About the NOI Calculator
Net operating income (NOI) is the income a property produces after operating expenses but before mortgage payments, depreciation and income tax. This NOI calculator starts from gross potential rent and other income (parking, laundry, storage, pet fees), deducts a vacancy and credit-loss allowance to reach effective gross income, then subtracts property tax, insurance, repairs, management, utilities, HOA dues and other operating costs.
NOI is the number investors, appraisers and lenders use to value income property and size loans: it feeds the cap rate, the debt service coverage ratio (DSCR) and debt yield. Use this tool when underwriting a purchase, checking a seller’s pro forma, or tracking how a rent increase or expense cut changes the value of a building you own.
Mortgage principal and interest, capital improvements, depreciation and income taxes are deliberately excluded, because NOI measures the property’s performance independent of how it is financed or who owns it. Enter a property value to see the implied cap rate.
With the default inputs, the net operating income (yearly) is $22,612.80. Change any value above to recalculate instantly.
How to use the noi calculator
- 1Enter total monthly rent for all units and any other monthly income.
- 2Set a vacancy and credit-loss allowance.
- 3Enter yearly property tax, insurance, repairs, utilities and other expenses.
- 4Add the management fee percentage and any monthly HOA dues.
- 5Enter the price or value to see the cap rate, then review the operating statement.
Formula and method
Gross potential income is what the property would earn if every unit were rented all year at scheduled rent, plus other income. Subtracting the vacancy and credit-loss allowance gives effective gross income (EGI), the rent you realistically collect. Property management is calculated as a percentage of EGI because managers are paid on collected income.
Operating expenses are the recurring costs of running the property: taxes, insurance, repairs, management, owner-paid utilities, HOA dues and other services. NOI is EGI minus those expenses. Debt service, capital expenditures such as a new roof, depreciation and income taxes are not operating expenses and are left out. Dividing NOI by the property value gives the capitalization (cap) rate.
- EGI
- Effective gross income after vacancy
- NOI
- Net operating income (annual)
- Vacancy%
- Allowance for empty units and unpaid rent
Worked examples
Single-family rental at $3,000 a month
Rent and other income total $37,200 a year; 5% vacancy leaves $35,340. Expenses — $4,200 tax, $1,500 insurance, $2,400 repairs, $2,827.20 management, $1,200 utilities and $600 other — total $12,727.20, so NOI is $22,612.80, a 5.03% cap rate on $450,000.
Eight-unit building
Gross income is $148,800; after 7% vacancy EGI is $138,384. Management at 6% is $8,303.04 and total expenses are $52,603.04, leaving NOI of $85,780.96 — a 4.77% cap rate at $1.8 million.
Self-managed condo with HOA
A $1,800 condo earns $21,600 a year. The $250 monthly HOA ($3,000 a year) plus tax, insurance and repairs total $8,700, so NOI is $12,900 and the cap rate at $280,000 is 4.61%.
Frequently asked questions
What is the NOI formula?+
NOI = effective gross income − operating expenses. Effective gross income is gross scheduled rent plus other income, minus vacancy and credit losses. Operating expenses include taxes, insurance, repairs, management, utilities and similar recurring costs.
Does NOI include the mortgage payment?+
No. NOI is calculated before debt service so that properties can be compared regardless of financing. Subtract annual mortgage payments from NOI to get before-tax cash flow.
Are capital expenditures included in NOI?+
Major replacements such as roofs, HVAC systems and parking lots are usually excluded from NOI and budgeted as a separate replacement reserve below the NOI line, although some lenders deduct a reserve when underwriting.
What is a good expense ratio for a rental?+
Residential rentals commonly have operating expense ratios of roughly 35%–50% of effective gross income. Older buildings, owner-paid utilities and high-tax areas push the ratio higher; newer single-family homes with tenant-paid utilities are often lower.
How is NOI used to value a property?+
Income property value is often estimated as NOI ÷ market cap rate. For example, $50,000 of NOI at a 6% cap rate implies a value of about $833,000, so raising NOI directly raises value.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.