Net Operating Income (NOI) Calculator

A property listing says $3,200 a month in rental income. Your mortgage payment would be $2,100. Looks like $1,100 in profit, right?

Not so fast. Property taxes eat $380 a month. Insurance runs $150. You're budgeting $200 for maintenance, the management company takes 10%, and then there's the month between tenants where the unit sits empty. That $1,100 "profit" starts looking very different once you account for what it actually costs to keep the building running.

This NOI calculator walks you through that reality check. It takes your rental income, adjusts for vacancy, subtracts your real operating expenses, and shows you what the property actually earns -- before your mortgage enters the picture. Whether you're sizing up a potential purchase, reviewing a property you already own, or comparing two buildings to decide where to put your money, this is the number that tells you whether the property works.

NOI strips away your personal financing situation entirely. It doesn't care whether you put 20% down or paid cash. That's the point -- it measures the property's earning power on its own merits, which is exactly why lenders, appraisers, and seasoned investors use it as the foundation for every serious property analysis.

Net operating income is what's left after you collect all the revenue a property generates and subtract what it costs to keep the lights on, the lawn mowed, and the tenants reasonably happy. It doesn't include your mortgage, your income taxes, or that new roof you'll need in five years. Just the operating basics.

That might sound like an odd way to measure profitability, but there's a good reason for it. Two investors can buy the same building -- one finances 80%, the other pays cash -- and the NOI is identical for both. Strip away the financing, and you're looking at the property's raw earning power. That's what makes NOI the common language of real estate investing. It's how you compare a duplex in Austin to a fourplex in Cleveland without getting tangled up in different loan terms.

It's also the number your lender cares about most. When you apply for a commercial property loan, the bank divides your NOI by your annual mortgage payments to calculate the Debt Service Coverage Ratio (DSCR). Most lenders want to see at least 1.20 to 1.25 -- your property needs to earn 20-25% more than your annual debt payments. Fall short, and the loan gets harder to secure, no matter how strong the rest of your application looks.

Beyond lending, NOI is the basis for estimating what a property is worth. Divide NOI by the local market cap rate, and you get an estimated property value. That single calculation drives more investment decisions in commercial real estate than any other metric.

The calculation builds in three stages. Each one narrows the picture from "best-case scenario" to "what you'll actually earn."

PGI = (Rentable Area × Rental Rate per Unit Area) + Other Income

This is the ceiling -- your maximum possible income if every unit stays occupied all year and every tenant pays on time. Other income covers anything the property earns beyond rent: parking fees, coin laundry, storage units, pet rent, vending machines, or billboard leases. On multi-unit properties, these ancillary streams can add 5-15% to your gross revenue, so don't leave them out.

EGI = PGI − Vacancy Loss

Here's where reality enters. No property stays fully occupied forever. Between lease turnovers, the occasional slow month, and tenants who stop paying, some income simply won't materialize. The national residential vacancy rate averaged about 7.1% in Q3 2025, though that number ranges from around 5% in tight coastal markets to 9% or more in parts of the South.

And vacancy isn't just lost rent. Each tenant turnover typically costs $2,500 to $4,000 when you factor in cleaning, minor repairs, marketing, and the empty weeks in between. That context makes the occupancy rate one of the most consequential inputs in this entire calculation.

NOI = EGI − Total Operating Expenses

Operating expenses are the recurring costs of keeping the property functional and tenanted:

What to leave out: Mortgage payments, capital expenditures (new roof, full HVAC replacement, structural work), depreciation, and income taxes. Including any of these fundamentally distorts your NOI and makes the property look worse -- or better -- than it actually performs day to day.

