NOI Calculator
Use this NOI calculator to turn income, vacancy, and operating expenses into net operating income, the number that drives what a property is worth. It also shows your operating expense ratio, the fastest read on whether the expense load is normal.
NOI equals effective gross income minus operating expenses. Effective gross income is gross rental income plus other income, minus vacancy and credit loss. Operating expenses include taxes, insurance, management, repairs, and utilities, but never the mortgage and never capital projects. So if a property collects 200,000 dollars after vacancy and spends 80,000 dollars on operations, NOI is 120,000 dollars. That number is what the property earns before financing, and it is what a lender or buyer values the asset on. Enter your numbers below and the calculator returns NOI and your operating expense ratio instantly.
All rent the property would collect fully leased at market.
Laundry, parking, pet rent, fees, and any other income.
Percent of potential income lost to empty units and uncollected rent. Stabilized multifamily runs roughly 5 to 8 percent.
Taxes, insurance, management, repairs, utilities, landscaping. NOT the mortgage and NOT capital projects.
Enter gross income to calculate NOI.
What is NOI?
Net operating income is what a property earns from operations after operating expenses and before financing. It is the income the building itself produces, stripped of how any one owner paid for it.
I manage 1,500 apartment units across 48 properties in 7 states, and NOI is the number everything else hangs on. Value is NOI divided by the cap rate, so NOI is not just this year's income, it is the foundation the property's value is built on.
How do you calculate NOI?
Start with gross rental income, add other income like parking and fees, then subtract vacancy and credit loss to get effective gross income. Subtract operating expenses and you have NOI. The formula: NOI = Effective Gross Income - Operating Expenses.
The discipline is in what you count. Taxes, insurance, management, repairs and maintenance, utilities you pay, and turnover all belong in operating expenses. The mortgage does not, because NOI is measured before debt service. Depreciation does not, because it is a tax item, not cash. Large capital projects like a roof are usually held out too, because they are one-time, not annual.
NOI vs cash flow
NOI stops before the mortgage. Cash flow is what is left after it: cash flow = NOI minus annual debt service. NOI tells you how the property performs; cash flow tells you what your equity earns once the loan is in place. Judge the asset on NOI, then check what the financing does to your cash.
What is a good operating expense ratio?
The operating expense ratio is operating expenses divided by effective gross income. For stabilized multifamily, roughly 35 to 45 percent is normal. Across the 7-state portfolio I run, a ratio that comes in far below that range is usually a sign that something real, like management or a maintenance reserve, was left out of the expenses. Honest expenses give you an honest NOI. Understate them and you are only fooling yourself.
Once you have NOI, our cap rate calculator turns it into a cap rate and an implied property value, and shows what recovering NOI is worth at your cap rate.
Common questions
How do you calculate NOI?
Subtract operating expenses from effective gross income. Effective gross income is your gross rental income plus other income, minus vacancy and credit loss. Operating expenses are taxes, insurance, management, repairs, and utilities, but not the mortgage and not capital projects. So NOI = (gross income + other income - vacancy) - operating expenses. That single number is what a property earns before financing.
What is included in operating expenses for NOI?
Property taxes, insurance, property management, repairs and maintenance, utilities you pay, landscaping, turnover costs, and administrative costs. What is excluded matters just as much: the mortgage (debt service), depreciation (a tax item, not cash), and capital expenditures like a new roof (one-time, not annual). Leave those three out or the number is not NOI.
What is the difference between NOI and cash flow?
NOI is income after operating expenses but before the mortgage. Cash flow is what is left after the mortgage is paid: cash flow = NOI - debt service. Two buyers can produce the same NOI on the same building and very different cash flow depending on their loans. NOI measures the property; cash flow measures your position in it.
Does NOI include the mortgage?
No. NOI is calculated before debt service on purpose, so the property can be compared and valued independently of how any one buyer finances it. The mortgage comes out after NOI, when you calculate cash flow and debt-service coverage. Including the mortgage in NOI is one of the most common mistakes in real estate math.
What is a good operating expense ratio?
For stabilized multifamily, an operating expense ratio (operating expenses divided by effective gross income) of roughly 35 to 45 percent is normal. Older assets and properties where the owner pays all utilities run higher. A ratio well below 35 percent usually means something real, like management or maintenance reserves, is missing from the expenses.