Commercially Speaking Podcast- Commercial Real Estate Investing That Entertains

Stop Buying Buildings! Start Buying NOI for Real Wealth – Ep. 91

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Feb 17, 2025

Dive into the world of Net Operating Income (NOI) and discover why it's the linchpin of commercial real estate investing. Learn how to accurately calculate NOI and its essential role in property valuation. Explore seven crucial uses of NOI, from securing financing to measuring performance. The hosts share a real-world case study and highlight common pitfalls to avoid. Plus, uncover strategies to boost NOI and increase property value, ensuring you're making informed investment decisions throughout your journey!

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INSIGHT

NOI Is The Core Value Driver

Net operating income (NOI) is the core value driver in commercial real estate and where investors should focus.
Increasing NOI through management raises property value independent of cap rate movements.

ADVICE

Value Properties Using NOI/Cap Rate

Use the NOI-to-cap-rate formula to value properties: Value = NOI / Cap Rate.
Validate the NOI first, then choose an appropriate market cap rate to estimate market value.

ANECDOTE

Duplex Portfolio Valuation Case Study

Bo describes pricing a portfolio of six duplexes by computing NOI, adjusting for CapEx, and applying a market cap rate.
The properties went under contract at ~97% of list within a week, validating the valuation approach.

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In commercial real estate, Net Operating Income (NOI) is everything—but too many investors get it wrong. In this episode of Commercially Speaking, Bo and Timmy Barron deliver a NOI masterclass, breaking down how to calculate it, why it matters, and how to avoid common mistakes that could cost you so many thousands.

You’ll learn not only how to find NOI but how to use it to:

✅ Value properties with confidence using the NOI-to-cap rate formula

✅ Spot opportunities in underperforming assets with low NOI

✅ Win deals faster by presenting NOI-backed proposals to lenders

✅ Measure performance and maximize returns over time

📊 Plus: Timmy gets a pop quiz (and passes!), and the brothers share a real-world case study of using NOI to price a duplex portfolio.

🎧 Get this essential CRE knowledge—listen now on Spotify, Apple Podcasts, or YouTube!

📘 Resources Mentioned:

🎓 CRE Marketing Mastermind with Wes Gay – Join the waitlist: wesgay.com/cs
🥏Tizbee: All Disc, No Balls! - (www.tizbee.com)
🛠️ CCIM Learning Resources – Master CRE fundamentals
🧠 SuperpowersHQ – Get an EA who understands CRE (superpowershq.com/commerciallyspeaking)
💡 Massimo Group – World-class coaching for CRE brokers: massimo-group.com
🛠️ Site to Do Business (STDB) – Powerful CRE analysis and mapping tools: stdb.com
📊 APOD Worksheet (Annual Property Operating Data) – The key tool for calculating NOI

00:00:00 - Start00:01:51 - Happy Birthday, Bo!00:03:33 - Tizbee.com00:05:21 - wesgay.com/CS00:09:59 - Shoutout to McNeill Stout for Today’s Topic00:13:26 - Net Operating Income (NOI) & 7 Reasons Why It’s Important00:15:07 - 1. Profitability Indicator00:16:12 - 2. Evaluation Tool00:20:24 - 3. Investment Decision Making00:22:37 - 4. Financing Opportunities00:24:08 - Debt Service Coverage Ratio (DSCR)00:26:21 - 5. Performance Measurement00:27:27 - 6. Cap Rate Calculation00:27:45 - 7. Cash Flow Estimation00:29:26 - APOD - NOI Formula Break Down00:30:29 - Line 1: Potential Rental Income (PRI)00:31:01 - Line 2: Less Vacancy and CR Loses00:32:41 - Line 3: Effective Rental Income00:33:18 - Line 4: Other Income00:37:02 - Line 5: Gross Operating Income00:37:40 - Line 6+: Breaking Down The Operating Expenses00:44:15 - Operating Expense Vs Capital Expense00:46:21 - Line 30: NET OPERATING INCOME (NOI)00:46:54 - Common Mistakes: 1. Expense Capital Expenditures00:47:17 - Mistake 2. “Below The Line” Expenditures00:48:02 - Mistake 3: Leasing Commissions00:48:36 - 4. Reserve Fund00:51:57 - Pop Quiz00:57:24 - Figuring Out How Much $ You Can Take Home To Mama.01:01:36 - When Sellers Double The NOI01:06:08 - SuperpowersHQ.com/commerciallyspeaking

📒Show Notes📒🎉SIGNUP FOR THE WEEKLY NEWSLETTER FOR CURATED CONTENT ON COMMERCIAL REAL ESTATE TRENDS, THRIVING IN BUSINESS AND MORE: https://subscribe.wgbarron.com/?utm_source=newsletter_shareSUBSCRIBE and LISTEN to Commercially Speaking Here:Youtube: www.youtube.com/@CommerciallySpeaking Apple: https://podcasts.apple.com/us/podcast/commercially-speaking/id1680750330Spotify: https://podcasters.spotify.com/pod/show/commerciallyspeakingAmazon Music: https://music.amazon.com/podcasts/ad036303-414c-4e30-9e89-768d30ed3ffb/commercially-speaking----📲 Connect with us:Youtube: https://www.youtube.com/@commerciallyspeaking Instagram: https://www.instagram.com/commerciallyspeaking/Facebook: https://www.facebook.com/commerciallyspeakingTiktok: https://www.tiktok.com/@commerciallyspeaking Newsletter: https://subscribe.wgbarron.com/?utm_source=newsletter_share----Bo is a CCIM Instructor and the owner and operator of Barron Commercial Group servicing Western KY and it's surrounding markets. For all CRE inquiries visit http://www.barroncommercial.comTimmy is an actor, comedian, writer and host: @timmybarron https://youtu.be/ICoIAHSZvgA