Commercial Real Estate NOI Calculator

Calculate Net Operating Income (NOI) to evaluate commercial property performance. Includes cap rate and expense ratio analysis.

Total annual rent from all tenants

Parking, laundry, vending, late fees

Expected vacancy (5% is typical for stable properties)

Annual property tax bill

Annual commercial property insurance

Property management (3-6% of gross rents)

Routine maintenance, repairs, landscaping

Electric, water, gas, trash (if owner-paid)

Security, janitorial, leasing commissions, etc.

Used to calculate Cap Rate (optional)

Effective Gross Income = (Gross Rental Income + Other Income) × (1 - Vacancy Rate)\nNOI = Effective Gross Income - Total Operating Expenses\nCap Rate (%) = (NOI / Property Value) × 100\nNOI Margin (%) = (NOI / Effective Gross Income) × 100
Gross Rental: $200,000 | Other Income: $10,000 | Vacancy: 5%\nProperty Tax: $20,000 | Insurance: $5,000 | Management: $10,000\nMaintenance: $8,000 | Utilities: $3,000 | Other: $2,000\nProperty Value: $1,500,000\n\nEffective Gross Income: $210,000 - $10,500 (5% vacancy) = $199,500\nTotal OpEx: $20,000 + $5,000 + $10,000 + $8,000 + $3,000 + $2,000 = $48,000\nNOI: $199,500 - $48,000 = $151,500\nCap Rate: ($151,500 / $1,500,000) × 100 = 10.1%\nNOI Margin: ($151,500 / $199,500) × 100 = 76.0%

What is NOI (Net Operating Income) in commercial real estate?

NOI is the profitability metric for income-producing properties, calculated as Gross Rental Income + Other Income - Operating Expenses. NOI excludes debt service (mortgage payments), depreciation, amortization, and capital expenditures. It represents the property's ability to generate cash flow from operations before financing costs.

What operating expenses are included in NOI?

Operating expenses include: property management fees (3-6% of rent), property taxes, building insurance, utilities (if paid by owner), maintenance and repairs, janitorial services, landscaping/snow removal, security, and leasing commissions. Exclude: mortgage payments, depreciation, income taxes, and capital improvements (new roof, HVAC replacement).

How is Cap Rate calculated from NOI?

Capitalization Rate (Cap Rate) = NOI / Property Value × 100. For example, a $1,000,000 property generating $80,000 NOI has an 8% cap rate. Cap rates vary by asset class and location: Class A urban (4-6%), Class B suburban (6-8%), Class C tertiary markets (8-12%). Higher cap rates indicate higher risk and potentially higher returns.

What is a good NOI margin for commercial properties?

NOI Margin = (NOI / Gross Income) × 100. Healthy margins: multifamily (50-65%), office buildings (45-60%), retail (55-70%), industrial (60-75%). Lower margins indicate high operating costs or inefficient management. Value-add opportunities exist when NOI margins are below market averages—reducing expenses by 10% can increase property value by 10-15% (based on cap rate).

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