Real estate & rental
Rental NOI Calculator
Works net operating income, where what counts as an operating expense decides the number.
Result
An arithmetic tool, not investment advice. Property returns depend on the local market, the condition of the building, financing terms and tax position, none of which a calculator can see. Verify the income and expense figures against actual statements rather than a seller's projection. NOI conventionally excludes mortgage payments, depreciation, income tax and capital expenditure. Excluding capital expenditure is the convention that causes the most trouble, because roofs and boilers are not optional. Vacancy, repairs and capital expenditure are the three line items most often left out of a listing's numbers, and together they routinely account for 20% to 30% of gross rent. A pro forma that omits them is a marketing document, not an analysis.
Get a Free Business AuditHow the calculation works
Gross rental income less vacancy and credit loss, plus other income, less operating expenses. Operating expenses mean the recurring cost of running the property: taxes, insurance, utilities the landlord pays, maintenance, management and turnover costs. Mortgage payments, capital improvements, depreciation and income tax are excluded by convention.
What moves the number
- Vacancy and credit loss allowance.
- Property taxes and insurance, which are often the largest items.
- Maintenance and turnover costs.
- Management, whether paid or performed by the owner.
Where this one goes wrong
The boundary between maintenance and capital improvement is where net operating income gets manipulated, deliberately or otherwise: a roof is capital and a repair is maintenance, and classifying a large repair as capital lifts net operating income without changing what the property costs to own. Judge any figure by whether the expenses are complete rather than by the total. Reserves for capital items are excluded by convention, which is why net operating income is not cash available to the owner.
Before you quote
- Check whether vacancy, management and turnover are all included.
- Watch the maintenance against capital boundary.
- Remember a capital reserve still has to be funded from somewhere.
Questions
About this calculator
What is excluded from net operating income?
Mortgage payments, capital improvements, depreciation and income tax, by convention. That makes it a measure of the property's operating performance independent of its owner's financing and tax position, which is why it is the basis for cap rate.
How does net operating income get overstated?
By omitting vacancy, management or turnover costs, and by classifying a large repair as a capital item. Judging a figure by whether the expense list is complete matters more than the total, since the omissions are rarely obvious.
Is net operating income the cash I keep?
No. Debt service comes out of it, and capital items have to be funded from somewhere even though they sit outside the calculation. A property with healthy net operating income and no reserve can still face a bill it cannot pay.
The formula
NOI = effective gross income - operating expenses, before financing and before capital items
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How to use this calculator
- Gross scheduled rent ($). Enter your own figure; the page starts at $42,000.
- Other income ($). Laundry, parking, pet rent, storage.
- Vacancy and credit loss (%). Enter your own figure; the page starts at 7%.
- Property taxes ($). Enter your own figure; the page starts at $4,800.
- Insurance ($). Enter your own figure; the page starts at $1,600.
- Utilities paid by the owner ($). Enter your own figure; the page starts at $1,400.
The result updates as you type, so you can try a figure, see what it does to net operating income, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Gross scheduled rent | $42,000 |
| Other income | $1,800 |
| Vacancy and credit loss | 7% |
| Property taxes | $4,800 |
| Insurance | $1,600 |
| Utilities paid by the owner | $1,400 |
| Repairs and maintenance | $3,200 |
| Property management | $3,000 |
| Capital reserves | $2,100 |
What comes out
| Result | Value |
|---|---|
| Net operating income main result | $26,734 |
| Effective gross income | $40,734 |
| Operating expenses | $14,000 |
| NOI after capital reserves | $24,634 |
| Expense ratio | 34.4% |
NOI is $26,734 at an expense ratio of 34.4%. After capital reserves it is $24,634, and the second figure is the one that reflects what the building actually costs to keep.
How sensitive the answer is
Holding everything else steady and changing only gross scheduled rent, this is what happens to net operating income. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Gross scheduled rent ($) | Net operating income |
|---|---|
| $21,000 | $7,204 |
| $31,500 | $16,969 |
| $42,000 example above | $26,734 |
| $63,000 | $46,264 |
| $84,000 | $65,794 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Gross scheduled rent ($)
- A money amount, starting at $42,000.
- Other income ($)
- Laundry, parking, pet rent, storage.
- Vacancy and credit loss (%)
- A percentage, between 0 and 50, starting at 7%.
- Property taxes ($)
- A money amount, starting at $4,800.
- Insurance ($)
- A money amount, starting at $1,600.
- Utilities paid by the owner ($)
- A money amount, starting at $1,400.
- Repairs and maintenance ($)
- A money amount, starting at $3,200.
- Property management ($)
- A money amount, starting at $3,000.
- Capital reserves ($)
- Roof, systems, appliances. Not in conventional NOI, shown separately.
What the results tell you
| Result | What it is |
|---|---|
| Net operating income | The headline result. A money figure. |
| Effective gross income | A money figure. |
| Operating expenses | A money figure. |
| NOI after capital reserves | A money figure. |
| Expense ratio | A percentage. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
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