NOI Calculator
Work out net operating income from rent, vacancy and operating costs, before any mortgage.
Result
Net operating income: $23,621.60
NOI excludes the mortgage, depreciation and capital improvements, so it is not the bottom line of a Schedule E. A tax expense total dropped into these rows includes mortgage interest and will understate NOI.
- Effective gross income
- $34,230.00
- Total operating expenses
- $10,608.40
- Vacancy loss
- $1,770.00
- Operating expense ratio
- 30.99%
https://calcgallery.com/real-estate/noi-calculator/
Results are arithmetic from the numbers you enter, not investment, lending, tax or valuation advice. The site supplies no rents, prices, cap rates or market data, and whether a deal is sound depends on facts no calculator can see. Read the full disclaimer
How to use the NOI Calculator
- Enter the rent and choose whether the figure is per month or per year.
- Set the share of rent you expect not to collect, and add any income that is not rent.
- List the annual operating costs. Leave the mortgage out: it is not an operating expense.
What net operating income is, and is not
Net operating income is what a property earns from operations in a year: the rent it actually collects, plus income that is not rent, less the cost of running it. It stops deliberately short of how the purchase was financed.
effective gross income = gross scheduled rent − vacancy loss + other incomenet operating income = effective gross income − operating expensesThree things are outside it, and each is excluded for the same reason: they describe the owner rather than the property. Debt service depends on what the buyer borrowed. Depreciation depends on a tax basis and a schedule. Capital improvements are an investment in the asset, not a cost of operating it this year.
That is what makes NOI comparable between two buildings and between two buyers. It is also why it cannot be read off a tax return.
The Schedule E trap
A tax return and an investment analysis disagree about what an expense is, in ways that all push the same direction.
| Item | On a tax return | In NOI |
|---|---|---|
| Mortgage interest | deductible | excluded |
| Mortgage principal | not deductible | excluded |
| Depreciation | capital expense, over time | excluded |
| Capital improvements | capitalised | excluded |
Copy a Schedule E expense total into the rows above and the mortgage interest inside it is counted as an operating cost. NOI comes out low, the cap rate built on it comes out low, and every number entered was honest.
The operating expense ratio
The ratio divides operating expenses by effective gross income. It is useful for comparing a property against itself over time, or against a building you know well. It is not a standard anyone has to meet, and this site publishes no benchmark for it: what counts as normal depends on the age of the building, who does the work, and which costs a tenant pays directly.
With your numbers
- Gross scheduled rent = $35,400.00 a year
- Less vacancy at 5% = $1,770.00
- Effective gross income = $34,230.00
- Less operating expenses $10,608.40 = $23,621.60
Quick reference
NOI excludes the mortgage, depreciation and capital improvements, so it is not the bottom line of a Schedule E. A tax expense total dropped into these rows includes mortgage interest and will understate NOI.
| Example | Net operating income |
|---|---|
| Single-family rental at $2,950 a month | $23,621.60 |
| No vacancy allowance | $25,250.00 |
| Rent entered annually | $23,621.60 |
| Fixed-fee management, no percentage row | $15,504.00 |
| Small multifamily with high vacancy | €45,285.60 |
| Self-managed, expenses entered as amounts | €19,644.00 |
Common questions about the NOI Calculator
- Can I use the expense total from my tax return?
- No, and this is the most common way to get a wrong answer here. IRS Publication 527 treats mortgage interest as a deductible rental expense, but net operating income excludes all debt service. A Schedule E total also includes depreciation. Using it understates NOI and everything built on it.
- Should a repair be an expense or an improvement?
- Publication 527 draws the line at whether the work betters the property, restores it, or adapts it to a new use. Work that does is an improvement and is capitalised, so it does not belong in these rows. Ordinary repairs and maintenance do.
- Why is vacancy not applied to my other income?
- Laundry, parking, storage and pet fees do not stop when a unit turns over, so a rental vacancy rate does not describe them. They are added after the vacancy deduction.
- What does a percentage expense row charge against?
- Effective gross income, meaning rent after vacancy plus other income. That is what a management agreement normally charges against. Resolving it against NOI instead would be circular, because NOI depends on the fee.
- Should I include a reserve for a new roof?
- That is your choice and the calculator does not add one. Many owners set aside a replacement reserve and some lenders require it. If you want it counted, add it as an expense row and say so in the label.