Deal Analysis
NOI Calculator (Net Operating Income)
Calculate net operating income, operating expense ratio, and estimated property value.
Annual income & expense breakdown
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How rental property returns work
Net operating income (NOI) is the single most important figure for valuing a rental property. It represents the income a property produces after all operating expenses are paid, but before any mortgage payment, depreciation, or income tax. Because NOI strips out financing and tax effects, it measures the property earning power on its own — and that is the number that drives cap rate and property value. To calculate NOI you first work out gross potential income — the total rent plus any other income such as parking, laundry, storage, or pet fees, multiplied by twelve. You then subtract a vacancy and credit-loss allowance to arrive at effective gross income (EGI). From EGI you subtract every operating expense: property taxes, insurance, property management, repairs and maintenance, HOA dues, owner-paid utilities, and any other recurring costs. What remains is NOI. What NOI deliberately excludes is just as important. It does not include the mortgage or any debt service, capital expenditures (big-ticket replacements like a roof or HVAC), depreciation, or income taxes. That is what makes NOI a clean, financing-independent measure of a property earning power, and it is the number that drives cap rate and value and that lenders rely on. Two derived figures are worth tracking. The operating expense ratio — total expenses divided by EGI — tells you how lean the property runs; 35–45% is typical for residential. The estimated value at a target cap rate — NOI divided by your required cap rate — tells you what the property is worth to you at that return. Use the Cap Rate Calculator to explore that relationship, the DSCR Loan Calculator to see how lenders use NOI to qualify a loan, and the Rental Property Calculator for full cash flow including the mortgage.
Worked example
Suppose a duplex rents for $2,000 per month with $0 in other income. Gross potential income is ($2,000 + $0) × 12 = $24,000. With a 5% vacancy allowance, effective gross income is $24,000 × (1 − 0.05) = $22,800.
Annual operating expenses are property taxes $3,000, insurance $1,200, property management at 8% of EGI ($1,824), repairs and maintenance at 5% of EGI ($1,140), HOA $0, owner-paid utilities $0, and other expenses $0. Total operating expenses are $7,164.
NOI (annual) = $22,800 − $7,164 = $15,636, or $1,303 per month. The operating expense ratio is $7,164 / $22,800 × 100 = 31.4%. At a target cap rate of 6%, the estimated property value is $15,636 / 0.06 = $260,600.
Frequently asked questions
What is a good NOI for a rental property?
There is no universal "good" NOI because it scales with property size and price. A better question is whether the NOI produces a healthy cap rate for your market — typically 6–10% in cash-flow markets. Compare NOI to similar properties and to your target return rather than looking for an absolute dollar figure.
Does NOI include the mortgage payment?
No. NOI is calculated before any debt service. That is intentional: NOI measures the property earning power regardless of how it is financed. Your actual cash flow after the mortgage will be lower than NOI. To see cash flow after financing, use the Rental Property Calculator.
What is the difference between NOI and cash flow?
NOI is the income left after operating expenses but before the mortgage, capital expenditures, depreciation, and taxes. Cash flow is what you actually keep after all of those — including the mortgage payment. A property can have positive NOI but negative cash flow if the debt service is high.
How does NOI affect property value and cap rate?
Cap rate equals NOI divided by property value, so for a given cap rate, a higher NOI means a higher value. You can also flip the formula: estimated value equals NOI divided by your target cap rate. Raising rent or cutting operating expenses increases NOI, which increases what the property is worth at any given cap rate.
What counts as an operating expense, and why is CapEx excluded?
Operating expenses are recurring costs of running the property: taxes, insurance, management, routine repairs, HOA, and utilities. Capital expenditures — big, infrequent replacements like a roof, furnace, or full re-pipe — are excluded because they are not part of day-to-day operations and are handled separately through a reserves or CapEx budget. Including CapEx in NOI would understate a property true earning power.
More Deal Analysis tools
- Rental Property Calculator Analyze cash flow, cash-on-cash return, cap rate, and GRM for any rental property.
- Cap Rate Calculator Calculate net operating income and capitalization rate for any rental property.
- Cash-on-Cash Return Calculator Measure the annual return on the actual cash you put into a rental property deal.
- Rental Yield Calculator Calculate gross and net rental yield to compare income relative to property price.
- Gross Rent Multiplier Calculator Screen deals fast with the gross rent multiplier and implied price at a target GRM.
- 1% Rule Calculator Check whether a rental deal meets the 1% rule and see the rent needed to pass.
- ARV Calculator Estimate after-repair value and maximum allowable offer for a fix-and-flip or BRRRR deal.