How Do I Calculate Net Operating Income (NOI)?

Net Operating Income, or NOI, measures the income a property generates after ordinary operating expenses. It is one of the core numbers used to value commercial real estate.

The formula

Gross operating income includes rent and other recurring income, such as parking, laundry, or reimbursement income. Operating expenses include the costs required to run and maintain the property.

Expenses that usually count

Property taxes
Property insurance
Utilities paid by the owner
Maintenance and repairs
Property management
Marketing and leasing costs

Expenses that do not count

NOI is calculated before debt and taxes. Mortgage payments, depreciation, income taxes, and capital improvements are generally excluded.

For example, a property with $250,000 of annual income and $90,000 of operating expenses has an NOI of $160,000.

Once you know NOI, you can use it with a property's value to calculate its cap rate.

Scott Forte

Scott Forte is a distinguished commercial and investment real estate professional with CENTURY 21, licensed in Maine, New Hampshire, and Massachusetts. A past president of both the New England Commercial Property Exchange (NECPE) and the New Hampshire Commercial Investment Board of REALTORS® (NH CIBOR), Scott brings extensive industry leadership and expertise to every transaction.

Before his career in real estate, Scott was a private jet pilot and earned his Master of Business Administration (MBA) with a specialization in Finance from Embry-Riddle Aeronautical University, widely regarded as the “Harvard of the Sky.”

Scott's professional achievements include the prestigious NH CIBOR President's Award and CENTURY 21 CENTURION® Award, representing the highest levels of recognition for professional excellence and sales achievement within their respective organizations.