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NOI calculator
Build net operating income line by line: base rent, recoveries, other income, a vacancy allowance and operating expenses. Add a price to see the cap rate. Amounts are annual, in CAD, and stay in your browser.
Results
- Potential gross income
- $711,000
- Vacancy & credit loss
- −$35,550
- Effective gross income
- $675,450
- Operating expenses
- −$214,000
- Net operating income
- $461,450
- Expense ratio (of EGI)
- 31.7%
All amounts in Canadian dollars. Calculated in your browser; nothing is sent or saved.
How it’s calculated
- Potential gross income
PGI = base rent + recoveries + other income - Effective gross income
EGI = PGI − vacancy & credit loss - Net operating income
NOI = EGI − operating expenses
Worked example (illustrative numbers)
- Base rent $520,000 + TMI recoveries $185,000 + other income (parking, signage) $6,000 = PGI $711,000.
- Vacancy & credit loss at 5% = $35,550, so EGI = $675,450.
- Operating expenses: property tax $98,000, insurance $22,000, repairs & maintenance $58,000, management $20,000, utilities $12,000, other $4,000 = $214,000.
- NOI = 675,450 − 214,000 = $461,450. Expense ratio = 214,000 ÷ 675,450 = 31.7%.
Illustrative figures for a fictitious multi-tenant property; they are not benchmarks.
Net leases, TMI and recoveries
Most Canadian commercial leases are net: the tenant pays base rent plus its share of property taxes, maintenance and insurance (TMI, also called additional rent or CAM). Treat recoveries consistently. Either show the recoveries as income and the full operating costs as expenses, which is what most buyers expect, or leave both out. Mixing the two, for example counting recoveries as income while leaving the recoverable costs out, overstates NOI.
Check the leases for what is actually recoverable. Management fees, structural repairs and capital items are often limited or excluded, and a gross or semi-gross lease means the landlord carries some costs itself.
What counts as an operating expense
Operating expenses are the recurring costs of running the property: realty taxes, insurance, repairs and maintenance, snow and landscaping, utilities the landlord pays, property management and administration. They exclude mortgage principal and interest, income tax, depreciation (capital cost allowance), and one-off capital work such as a roof or parking lot replacement. Many buyers deduct a structural or capital reserve when they underwrite; if you show one, label it.
Use a vacancy and credit-loss allowance even on a fully leased building when a lease expires soon or a tenant is weak, and say which figure you used. A buyer's lender will apply its own.
From NOI to the listing
NOI drives the price conversation, so show where it comes from. An offering memorandum normally sets out the income and expense lines, the assumptions behind them, and the cap rate on the asking price. In OfferingStack the Financial Overview page lays out income, expense and NOI lines with up to three columns (for example in-place and pro forma), and the Pricing & Valuation page turns the NOI into a cap-rate sensitivity table.
Estimates for marketing and screening only. This is not an appraisal, a valuation opinion, or financial, legal or tax advice.
Questions
What is net operating income (NOI)?
NOI is a property's annual income after vacancy and operating expenses, before mortgage payments, income taxes, depreciation and capital expenditures.
Is property tax an operating expense?
Yes. Realty taxes are an operating expense. Under a net lease the tenants usually reimburse them, so they also appear in income as recoveries.
Are mortgage payments included in NOI?
No. Debt service is a financing cost, not an operating expense, so NOI is the same whether the property is bought with cash or a loan.
What vacancy rate should I use?
Use one that fits the property: its lease expiries, tenant quality and the market for that space. Say which rate you used. This calculator doesn't supply market vacancy figures.
Is my data saved?
No. The calculation runs in your browser and nothing you type is sent to OfferingStack.
Related
Put the numbers in a finished offering memorandum.
Upload your fact sheet or rent roll, add the NOI and price, and review a watermarked preview of the financial and pricing pages before you buy anything.