How do you calculate NOI?

Start with gross potential rent, subtract vacancy and credit loss, add other income to get effective gross income (EGI), then subtract operating expenses. NOI excludes debt service, capital expenditures, depreciation, and income taxes.

What expenses are excluded from NOI?

Debt service, capital expenditures, tenant improvements, leasing commissions, depreciation, and income taxes are all below the NOI line. Including them is one of the most common underwriting errors.

What is a good expense ratio?

Stabilized commercial assets commonly run 30-50% of EGI depending on asset class and lease structure — triple-net properties far lower, full-service office higher. A ratio above ~55% deserves scrutiny.

Free tool

NOI calculator

From gross potential rent through vacancy and expenses to the number every valuation starts with.

Moraine · Instrument

NOI calculator

Gross potential rent through vacancy and expenses to net operating income.

Gross potential rent(annual)$Vacancy & credit loss%Other income(annual)$Operating expenses(annual)$

Net operating income

$1,350,000

Expense ratio 44% of EGI

EGI $2,400,000 ($2,400,000 less 5.0% vacancy, plus $120,000 other income) − $1,050,000 OpEx

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Why NOI is where deals are won and lost

Every cap-rate valuation is only as good as the NOI beneath it, and NOI is where offering memoranda get creative: market-rate vacancy on an under-market rent roll, management fees below actuals, capital items reclassified as one-time. The deep treatment is in NOI in Real Estate; pair the result with the cap rate calculator for implied value and the DSCR calculator for debt capacity. To verify NOI against the actual documents, see the T-12 guide.

From napkin math to defensible model

The calculator answers one number. Moraine underwrites the whole deal.

Drop in an OM, rent roll, or T-12 and get a source-linked DCF — NOI from the actual documents, not the broker's pro forma.

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Why NOI is where deals are won and lost