JB PARCELNOI Calculator
NOI is the foundation under cap rate, DSCR, debt yield, and value itself. Get it wrong and every number downstream is wrong. This builds it line by line so nothing quietly goes missing.
How this calculator works
NOI is built in four steps. Gross potential income is what the property collects at full occupancy. Subtract vacancy and credit loss to get collected rent, add other income to reach effective gross income, then subtract every cost of running the building. What is left is net operating income.
The line that separates NOI from everything else is financing. Mortgage payments, depreciation, capital improvements, and income taxes all sit below NOI, not inside it. That is deliberate. A building has one NOI, and it does not change based on who bought it or how they paid.
Capital reserve is the line where honest and optimistic underwriting part ways. Roofs, HVAC systems, water heaters, and parking lots do not fail every year, but they fail. Lenders and appraisers underwrite roughly $250 to $350 per unit per year for residential. If you leave it out, your NOI and therefore your value are both overstated.
On commercial and five-plus unit multifamily, NOI sets the value. At a 6.25 percent cap, every additional dollar of annual NOI adds sixteen dollars of value. That is why utility reimbursement, pet rent, and covered parking on older Tennessee multifamily are worth chasing: $6,000 a year of new income is roughly $96,000 of value.
Worked example: an eight-unit in Knoxville
Eight units averaging $1,000 a month, owner pays water and sewer, no reimbursement in place.
| Gross potential income | $96,000 |
|---|---|
| Less 6% vacancy | $90,240 |
| Effective gross income | $90,240 |
| Total operating expenses | $48,419 |
| NOI | $41,821 |
| Expense ratio | 53.7% |
| Value at a 6.25% cap | $669,133 |
Now add utility reimbursement at $65 a unit per month. That is $6,240 of new income against no new cost. After the management fee on it, NOI goes to $47,562, and at the same cap rate the building is worth $760,986. One lease amendment at renewal, about $92,000 of value.
Questions investors ask
What is not included in NOI?
Mortgage principal and interest, depreciation, capital improvements, income taxes, and owner draws. All five sit below the NOI line. The reason is comparability: NOI describes the building, so it has to be independent of how any particular owner financed or depreciated it.
Is a capital reserve an operating expense?
Technically no, and accountants will tell you so. Practically yes, and every lender and appraiser underwrites one. Leaving it out makes your NOI, your cap rate, and your value all look better than they are. Use $250 to $350 per unit per year for residential, or a real reserve study on commercial.
What is a normal operating expense ratio?
Small residential multifamily generally runs 35 to 50 percent of effective gross income. Older buildings with owner-paid utilities can push past 55. True triple-net commercial, where the tenant pays taxes, insurance, and maintenance directly, can be under 10. If your ratio falls far outside the range for your asset type, find out why before you trust the number.
How do I raise NOI on a property I already own?
Income side: bring rents to market at renewal, add utility reimbursement, charge pet rent, bill for covered parking or storage, and collect application and late fees consistently. Expense side: shop insurance annually, appeal the assessment when the appraised value is out of line, put maintenance on contract rather than emergency calls, and audit the water bill for leaks. On an eight-unit, a few hundred dollars a month of either compounds into six figures of value.
Should NOI use actual or pro forma numbers?
Both, labeled clearly. Underwrite the purchase on actuals, two years of real statements, because that is what you are buying. Model the pro forma separately as your business plan, and only pay for it if you control the levers that get you there. Paying a stabilized price for a value-add pro forma is the most common way investors overpay.
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Screening a real property? Pull its appraised value, assessed value, acreage, land use, and last recorded sale off the JB PARCEL parcel map and drop the real numbers into this calculator instead of guessing. Coverage runs across every county we carry.