Net Operating Income: Get Your Clients Approved Fast

Your client just fell in love with a property. They’ve got their heart set on it. You put in an offer, negotiate back and forth, and then… the financing falls through.

Sound familiar?

Here’s the thing: you could have avoided that whole mess with one simple calculation. It’s called Net Operating Income (NOI), and it’s the secret weapon that separates successful investors from those who waste months chasing deals they’ll never qualify for.

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What Is Net Operating Income?

Net Operating Income is dead simple. It’s the property’s income minus its expenses. That’s it.

But here’s where it gets powerful: lenders use this number to determine exactly how much they’ll loan your client. They don’t just look at your client’s personal income - they look at whether the property itself can support the debt.

Think of it like this: if a property generates $120,000 per year and has $20,000 in expenses, your NOI is $100,000. The lender then asks, “Can this $100,000 cover the mortgage payments with room to spare?”

The Magic Number: 1.2 Coverage Ratio

Lenders want to see a coverage ratio of 1.2. This means the property’s NOI must be 20% higher than the mortgage payment.

Here’s how the math works:

• Property NOI: $100,000
• Required coverage: 1.2
• Maximum annual debt service: $83,333 ($100,000 ÷ 1.2)
• Maximum monthly payment: $6,944

Now you can work backwards to find the maximum loan amount based on current interest rates and Amortization periods.

I’ve seen too many investors skip this step. They fall in love with a property, put in an offer, and then discover they can only qualify for 60% of what they need. Don’t let your clients make this mistake.

Real Example: Why Amortization Periods Matter

I just worked with a client buying a trucking facility. His bank offered him almost $4 million - sounds great, right? But they stuck him with a 15-year amortization because of their internal policies on trucking properties.

The deal didn’t work. The monthly payments were too high, and he didn’t have enough cash to make up the difference.

We found another lender offering 25-year amortization. Same $4 million loan, but now the monthly payments dropped by over $8,000. The deal suddenly made sense.

This is why you need a commercial broker who knows multiple lenders. Your client’s bank might have one set of rules, but there are dozens of other lenders with different appetites.

How NOI Saves You Time (And Commissions)

Here’s the part that directly impacts your business: NOI calculations help you pre-qualify properties, not just clients.

Before you spend weeks showing properties and writing offers, get the financials analyzed. A quick 5-minute call with a commercial broker can tell you the maximum loan amount for any property.

I do these calculations all the time for realtors and their clients. Sometimes the client gets upset because they really wanted that specific property. But you know what? It’s better to crush their dreams early than waste months on a deal that’ll never close.

Your success rate will skyrocket when you only show properties your clients can actually buy.

Beyond Real Estate: Business Acquisitions

NOI isn’t just for real estate. It works for any business acquisition where you have two years of clean financials.

In Canada, accountants often prepare beautiful two-year summaries that make NOI calculations simple. You take that net income, apply the 1.2 coverage ratio, and boom - you know the maximum loan amount.

I’ve helped business buyers finance up to 100% of their purchase price using this method. It depends on loan size, location, and business type, but the opportunities are massive.

Getting Started With NOI Analysis

Don’t try to become a commercial lending expert overnight. Partner with brokers who live and breathe this stuff.

Here’s what you need from your clients:

• Two years of business financials (for business purchases)
• Property rent rolls and expense statements (for real estate)
• Basic info on loan amount and down payment available

A good commercial broker can run these numbers in minutes and tell you exactly what’s possible.

Stop wasting time on deals that’ll never close. Start using NOI to pre-qualify every opportunity, and watch your closing rate climb.

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Frequently Asked Questions

Written by

LendCity

Published

January 26, 2026

Tags

Commercial Financing Mortgage Qualification Investment Strategy Mortgage Brokers Canadian Investing

Key Terms in This Article

Net Operating Income Coverage Ratio

Coverage Ratio

A measure of a property's ability to cover its debt payments, typically referring to DSCR. Commercial lenders often require a minimum of 1.2, meaning the property's net operating income exceeds debt payments by at least 20%.

Commercial Lending

Commercial Lending

Financing for commercial real estate or business purposes, typically qualified based on property income (NOI) rather than personal income. Includes mortgages for multifamily buildings (5+ units), retail, office, and industrial properties.

Debt Service Coverage Business Acquisition Financing

Business Acquisition Financing

Loans used to purchase an existing business, typically qualified based on the business's net operating income and historical financials. Some programs can cover up to 100% of the purchase price for qualified buyers.

Hover over terms to see definitions, or visit our glossary for the full list.

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