Calculate the Net Operating Income for your real estate investment.
Your Net Operating Income (NOI) is: N/A
Understanding Net Operating Income (NOI) in Real Estate
Net Operating Income (NOI) is a crucial metric for real estate investors. It represents the profitability of an income-generating property before accounting for debt service (mortgage payments) and income taxes. In simpler terms, it's the property's income after all reasonable operating expenses have been paid.
Why is NOI Important?
Investment Valuation: NOI is a primary component in calculating a property's value using the capitalization rate (Cap Rate). The formula is Value = NOI / Cap Rate.
Performance Analysis: It helps investors understand the actual cash flow generated by the property itself, irrespective of how it's financed.
Comparison: NOI allows for consistent comparison between different properties, as it removes financing and tax variables.
Loan Qualification: Lenders often use the Debt Service Coverage Ratio (DSCR), which is NOI divided by the annual mortgage payment, to assess a property's ability to cover its debt.
The Calculation Formula:
The calculation follows a straightforward formula:
NOI = (Gross Rental Income + Other Income) – Operating Expenses
Where:
Gross Rental Income: The total potential income from rent if the property were fully occupied.
Other Income: Any additional revenue generated from the property, such as parking fees, laundry services, vending machines, etc.
Operating Expenses: These are the costs associated with running and maintaining the property. Importantly, NOI does NOT include:
Capital Expenditures (e.g., major renovations, structural repairs)
Depreciation
Amortization
Interest Expense (on loans)
Income Taxes
Tenant Improvements
Repairs that are capitalized
The calculator above simplifies this by allowing you to input each major operating expense category individually. We've included:
Vacancy and Credit Loss: An allowance for potential periods when the property is vacant or a tenant defaults on rent.
Property Taxes: Taxes levied by local government.
Property Insurance: Costs for insuring the property against damage or liability.
Property Management Fees: Fees paid to a management company (often a percentage of collected rent).
Repairs & Maintenance: Routine costs to keep the property in good condition.
Utilities: Costs for services like water, electricity, gas, if paid by the owner.
General & Administrative Expenses: Other overhead costs like bookkeeping, legal fees, etc.
Example Calculation:
Imagine a small apartment building with:
Annual Rental Income: $50,000
Other Income: $1,500
Vacancy & Credit Loss: $3,000
Property Taxes: $4,000
Property Insurance: $1,200
Property Management Fees: $4,000
Repairs & Maintenance: $2,000
Utilities: $1,800
General & Administrative: $1,000
Step 1: Calculate Potential Gross Income (PGI)
PGI = Annual Rental Income + Other Income
PGI = $50,000 + $1,500 = $51,500
Step 2: Calculate Vacancy and Credit Loss
This is the amount you input directly.
Step 3: Calculate Effective Gross Income (EGI)
EGI = PGI – Vacancy and Credit Loss
EGI = $51,500 – $3,000 = $48,500
Step 5: Calculate Net Operating Income (NOI)
NOI = EGI – OE
NOI = $48,500 – $14,000 = $34,500
Using our calculator with the above inputs would yield an NOI of $34,500. This figure is vital for assessing the property's profitability and potential return on investment.
function calculateNOI() {
var annualRentalIncome = parseFloat(document.getElementById("annualRentalIncome").value);
var vacancyLoss = parseFloat(document.getElementById("vacancyLoss").value);
var otherIncome = parseFloat(document.getElementById("otherIncome").value);
var propertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var propertyInsurance = parseFloat(document.getElementById("propertyInsurance").value);
var propertyManagementFees = parseFloat(document.getElementById("propertyManagementFees").value);
var repairsMaintenance = parseFloat(document.getElementById("repairsMaintenance").value);
var utilities = parseFloat(document.getElementById("utilities").value);
var generalAdmin = parseFloat(document.getElementById("generalAdmin").value);
var resultElement = document.getElementById("result").querySelector("span");
// Validate inputs
if (isNaN(annualRentalIncome) || isNaN(vacancyLoss) || isNaN(otherIncome) ||
isNaN(propertyTaxes) || isNaN(propertyInsurance) || isNaN(propertyManagementFees) ||
isNaN(repairsMaintenance) || isNaN(utilities) || isNaN(generalAdmin)) {
resultElement.textContent = "Please enter valid numbers for all fields.";
resultElement.style.color = "#dc3545"; // Red for error
return;
}
// Calculate Potential Gross Income (PGI)
var pgi = annualRentalIncome + otherIncome;
// Calculate Effective Gross Income (EGI)
var egi = pgi – vacancyLoss;
// Calculate Total Operating Expenses (OE)
var operatingExpenses = propertyTaxes + propertyInsurance + propertyManagementFees +
repairsMaintenance + utilities + generalAdmin;
// Calculate Net Operating Income (NOI)
var noi = egi – operatingExpenses;
// Display the result
if (noi < 0) {
resultElement.textContent = "$" + noi.toLocaleString(undefined, { maximumFractionDigits: 0 });
resultElement.style.color = "#dc3545"; // Red for negative NOI
} else {
resultElement.textContent = "$" + noi.toLocaleString(undefined, { maximumFractionDigits: 0 });
resultElement.style.color = "var(–success-green)"; // Green for positive NOI
}
}
function resetFields() {
document.getElementById("annualRentalIncome").value = "";
document.getElementById("vacancyLoss").value = "";
document.getElementById("otherIncome").value = "";
document.getElementById("propertyTaxes").value = "";
document.getElementById("propertyInsurance").value = "";
document.getElementById("propertyManagementFees").value = "";
document.getElementById("repairsMaintenance").value = "";
document.getElementById("utilities").value = "";
document.getElementById("generalAdmin").value = "";
document.getElementById("result").querySelector("span").textContent = "N/A";
document.getElementById("result").querySelector("span").style.color = "var(–primary-blue)";
}