NOI excludes the mortgage payment — it is an operating metric.
Calculation details
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Use this result
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What does this calculator estimate?
Net operating income is the cash profit a property generates from its operations before financing and taxes. It is the foundation of cap rate, DSCR, and most commercial real-estate value calculations.
- NOI = gross income − operating expenses
- Before financing and taxes
- Foundation of cap rate and DSCR
What NOI is used for
NOI is the property's operating profit before financing — the number behind cap rates and valuations. Lenders and appraisers use it to underwrite deals, and investors use it to compare properties on an apples-to-apples basis.
Limitations to watch for
NOI excludes the mortgage payment on purpose — financing is the owner's choice, not the property's cost. Operating expenses should include a vacancy allowance and maintenance reserve. Capital expenditures (roofs, HVAC) are usually treated separately.
How to use it in practice
Enter realistic rent and operating costs, then use the NOI in the cap rate and DSCR calculations. Compare properties by NOI per dollar of price. Lenders often require the DSCR (NOI ÷ debt service) above 1.0–1.25.
['Enter monthly rent and other income.', 'Enter operating expenses (taxes, insurance, maintenance, management).', 'Read the monthly and annual NOI.']
What NOI is
Net operating income is rental income minus operating expenses, before financing: $2,000 rent minus $700 expenses = $1,300 monthly NOI = $15,600 annually. It is the core income number for investment property.
What counts as an expense
Operating expenses include property tax, insurance, maintenance, management, utilities paid by the owner, and vacancy allowance — but NOT mortgage payments or capital improvements. The calculator's expense list matches the lender definition.
Why NOI matters
NOI drives the cap rate (NOI ÷ value), the DSCR (NOI ÷ debt service), and the property's valuation. Lenders underwrite on NOI; overstating income or understating expenses inflates the deal.
A worked example
$1,800 rent plus $200 storage income = $2,000 gross. $900 in monthly expenses: NOI = $1,100 monthly, $13,200 annually. At a 6 percent cap rate, that supports a value of about $220,000. The calculator runs the stack.
The 50 percent rule check
Operating expenses near 50 percent of gross rent is typical: $1,000 of $2,000 in the example. The calculator's expense ratio makes the deal comparable across properties.
How this calculator works
Formula
Net operating income = (rent + other income) − operating expenses (taxes, insurance, maintenance, management, utilities). NOI excludes mortgage payments — it's pre-financing profit.
Worked example
$2,000 monthly income − $700 operating expenses = $1,300/month NOI = $15,600/year.
Assumptions to verify
- Income and expenses are monthly and stable.
- A vacancy allowance is included by the user.
- Capital expenditures are excluded.
Frequently asked questions
What is NOI?
Net operating income — the property's profit before mortgage payments: $2,000 − $700 = $1,300/month.
How is it calculated?
Rent + other income − operating expenses (taxes, insurance, maintenance, management, utilities).
Why doesn't it include the mortgage?
Financing varies by buyer — NOI measures the property itself, which is why it feeds cap rates and valuations.
What's the difference from cash flow?
Cash flow subtracts the mortgage; NOI doesn't. NOI is always higher.
What expenses count?
Property taxes, insurance, maintenance, property management, utilities, and vacancy.
What is a vacancy allowance?
Budgeted lost rent (5–10%) between tenants — a real cost many owners forget.
How do lenders use it?
They divide NOI by annual debt service for the DSCR — usually wanting 1.0–1.25+.
What is net operating income?
Rental income minus operating expenses, before mortgage payments.
How is NOI used?
It drives cap rate, DSCR, and valuation.
What is a healthy expense ratio?
Operating expenses near 50% of gross rent is typical.
Cite this tool
BoringToolsKit. “Net Operating Income Calculator.” boringtoolskit.com/net-operating-income-calculator/ (reviewed 2026-08-25). Free to reference in articles, syllabi, and answer posts with a link.
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