Net Operating Income Calculator

Net Operating Income (NOI) is a fundamental metric in real estate investing that measures the profitability of an income-producing property. NOI represents the total revenue from a property after operating expenses are deducted, but before debt service (mortgage payments) and income taxes.

NOI Formula

What Counts as Operating Expenses?

• Property Management Fees: Typically 8-12% of gross rent
• Maintenance & Repairs: Ongoing upkeep and repairs
• Property Taxes: Local property tax assessments
• Insurance: Property and liability insurance premiums
• Utilities: Water, electricity, gas, trash, etc.
• Legal & Administrative: Legal fees, accounting, office supplies
• Advertising & Marketing: Costs to find and retain tenants

What Doesn't Count in Operating Expenses?

• Mortgage principal and interest payments
• Income taxes
• Capital expenditures (roof replacement, major renovations)
• Depreciation
• Personal expenses of the owner

Why NOI Matters

NOI is crucial for several reasons:

• Valuation: Used to calculate property value (NOI ÷ Cap Rate)
• Investment Analysis: Helps compare different properties
• Lending: Lenders use NOI to determine maximum loan amounts
• Cash Flow: Indicates property's ability to generate income

Cap Rate Relationship

The capitalization rate (cap rate) is calculated as NOI divided by property value. A higher cap rate indicates a potentially better return on investment, but also typically means higher risk.