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NOI Calculator for Real Estate Investors

Calculate Net Operating Income (NOI) using our calculator.

NOI Calculator

Net Operating Incone (NOI)


The higher the net operating income is compared to the property price, the easier it is to find financing.

Property investors can use net operating income (NOI) to make informed decisions and assess the financial viability of potential real estate opportunities. NOI is an important metric that represents the property’s revenue after subtracting operating expenses, debt service, and income taxes. It provides a clear picture of the property’s profitability and cash flow potential.

Investors can use an NOI calculator to simplify computing a property’s net operating income. It can also help them quickly and efficiently assess a property’s financial performance. This allows investors to compare and evaluate various investment opportunities, determine potential returns, and make well-informed decisions based on the property’s income-generating potential.

How to Use Fairmount Funding's NOI Calculator

Utilizing an NOI calculator is a straightforward and efficient way for property investors to evaluate the net operating income of a potential investment property. All you need to do is input the amount of revenue you earned from a specific property and how much you spent on operating expenses. Following a few simple steps can give investors valuable insights into the property’s financial performance.

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How to Calculate NOI

The NOI formula calculates a property’s income potential by subtracting its operating expenses. The formula is as follows:

NOI = Real Estate Revenue – Operating Expenses

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Let’s break down the different components of the NOI formula:

  1. Real Estate Revenue. This refers to the total revenue generated by the property from various sources. It typically includes rental income from tenants, parking fees, and any other income streams associated with the property. It is crucial to consider only the revenue directly related to the property’s operations and exclude any non-operating or one-time income.

  2. Operating Expenses. These are the expenses related to operating and maintaining the property. Operating expenses include property taxes, insurance premiums, utilities, repairs and maintenance, janitorial services, and more.

By subtracting the total operating expenses from the total income, the net NOI is derived. This indicates the property’s profitability and cash flow potential, excluding factors such as debt service and income taxes. Understanding the components of the NOI formula allows property investors to analyze the financial performance of an investment property.

How to Use NOI to Calculate Debt Yield

Lenders use debt yield to understand how long it would take for them to recoup their investment if they had to take possession of a property after a loan default.

The NOI formula calculates a property’s income potential by subtracting its operating expenses. The formula is as follows:


Debt Yield = Net Operating Income ÷ Total Loan Amount


Click here to use our Debt Yield Calculator.

What components are excluded in an NOI calculation?

  • Debt Service. This component refers to the regular payments made by a property investor to repay the principal and interest on a loan. It encompasses the periodic installments made to the lender based on the loan agreement terms.

  • Income Taxes. These are mandatory contributions levied by the government based on an entity’s income, including rental income from real estate investments. These taxes are calculated based on the applicable tax laws and rates in the state where a property is situated, and the property owner is responsible for paying them to the appropriate authorities.

  • Depreciation. It denotes the decrease in property value throughout the years due to wear and tear, obsolescence, or other factors. Depreciation is a non-cash expense that enables landlords to subtract a portion of the property’s cost as an expense on their tax returns, reducing taxable income.

  • Tenant Improvements (TI). This refers to the alterations made to a rental property, like partition walls, flooring, or lighting, to meet a tenant’s specific needs or preferences. The tenant and landlord typically talk about these improvements before signing a contract.

  • Capital Expenditures. Also known as CapEx, this component refers to the significant expenses incurred to improve, maintain, or replace long-term assets in a property. Some excellent examples are replacing a roof, upgrading HVAC systems, renovating common areas, or installing new equipment. Capital expenditures are investments made to preserve or enhance the property’s value and are not considered regular operating expenses.

Pros and Cons of Calculating NOI

Calculating a property’s NOI can be helpful to real estate investors and money lenders. However, the NOI formula also has its flaws. Let’s explore the pros and cons of calculating NOI:

Advantages of Calculating NOI:

  • Financial Analysis. Calculating NOI provides a comprehensive financial analysis of a property’s income-generating potential. It helps investors evaluate the property’s profitability, cash flow, and overall financial performance.


  • Comparison of Investment Opportunities. NOI allows for easy comparison of different investment opportunities. By calculating the NOI for various properties, investors can assess and compare their income potential, helping them make informed decisions when selecting what real estate asset to acquire.


  • Risk Assessment. NOI helps in assessing the risk associated with an investment property. By analyzing the income stream and deducting operating expenses, investors can gauge the property’s ability to generate income and cover expenses, enabling them to evaluate and mitigate potential risks.


Disadvantages of Calculating NOI:

  • Reliance on Accurate Data. Calculating NOI requires updated income and expense data. Relying on incomplete or inaccurate information can lead to misleading computation and potentially flawed investment decisions.


  • Limited Focus. NOI does not consider factors like financing costs, taxes, and capital appreciation. While it provides valuable insights into the property’s income potential, it may be unable to provide a comprehensive assessment of its overall return on investment.


  • Sensitivity to Market Conditions. NOI calculations are sensitive to changes in market conditions, like rental rates, occupancy rates, and operating expenses. These fluctuations can impact the accuracy of the NOI calculation.

NOI Calculator FAQs

How does net operating income differ from gross operating income?

Net operating income (NOI) and gross operating income (GOI) are essential financial metrics used in real estate analysis, but they differ in scope and components. GOI represents the total income generated by a property before deducting any operating expenses, while NOI reflects the income remaining after subtracting operating expenses from the GOI.

What is a good NOI percentage?

The determination of a good NOI percentage depends on various factors, including the property type, location, market conditions, and individual investment goals. A higher NOI percentage generally indicates a more favorable financial performance, but what is considered “good” can vary across different markets and investment strategies. Investors should compare NOI percentages within the specific market they are operating in to assess what would be considered favorable based on local benchmarks and their investment objectives.

How is calculating NOI used to determine the cap rate?

Calculating NOI is an essential step in determining the capitalization rate (cap rate), which is a measure of the property’s potential return on investment. You can compute the cap rate by dividing the property’s NOI by its market value or purchase price.

By using NOI to determine a property’s cap rate, investors can assess its income-generating potential relative to its value. Thus, they can make comparisons to other investment opportunities. A higher cap rate generally indicates a higher potential return but may also entail higher risk, while a lower cap rate suggests lower potential returns but potentially lower risk.

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