NOI Margin
NOI Margin expresses Net Operating Income as a percentage of gross revenue, revealing how efficiently a property converts revenue into operating profit.
What You Will Learn: You'll understand how NOI Margin reveals a property's operating efficiency by showing what percentage of revenue becomes profit. Learn how to benchmark margins across property types, identify value-add opportunities, and assess management effectiveness.
Definition
NOI Margin expresses Net Operating Income as a percentage of gross revenue. It reveals how efficiently a property converts every revenue dollar into operating profit.
Formula
NOI Margin = (NOI / Gross Revenue) × 100Example Calculation
Gross Annual Revenue: $200,000
Operating Expenses: $80,000
Net Operating Income: $120,000
NOI Margin = ($120,000 / $200,000) × 100 = 60%
For every $1.00 of revenue collected, $0.60 flows through as NOI and $0.40 is consumed by operating expenses.
Why NOI Margin Matters
Operational Efficiency
Higher margins reflect lower operating cost burden
Leverage Impact
High-margin properties amplify returns when financed
Downside Protection
Wide margins provide buffer against revenue declines
Scalability
High margins enable easier portfolio expansion
NOI Margins Across Property Types
| Property Type | Typical NOI Margin | Characteristics |
|---|---|---|
| Self-Storage | 65-70% | Minimal staffing & maintenance |
| Industrial | 55-65% | Triple-net leases common |
| MHC | 55-60% | Lower density, simple utilities |
| Multifamily | 50-55% | Moderate operational intensity |
| Hotel | 30-40% | High staffing & variable costs |
The Power of High Margins
Example: A 10% revenue increase:
50% NOI Margin Property
Starting Revenue: $200,000
Starting NOI: $100,000
New Revenue: $220,000
New NOI: $110,000
NOI Growth: 10%
70% NOI Margin Property
Starting Revenue: $200,000
Starting NOI: $140,000
New Revenue: $220,000
New NOI: $154,000
NOI Growth: 10%
The Margin Advantage: The high-margin property generates $154K vs. $110K in NOI—a $44,000 difference on the same revenue base. This translates to materially higher cash flow, property value, and investor returns.
Using NOI Margins in Investment Analysis
- 1.Benchmark Against Peers: A multifamily property with 60% margins is exceptional; one with 40% needs scrutiny
- 2.Identify Value-Add: Below-market margins suggest operational improvements can boost NOI
- 3.Stress Test Downside: High margins provide cushion if revenues decline
- 4.Compare Property Types: Favor high-margin sectors when seeking stable, scalable cash flow
Where to Find This on Our Site
See NOI Margin analysis in action on our Research & Market Insights page, featuring:
- Operating efficiency comparisons across property types
- NOI margin trends and historical performance
- Property-level margin analysis and benchmarking
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