Net Operating Income (commonly just called “NOI”) is a real estate valuation metric that determines the revenue and profitability of a real estate investment property after subtracting necessary operating expenses. Our NOI Calculator is a convenient tool for investors to easily understand and calculate NOI for investment properties.
The standard mathematical formula for calculating Net Operating Income (NOI) is noted below. Note that you will first need to determine total property income and operating expense values first to input into calculation.
NOI = (Gross Operating Income1 + Other Income2)
– Operating Expenses3
1. Gross Operating Income – A property’s gross operating income can be calculated as the property’s annual gross scheduled income, less vacancy loss (the amount of rental income that the property owner loses when the space is unoccupied by the tenants) and credit loss (the estimated dollar amount of lost rental income due to vacant units and non-payment of rent.)
2. Other Income – Income generated by a rental property other than rental unit income. Examples of other income can include revenue from parking, laundry, late-fees, application processing, and more.
3. Operating Expenses – Operating expenses include the costs of running and maintaining the building, including insurance premiums, legal fees, utilities, property taxes, repair costs, and janitorial fees.
NOI is a real estate valuation calculation metric that measures the operating profitability of a specific income generating investment property by comparing the total income to the total expenses.