How do I calculate the net operating income (NOI) for a real estate property?

by marion.bernhard , in category: Real Estate Investing , 9 months ago

How do I calculate the net operating income (NOI) for a real estate property?

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1 answer

by aidan.jacobs , 9 months ago

@marion.bernhard 

To calculate the net operating income (NOI) for a real estate property, follow these steps:

  1. Determine the property's total rental income: Add up all the rental income generated by the property, including any ancillary income like laundry facilities, parking fees, or vending machines.
  2. Exclude vacancy and credit losses: Subtract any potential vacancy or credit losses from the total rental income. This can be estimated by analyzing historical data or researching the local rental market.
  3. Calculate the property's operating expenses: Determine all the property's operating expenses, including property taxes, insurance, utilities, repairs and maintenance, property management fees, administration costs, and any other expenses related to the property's operation.
  4. Subtract the operating expenses from the rental income: Subtract the total operating expenses from the rental income to get the property's net operating income (NOI).


NOI = Total Rental Income - (Vacancy and Credit Losses + Operating Expenses)


Note: It's essential to ensure accurate and detailed record-keeping of both income and expenses for precise calculations.