Net Operating Income (NOI) Calculator
Calculate NOI for any rental property — the core metric for investment analysis and property valuation. Includes 50% rule check, expense benchmarks, and NOI-to-value conversion.
Each expense as % of gross rent compared to industry benchmarks.
| Expense | Annual Amount | Your % of Rent | Benchmark % | Status |
|---|---|---|---|---|
| Property Taxes | $4,000 | 11.1% | 12% | Normal |
| Insurance | $1,500 | 4.2% | 5% | Normal |
| Maintenance | $2,400 | 6.7% | 8% | Normal |
| Management | $3,200 | 8.9% | 9% | Normal |
| Utilities | $0 | 0.0% | 3% | Not entered |
| Reserves | $1,200 | 3.3% | 5% | Normal |
| Total Operating Expenses | $12,300 | 34.2% | 38-52% | Efficient |
Commercial real estate is valued by income: Property Value = NOI ÷ Cap Rate. Enter a target cap rate to see the implied property value.
How to Use This NOI Calculator
Enter your property's income and expenses to calculate Net Operating Income instantly:
- Gross Annual Rental Income: Total potential rent at 100% occupancy — don't subtract vacancy here.
- Vacancy Rate: Expected percentage of time units sit empty or tenants don't pay. Industry standard is 5-10%.
- Operating Expenses: All costs to run the property — taxes, insurance, maintenance, management, utilities, and reserves. Never include mortgage payments.
The calculator shows Effective Gross Income (EGI), total expenses, NOI, and how your expense ratio compares to industry benchmarks.
The NOI Formula
Net Operating Income (NOI) = EGI − Total Operating Expenses
Example: $36,000 gross rent − $2,880 vacancy (8%) = $33,120 EGI
$33,120 − $12,300 expenses = $20,820 NOI
Expense Ratio: 34.2% | NOI Margin: 57.8%
NOI is the single most important metric in commercial real estate. It measures a property's profitability independent of financing — making it the standard tool for comparing properties and deriving value.
NOI vs. Cash Flow
NOI ≠ cash flow. NOI excludes mortgage payments. Cash flow = NOI − Debt Service. A property can have positive NOI but negative cash flow if the mortgage payment is too high.
The 50% Rule for NOI
The 50% rule is a quick benchmark: operating expenses typically consume about 50% of gross rent, leaving 50% as NOI. This rule exists because:
- Property taxes, insurance, maintenance, and management are relatively fixed costs
- Vacancy and reserves consistently erode gross income
- Unexpected repairs and capex are a reality of ownership
50% Rule in Practice
| Gross annual rent | $36,000 |
| 50% Rule NOI estimate | $18,000 |
| Actual itemized expenses | $12,300 |
| Actual NOI | $20,820 |
| Result | Beats 50% rule — efficient property |
The 50% rule is a screening tool, not a precise calculation. Use actual expenses for serious analysis.
How NOI Drives Property Value
Commercial and investment properties are valued by their income: Value = NOI ÷ Cap Rate. This means every dollar of NOI improvement directly increases property value.
NOI Value Creation Example
| Before | After | |
| Annual NOI | $18,000 | $21,000 |
| Market Cap Rate | 6% | 6% |
| Implied Value | $300,000 | $350,000 |
| Value Created | $50,000 from $3,000 NOI increase | |
A $250/month rent increase on a property in a 6% cap rate market adds $50,000 of property value — a 16.7x multiplier on the income increase.