NOI Calculator for Cap Rate & Debt Yield
Calculate the net operating income of an apartment property using our calculator.Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
How to Calculate Net Operating Income
The formula for NOI is:
(Gross Operating Income + Other Income) - Total Operating Expenses = Net Operating Income
NOI can only be properly calculated when all income that a property makes is taken into consideration, and all of the general expenses accrued during operation are subtracted. The total income of a property comes from various sources such as tenant rents, parking fees, coin laundry machines, etc. In terms of operating expenses, these aren’t only maintenance fees, but everything from insurance to professional help. Accuracy of an NOI calculation can only be achieved if the right components are used correctly in its calculation. The property’s gross income, for example, should not be simply estimated, as this would give a false NOI.
Using NOI to Determine Cap Rate
A property’s net operating income is a key component in the determination of the asset’s capitalization rate. Like NOI, the cap rate is a metric used by investors to assess the potential profits of a particular investment. Capitalization rates are measured by taking the net operating income of a property and dividing it by the purchase price of the asset. The formula for cap rate is as follows:
Capitalization Rate = Net Operating Income ÷ Purchase Price
Cap Rate Calculator
Using NOI to Calculate Debt Yield
Lenders use debt yield to understand how long it would take for them to recoup their investment if they had to take possession of a property after a loan default.
A debt yield is calculated by taking a property’s NOI and dividing it by the total loan amount:
Debt Yield = Net Operating Income ÷ Total Loan Amount