Net Operating Income (NOI) Calculator
Net Operating Income is the profitability engine that every other commercial real estate metric is built on top of — cap rate, DSCR, and property valuation all flow directly from it. NOI measures the income a property generates after all operating expenses but before mortgage payments, income taxes, and capital expenditures. This calculator builds it up the way underwriters do: it starts with your gross rental and ancillary income, subtracts a realistic vacancy and credit-loss allowance to arrive at Effective Gross Income, then deducts operating costs such as property taxes, insurance, management, utilities, and maintenance. The resulting NOI is the number lenders scrutinize when sizing a loan and the figure appraisers capitalize to establish market value. A clean, honest NOI is the foundation of every sound acquisition. Enter your income and expense assumptions to calculate it precisely.
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Results update live as you type. Estimates only — not financial, tax, or investment advice.
The Formula
NOI = Effective Gross Income − Operating Expenses
Understanding the Net Operating Income (NOI) Calculator
Net Operating Income is the profitability figure every serious real estate valuation flows from. It captures everything the property earns after real operating costs but before financing and non-operating items. Crucially, NOI deliberately excludes your mortgage payment, capital expenditures, income taxes, and depreciation — this makes it a pure measure of the asset's operating performance, independent of how any particular owner financed or accounts for it. Lenders size loans against it, and appraisers capitalize it to establish market value.
The integrity of an NOI depends on honest assumptions. The two most-manipulated inputs are the vacancy allowance and the operating-expense line. Sellers love to present a 'pro forma' NOI at full occupancy with understated expenses; a disciplined buyer underwrites a realistic vacancy rate and includes every recurring cost — property taxes, insurance, management, utilities, repairs, and reserves. A useful sanity check is the operating-expense ratio: for many residential rentals, total operating expenses land near 35–50% of effective gross income.
Frequently Asked Questions
Does NOI include the mortgage payment?
No. Net Operating Income is calculated before debt service, which is one of its defining features. Excluding the mortgage lets buyers and lenders evaluate a property's raw earning power regardless of financing. Once you subtract debt service from NOI, you arrive at pre-tax cash flow.
What expenses are included in NOI?
NOI includes recurring operating costs: property taxes, insurance, property management, utilities, routine maintenance and repairs, and reserves. It excludes the mortgage, capital expenditures (like a new roof), income taxes, and depreciation. Those excluded items are handled below the NOI line.
What is a good operating expense ratio?
For many residential rentals, operating expenses run about 35–50% of effective gross income, a range related to the '50% rule.' Newer buildings and those where tenants pay their own utilities land lower; older properties with high taxes land higher. A ratio far below the norm is a red flag for understated expenses.