-manage, because your time is worth something and the next buyer will price it in. Once you have a clean NOI you can drop it straight into the cap rate calculator to check pricing, or run the whole deal in the Deal Analyzer.
Watch: How I Analyze ANY Commercial Property in Under 5 Minutes
Growing NOI Is How You Build Value
Here is why I obsess over NOI: because value equals NOI divided by the cap rate, every dollar you add to NOI adds many dollars of value. At a 7% cap rate, adding $10,000 of annual NOI is worth roughly $143,000 in value. That is the whole game in value-add investing, raise below-market rents, cut wasted expenses, or add income, and the building is worth more without the market moving at all.
NOI Calculator FAQ
What is the formula for NOI?
NOI equals effective gross income minus operating expenses. Effective gross income is rent and other income minus a vacancy allowance, and operating expenses exclude your mortgage and capital expenditures.
Does NOI include the mortgage?
No. Net operating income is calculated before debt service, which is what makes it comparable across properties regardless of how each one is financed. Your loan payment comes out after NOI, when you calculate cash flow.
Does NOI include capital expenditures?
Generally no. Big one-time capital items like a new roof or a parking lot are treated separately from NOI, though most investors do include an ongoing reserve for replacements as an operating expense.
What is a good NOI?
There is no single good NOI, because it scales with the size of the property. What matters is the NOI relative to price, which is your cap rate, and whether the NOI is stable and has room to grow.
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Explore CRE CentralOnce you have your NOI, check what it says about price with the cap rate calculator, or see all the commercial real estate calculators in one place.