Gross income, less vacancy
Base rent + expense recoveries + other income = gross income. Less the vacancy and credit-loss allowance = effective gross income.
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What does this property actually net?
Enter the year’s rent, a vacancy allowance, and operating expenses by category. You’ll get net operating income and the expense ratio, plus cash flow after debt, the debt coverage ratio, and the cap rate if you add a loan and a value.
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One property, one year
Work out this property's NOI
Use last year's actuals or this year's budget. The result updates as you type.
Net operating income
$447,250
The property collects $584,250 after a 5% vacancy allowance and spends $137,000 to operate, so expenses take 23.4% of income.
Gross income$615,000Rent, recoveries, and other income
Effective gross income$584,250After 5% vacancy
Operating expenses$137,00023.4% of income
Cash flow after debt and reserves$195,250NOI less loan payments and reserves
Debt service coverage1.86NOI ÷ debt service
Cap rate6.88%NOI ÷ property value
NOI leaves out loan payments, income taxes, depreciation, capital spending, and leasing costs. This is a calculation from the figures you enter, not an appraisal or a lender’s underwriting.
How we got this number
- Potential gross income$508,000 rent + $101,000 recoveries + $6,000 other$615,000
- Less vacancy and credit loss$615,000 × 5%− $30,750
- Effective gross income$615,000 − $30,750$584,250
- Less operating expenses$60,000 taxes + $18,000 insurance + $32,000 repairs + $14,000 utilities + $9,000 admin + $4,000 other− $137,000
- Net operating income$584,250 − $137,000$447,250
- Operating expense ratio$137,000 ÷ $584,25023.4%
- Debt service coverage$447,250 ÷ $240,0001.86
- Cap rate$447,250 ÷ $6,500,0006.88%
- Cash flow after debt and reserves$447,250 NOI − $240,000 debt service − $12,000 reserves$195,250
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Step by step
How to use the NOI calculator
Add the income
Base rent and recoveries from your rent roll, any other income, and a vacancy allowance.
Add operating expenses
Taxes, insurance, repairs, utilities, management, and admin from your profit and loss statement.
Add a loan and value if you have them
Debt service and reserves give cash flow and DSCR; a value gives the cap rate. NOI doesn't change.
What the result means
What counts toward NOI, and what doesn’t.
The cost of running it
Taxes, insurance, repairs and maintenance, owner-paid utilities, management, administrative and professional fees, and other recurring costs.
Left out of NOI
Mortgage payments, income taxes, depreciation, capital improvements, tenant improvements, and leasing commissions. Debt service and reserves are shown separately.
Method
How this is calculated.
Steps
- Potential gross income = base rent + expense recoveries + other income.
- Effective gross income = potential gross income − vacancy and credit loss (a % of potential gross income).
- NOI = effective gross income − operating expenses (taxes, insurance, repairs, utilities, management, administrative, other).
- DSCR = NOI ÷ annual debt service. Cap rate = NOI ÷ property value.
What it leaves out
- Debt service, income taxes, and depreciation are not in NOI.
- Capital expenditures, tenant improvements, and leasing commissions are not in NOI.
- Market data: every figure comes from what you enter.
Method checked October 4, 2026. General information for commercial property owners, not legal, tax, or accounting advice. The signed lease controls.
Good to know
Net operating income questions, answered.
What is net operating income?
NOI is a property's income after operating expenses but before debt service, income taxes, depreciation, and capital expenditures. It's the number lenders, appraisers, and buyers use to compare properties regardless of how each one is financed. The calculation is: gross income, less a vacancy and credit-loss allowance, less operating expenses.
Read the guide to NOI for small commercial ownersShould management fees be included even if I self-manage?
For your own cash flow, no. For a valuation or a sale, most appraisers and buyers deduct a market management fee (often 3–5% of effective gross income for small commercial) whether or not you pay one, because the next owner may not self-manage. Run it both ways so you know your own number and the one an underwriter will use.
Estimate a management fee for this propertyAre expense recoveries income?
Yes. CAM, tax, and insurance reimbursements billed to tenants are income; the underlying costs are operating expenses. Both sides appear so the NOI reflects what the property actually nets. Leaving recoveries out understates income, and leaving the recovered costs out understates expenses.
What vacancy rate should I use?
Lenders commonly apply a vacancy and credit-loss allowance of 5 to 10 percent of gross income for small retail and office, and more for properties with short leases or one large tenant, even when the property is fully leased today. If you have a strong collections history, documenting it can support a lower assumption. Enter 0% to see what the property nets at full occupancy.
What's the difference between NOI and cash flow?
Cash flow subtracts debt service and reserves from NOI. NOI describes the asset; cash flow describes your position as its financed owner. The calculator shows both so they're never confused: enter your loan payments and reserves in step 3, and they affect cash flow and the coverage ratio but never NOI.
What is DSCR, and what do lenders look for?
The debt service coverage ratio is NOI divided by annual debt service (principal and interest). A DSCR of 1.25 means the property earns $1.25 for every dollar of loan payments. Many small-balance commercial lenders look for roughly 1.20 to 1.35 or better, but requirements vary by lender, property type, and loan, and some deduct reserves from NOI before they test it.
The three ratios a lender runsHow does the cap rate relate to property value?
The cap rate is NOI divided by value. Buyers and appraisers use it in reverse to turn NOI into a price: at a 7% cap rate, $100,000 of NOI supports a value of about $1.43 million. That's why each dollar of NOI matters at sale time. The cap rate shown here comes only from the value you enter; it isn't a market rate for your area.
Which costs should I leave out of operating expenses?
Leave out mortgage payments, income taxes, depreciation, capital improvements such as a roof or parking lot replacement, tenant improvements, leasing commissions, and one-time costs such as a lawsuit. Routine repairs and maintenance stay in. Lenders often deduct a separate capital reserve anyway, which is why the calculator lets you enter one below the line.
How expenses flow through property accountingGeneral information for commercial property owners, not legal, tax, or accounting advice. The signed lease controls.
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