NOI Calculator
Calculate a property’s net operating income using rental income, vacancy and operating expenses. See effective gross income, annual expenses, monthly NOI and operating expense ratio.
Income & Property Details
Operating Expenses
NOI Analysis
How to Use the NOI Calculator
Using the NOI Calculator is simple. Enter the property's monthly rent, other rental income, vacancy rate, property taxes, insurance, maintenance costs, property management fees, HOA fees, utilities, and other operating expenses. Realtolic will automatically estimate potential annual income, vacancy loss, effective gross income, operating expenses, annual net operating income (NOI), monthly NOI, operating expense ratio, and NOI margin.
NOI Calculator Example
For example, suppose a rental property earns $3,000 per month in rent, or $36,000 per year. With a 5% vacancy rate, the estimated vacancy loss is $1,800, leaving $34,200 in effective gross income. If annual operating expenses are approximately $10,536, the property produces an estimated net operating income (NOI) of $23,664 per year, or about $1,972 per month.
How Is Net Operating Income (NOI) Calculated?
Net operating income is calculated by subtracting a property's operating expenses from its effective gross income. The basic formula is: NOI = Effective Gross Income − Operating Expenses. Effective gross income includes rental and other property income after accounting for vacancy, while operating expenses include the normal costs required to operate the property.
What Expenses Are Included in NOI?
NOI includes the normal operating expenses required to run and maintain a property. These may include property taxes, insurance, routine maintenance and repairs, property management fees, HOA fees, owner-paid utilities, and other recurring operating costs. Mortgage payments, income taxes, depreciation, and major capital improvements are generally not included when calculating NOI.
Why Is NOI Important in Real Estate?
NOI helps investors understand how much income a property generates from its operations before financing and certain non-operating costs. It is commonly used when analyzing rental property performance and calculating metrics such as cap rate and debt service coverage ratio (DSCR).
NOI vs. Cash Flow
NOI and cash flow are different. NOI measures property income after operating expenses but before mortgage payments. Cash flow usually represents the money remaining after operating expenses and debt payments have been paid. A property can therefore have positive NOI but much lower or even negative cash flow because of financing costs.
Does Vacancy Affect NOI?
Yes. Vacancy directly affects NOI because empty units reduce the rental income a property actually collects. A higher vacancy rate lowers effective gross income and, if operating expenses remain the same, reduces net operating income.
NOI Calculator FAQs
What does NOI mean in real estate?
NOI stands for Net Operating Income. It represents the income a property generates after subtracting normal operating expenses from effective gross income, before mortgage payments and certain other costs.
Are mortgage payments included in NOI?
No. Mortgage principal and interest payments are generally not included in NOI because NOI measures the property's operating performance before financing costs.
Can NOI be negative?
Yes. NOI can be negative when a property's effective gross income is lower than its operating expenses. Negative NOI means the property is not generating enough operating income to cover its normal operating costs.
Is property management included in NOI?
Yes. Property management fees are generally treated as an operating expense and are included when calculating NOI, even if the property owner currently manages the property themselves.
Is vacancy included when calculating NOI?
Yes. Expected vacancy reduces potential rental income to estimate effective gross income. Because NOI is calculated from effective gross income, a higher vacancy rate generally reduces NOI.
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