An apartment building is just a giant lemonade stand. Rent comes in, expenses go out, and the sweet stuff left over is NOI.
Free interactive tool from Real Estate 101
NOI stands for Net Operating Income. It is the number every commercial real estate deal lives or dies on. Banks size loans with it. Buyers value buildings with it. And most people have never had it explained in plain English. This page fixes that with a lemonade stand. Drag the sliders below and watch how vacancy and expenses change what a building actually earns.
No signup. No email gate. Just drag and learn.
Join the Free CommunityGrab a slider. Change the recipe. Every number on this page updates as you pour.
The exact path from a rent roll to NOI. Same math the pros punch into a calculator.
Every cup you could sell in a year at full price. This number comes straight off the OM, the seller's brochure.
For the year
Real stands lose sales. Empty units are cups nobody bought.
19 cups sold, 1 sat empty
Lemons, sugar, cups, repairs, taxes, insurance, utilities. The monthly stuff that keeps the stand open. No one-time purchases here.
Pay the bills. Whatever is left in the cash box is NOI.
Your NOI
One pitcher of rent, three pours. Watch the levels move when you touch the sliders.
Cups that never sold.
Lemons, sugar, cups, repairs, taxes, insurance, utilities.
The sweet stuff. Profit before any mortgage.
Why the pros type .55 instead of doing two steps.
Squeeze 45 away for expenses and you keep 55. Put a decimal in front and you have your one-keystroke NOI.
Both stands start from the same $228,000 in Effective Gross Income. The only difference is how tight each owner runs it.
Seller's NOI$114,000
Your projected NOI$125,400
Same rent. Same building. You just run a tighter stand.
"You are not buying today's income.
You are buying tomorrow's potential income."
The gap is not guaranteed. It is the upside you believe you can create by running the stand better.
This page covers one number. The free Real Estate 101 community covers the whole game: how everyday investors buy apartment buildings and commercial property using seller financing instead of banks. Inside you get the A-to-Z commercial real estate starter course, deal scripts, and the underwriting toolkits behind pages like this one.
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What is NOI in real estate?
Net Operating Income. Take the rent a property actually collects, subtract the operating expenses, and NOI is what is left. Mortgage payments stay out of it, which is why two buyers with different loans can compare the same building.
What is an expense ratio?
Operating expenses divided by effective gross income. A 45% expense ratio means 45 cents of every collected dollar goes to running the property, and the other 55 cents remain as NOI.
Why is the mortgage left out?
Debt is a financing choice, not a property cost. NOI measures how the building performs on its own, so a lender, a cash buyer, and a seller-financed buyer can all point at the same number.