Real Estate Investment Calculator

NOI is the annual income generated by a property after deducting all operating expenses (taxes, insurance, maintenance, management, utilities) but before mortgage payments and income taxes. It is the core metric for property valuation.

Property Value = NOI / Cap Rate. If a property generates $30,000 NOI and cap rates in the area are 6%, the property is worth $30,000 / 0.06 = $500,000. This income approach is standard for commercial real estate valuation.

Vacancy rate is the percentage of rental units that are unoccupied. A 5% vacancy means the property is occupied 95% of the time. Use 5-10% in underwriting even if currently fully occupied to account for future turnover.

Include property taxes, insurance, property management (8-10%), maintenance and repairs, utilities you pay, landscaping, legal and accounting, and reserves for capital expenditures. Exclude mortgage payments — those are financing, not operations.

GRM = Property Price / Annual Gross Rent. A property costing $450,000 with $36,000 annual rent has a GRM of 12.5. Lower GRM is better. GRM is a quick screening tool but does not account for expenses.

A typical expense ratio is 35-50% of effective gross income. If expenses exceed 50%, cash flow will be tight. Commercial properties often have higher expense ratios than residential due to more complex systems and higher taxes.