Real Estate & Investing
NOI Calculator
Work from gross potential rent down to net operating income by applying vacancy loss and each operating expense line.
Calculation inputs
Enter annual figures for income and each operating expense.
Results
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Complete the fields and select Calculate to show results here.
About this calculator
Net operating income, or NOI, is the annual income a property produces after operating expenses but before financing costs. This calculator walks from gross potential rent down to NOI so investors, appraisers, and lenders can compare properties on the same basis.
How the calculation works
- Effective gross income = gross potential rent × (1 − vacancy %)
- Total operating expenses = taxes + insurance + repairs + management + utilities + reserves
- NOI = effective gross income − total operating expenses
Notes and assumptions
NOI excludes mortgage payments and capital improvements, which keeps it comparable across differently financed deals.
Lenders and appraisers often normalise management fees and reserves even when an owner self-manages.
How it works in plain English
The calculation begins with gross potential rent, the total rent the property would collect if every unit were leased at full asking rent all year. A vacancy and credit loss percentage is subtracted to reflect turnover, unpaid rent, and concessions, producing effective gross income (EGI). This step matters because a building rarely stays at 100% occupancy year-round, so starting from a realistic income figure keeps the rest of the calculation grounded.
From EGI, the calculator subtracts each operating expense line you enter: property taxes, insurance, repairs and maintenance, management fees, owner-paid utilities, and capital reserves. These are the ordinary, recurring costs of running the property day to day, as opposed to one-time capital projects or financing costs.
What remains is net operating income. Because NOI deliberately excludes mortgage payments, income taxes, and major capital improvements, it represents the property's performance independent of how it is financed or owned, which is why it is the standard input for cap rate and valuation comparisons across different buildings. Two owners with very different loans on the same property will still calculate the same NOI, which is what makes it such a widely used benchmark for comparing deals.
The formula
- Effective gross income = gross potential rent x (1 - vacancy %)
- Total operating expenses = taxes + insurance + repairs + management + utilities + reserves
- NOI = effective gross income - total operating expenses
Worked example
A property with $180,000 in gross potential rent and 6% vacancy loses $10,800, leaving effective gross income of $169,200. Operating expenses total $57,500: $18,000 in taxes, $7,500 in insurance, $12,000 in repairs, $9,000 in management, $6,000 in utilities, and $5,000 in reserves.
Subtracting expenses from effective gross income gives a net operating income of $111,700 per year, or roughly $9,308 per month. That NOI figure, not the gross rent, is what would be divided by a purchase price to calculate a cap rate. If this property were listed at $1,550,000, dividing the $111,700 NOI by that price would produce a cap rate of about 7.2%, giving a quick sense of how the return compares to other properties in the same market.
Frequently asked questions
Does NOI include mortgage payments?
No. NOI is calculated before debt service, income taxes, and depreciation. This makes it possible to compare two properties with completely different financing structures on equal footing, since NOI reflects only the building's own operating performance.
Should capital reserves count as an operating expense?
Many lenders and appraisers include a reserve allowance for future capital items like roofs or HVAC systems, even though it isn't a cash expense in a given year. Including it produces a more conservative, lender-friendly NOI figure.
Why does vacancy get subtracted before expenses instead of after?
Vacancy loss reduces the income side of the ledger because empty units simply don't generate rent; it isn't a cost of operating the building. Calculating effective gross income first keeps the expense side focused purely on running costs.
How is NOI different from cash flow?
NOI stops before financing costs, while cash flow subtracts the mortgage payment from NOI as well. A property can have healthy NOI and still show negative cash flow if the debt service is large relative to income.
What if I self-manage the property?
It's still standard practice to include a management fee estimate, typically comparable to what a third-party manager would charge. This keeps NOI comparable to other properties and reflects the true economic cost of the labor involved, even if you aren't currently paying it out.
Related tools
Compare net operating income against annual debt service.
Compare price to gross rent with the gross rent multiplier.
Total current and market rent across your unit mix.
Find the occupancy level where income covers all costs.