NOI Calculator
NOI = (Gross Potential Income − Vacancy Loss + Other Income) − Operating Expenses
How NOI is built
Net operating income is the property’s income after operating costs but before debt service, depreciation, capital expenditure and tax. It is the number that drives valuation, so how it is assembled matters more than the result itself.
Worked example
A retail centre with $1,200,000 gross potential income, 7.5% vacancy and credit loss, $45,000 of other income, and $380,000 of operating expenses:
- Vacancy and credit loss: $1,200,000 × 7.5% = $90,000
- Effective gross income: $1,200,000 − $90,000 + $45,000 = $1,155,000
- NOI: $1,155,000 − $380,000 = $775,000
What to watch
- Operating expense ratio is a fast sanity check. The calculator shows it. A ratio far below market usually means something has been left out.
- Recoveries matter. In a NNN structure much of the expense load is reimbursed, which changes both sides of the calculation.
- Management fees and replacement reserves belong in operating expenses even when a seller’s summary omits them.