Commercial NOI Calculator
Calculates Net Operating Income (NOI) for commercial properties by subtracting vacancy loss and operating expenses from total income. Used by investors and lenders to evaluate a property's profitability before financing costs.
About this calculator
Net Operating Income (NOI) measures how much income a commercial property generates after accounting for vacancies and operating costs, but before debt service or taxes. The formula is: NOI = (Gross Rental Income + Other Income − Vacancy Loss) − Operating Expenses. Gross Rental Income is the maximum rent collectible at full occupancy. Other Income includes parking fees, laundry, or signage revenue. Vacancy Loss represents the estimated income lost due to unoccupied units, often expressed as a percentage of gross income. Operating Expenses cover property management, maintenance, insurance, and property taxes — but not mortgage payments. NOI is the single most important figure in commercial real estate valuation, forming the basis for cap rate and DSCR calculations.
How to use
Suppose an office building collects $200,000 in gross rental income and $10,000 in parking fees. Vacancy loss is estimated at $15,000, and annual operating expenses total $60,000. Step 1: Add income — $200,000 + $10,000 = $210,000. Step 2: Subtract vacancy — $210,000 − $15,000 = $195,000. Step 3: Subtract operating expenses — $195,000 − $60,000 = $135,000 NOI. Enter each figure into the corresponding field and the calculator returns your NOI instantly.
Frequently asked questions
What is the difference between NOI and net profit for a commercial property?
NOI excludes debt service (mortgage payments), income taxes, depreciation, and capital expenditures — items that net profit accounts for. This makes NOI a property-level metric rather than an owner-level one. Because it strips out financing decisions, two investors with different loan structures can compare properties on equal footing. Lenders and appraisers rely on NOI precisely because it reflects the property's earning power independent of how it is financed.
How does vacancy loss affect commercial NOI calculations?
Vacancy loss directly reduces Effective Gross Income, which is the starting point for computing NOI. Even a 5% vacancy rate on a $500,000 gross income property wipes out $25,000 before a single expense is paid. Accurate vacancy estimates are critical — underestimating vacancy inflates NOI and leads to overpaying for a property. Most lenders apply a market-standard vacancy rate (commonly 5–10%) even if the property is currently fully occupied.
What is a good NOI for a commercial real estate investment?
There is no universal 'good' NOI because it scales with property size and market. What matters more is the relationship between NOI and purchase price, expressed as the cap rate. A $200,000 NOI on a $2,500,000 property yields an 8% cap rate, which may be attractive in a secondary market. Investors should benchmark NOI against comparable sales in the same submarket and property class to judge whether the income justifies the asking price.