NOI Calculator
Net operating income is the number every other metric is built on — cap rate, DSCR, value. Build it line by line from a year of income and expenses.
What counts as an operating expense
Operating expenses are the recurring costs of keeping the property rented: property taxes, insurance, repairs and maintenance, management fees, utilities the owner pays, HOA dues, landscaping, pest control, advertising, legal and accounting. They exclude mortgage principal and interest, depreciation, income taxes and one-off capital improvements.
The IRS lists the deductible rental expenses in Publication 527 (Residential Rental Property); most of them are operating expenses for NOI, with the notable exceptions of mortgage interest and depreciation.
NOI in practice
Plug NOI into the cap rate calculator to compare it with a price, or into the DSCR calculator to see how much loan it can support. When a seller quotes an NOI, ask for the trailing twelve months of actual income and expenses (a “T-12”) and rebuild it here — seller NOIs often omit management, reserves or vacancy.
Questions investors ask
What is net operating income (NOI)?
NOI is the income a property produces in a year after vacancy and all operating expenses, but before mortgage payments, depreciation, capital improvements and income tax. It measures the property’s earning power independent of how it is financed.
How do you calculate NOI?
NOI = gross scheduled rent + other income − vacancy and credit loss − operating expenses. For example, $36,000 rent + $1,200 laundry − $1,800 vacancy − $13,500 expenses = $21,900 NOI.
Does NOI include the mortgage?
No. Mortgage principal and interest are debt service, not operating expenses. Leaving them out is what lets NOI feed the cap rate and DSCR formulas.
Are capital expenditures part of NOI?
Actual capital improvements (a new roof, a remodel) are not operating expenses, so they are excluded from NOI in accounting. Many investors and lenders still deduct an annual replacement reserve when underwriting, which gives a more conservative NOI. This calculator lets you choose.