NOI Calculation for a Large Commercial Property at $500K Gross Rent
A commercial property with $500,000 gross rent, 10% vacancy, and $150,000 in operating expenses yields approximately $305,000 in annual NOI.
How to use this tool
- Enter gross potential rent — annual rent at full occupancy.
- Set a realistic vacancy and credit-loss percentage.
- Add any other income (parking, laundry, fees).
- Enter annual operating expenses, EXCLUDING mortgage and capital improvements.
- Read the NOI and NOI margin.
Calculate net operating income for a larger commercial or multifamily property with $500,000 in gross potential annual rent.
Frequently asked questions
- What is included in operating expenses?
- Property taxes, insurance, property management, repairs and maintenance, utilities you pay, and replacement reserves. Exclude the mortgage payment, depreciation, and capital expenditures — those are not operating expenses.
- Does NOI include the mortgage?
- No. NOI is calculated before debt service so that the property can be compared and valued independently of how it is financed. Subtract the mortgage from NOI to get pre-tax cash flow.
- How is NOI used to value a property?
- Divide NOI by the market capitalization rate to estimate value: Value = NOI ÷ Cap rate. A higher NOI or a lower cap rate implies a higher value.