Net Operating Income (NOI) Calculator
Net Operating Income (NOI) is a key metric used in real estate investing to analyze the profitability of an income-generating property. It represents the income generated from a property after deducting all operating expenses, but before accounting for debt payments (mortgage) and income taxes. NOI is crucial for comparing different investment opportunities, determining a property's value, and understanding its cash flow potential.
How to Calculate NOI:
The basic formula for NOI is:
NOI = Total Rental Income + Other Income – Operating Expenses
- Total Rental Income: This is the gross income collected from rent after accounting for vacancies and credit losses.
- Other Income: This includes any additional income generated by the property, such as parking fees, laundry facilities, vending machines, or late fees.
- Operating Expenses: These are the costs associated with running and maintaining the property. They typically include property taxes, insurance, property management fees, repairs and maintenance, utilities (if paid by the owner), and administrative costs. Expenses that are NOT included in operating expenses for NOI calculation are mortgage principal and interest payments, capital expenditures (major renovations), depreciation, and income taxes.
Why is NOI Important?
NOI is a fundamental tool for investors because:
- Valuation: It's used in the capitalization rate (cap rate) calculation (Cap Rate = NOI / Property Value), which helps determine a property's market value.
- Performance Analysis: It provides a clear picture of a property's operational efficiency. Higher NOI generally indicates a more profitable investment.
- Lending: Lenders often use NOI to assess a borrower's ability to repay a mortgage loan.
- Comparison: It allows investors to compare the profitability of different properties on an apples-to-apples basis, regardless of their financing structures.
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"Total Annual Income: $" + totalIncome.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "" +
"Total Annual Operating Expenses: $" + totalOperatingExpenses.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "" +
"Net Operating Income (NOI): $" + netOperatingIncome.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "" +
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