1. Enter your property area -- Use the total rentable area, not the full building footprint. Exclude common hallways, utility rooms, and other non-leasable space. Select square meters or square feet from the dropdown.
2. Set the rental rate per unit of area -- If you charge $1,800/month for a 1,200 sq ft unit, that works out to $1.50 per square foot. For multi-unit properties, use the blended average across all units.
3. Add other income -- Parking, laundry, storage, pet fees, application fees -- anything the property earns beyond base rent. Enter 0 if there's none, but don't skip this too quickly. These streams are often underestimated or forgotten entirely.
4. Review your Potential Gross Income -- This is your maximum income at full occupancy. If this number looks wrong, double-check your area and rate inputs.
5. Enter your occupancy rate -- Use actual historical data if you have it. For a new purchase, start with 93% for residential and adjust based on your local market. Suburban properties tend to run tighter than urban ones in the current market.
6. Check the vacancy loss -- The calculator shows both your Effective Gross Income and the dollar amount of vacancy loss. That vacancy number is what empty units cost you each year -- it's worth staring at for a moment.
7. Fill in each operating expense -- Use actual figures wherever possible. If you're evaluating a purchase, request the seller's trailing 12-month income and expense statement (the T-12). Pro forma projections tend to be optimistic. Actual records tell the truth.
8. Read your NOI -- This is your property's operating profit. The sections below will help you figure out whether it's good, mediocre, or a red flag.

A number without context is just a number. Here's how to make your NOI meaningful.

Before diving into detailed benchmarks, run these three quick tests:

• The 50% rule (rough estimate): On a typical residential rental, operating expenses tend to land around 50% of gross income. If your expenses are well below that, you may be underestimating. Well above, and you've got an efficiency problem worth investigating.
• The DSCR test: Divide your NOI by your expected annual mortgage payments. Below 1.0 means negative cash flow. Below 1.2 and most lenders won't touch it. Above 1.25 gives you breathing room.
• The per-unit test: For multi-unit properties, divide your NOI by the number of units. NOI per unit in the range of $4,000-$8,000/year is common for smaller residential properties; above $10,000 is strong.

Your OER is total operating expenses divided by gross income. It's the fastest way to gauge efficiency.

When your OER runs high, look at the biggest line items first. Property taxes and insurance are typically the two largest operating expenses and are both worth challenging or shopping periodically.

NOI connects directly to property value through the cap rate:

Property Value = NOI ÷ Cap Rate

Here's where average cap rates sat in early 2025, based on CBRE survey data:

A lower cap rate means investors are paying more per dollar of NOI -- typically because they perceive lower risk and steadier income. A higher cap rate implies higher returns but usually comes with higher risk, more management headaches, or both.

So if your apartment building generates $60,000 in NOI and comparable Class B properties in your market trade at a 4.9% cap rate, the estimated value would be $60,000 ÷ 0.049 = roughly $1,224,000. If someone's asking $1.5 million for it, the price may be aggressive -- or they're betting on rent growth you should verify.

You're looking at a duplex with 2,400 rentable square feet, both units renting at $1.25 per square foot per month. A shared coin laundry brings in $150/month.

• Potential Gross Income: (2,400 × $1.25) + $150 = $3,150/month = $37,800/year
• Occupancy Rate: 95% → Vacancy Loss: $1,890/year
• Effective Gross Income: $35,910/year
• Operating Expenses: Property taxes $4,200 + Management (10%) $3,591 + Insurance $1,800 + Maintenance $2,400 + Repairs $1,500 + Other $900 = $14,391
• NOI: $21,519/year ($1,793/month)

The sanity checks: OER is 40.1% -- right in the sweet spot. NOI margin is 57%. At a 5.4% cap rate, this property would be valued around $398,500. If it's listed at $380,000, you're buying at a reasonable price. If it's listed at $500,000, the seller is either pricing in future rent growth or hoping you don't run the numbers.

The real question: will that $21,519 in NOI cover your mortgage? On a $380,000 purchase with 25% down and a 7% rate, your annual debt service would be around $22,800. That puts your DSCR at 0.94 -- technically negative cash flow. You'd need to raise rents, reduce expenses, or put more money down to make the monthly math work. This is exactly the kind of insight NOI alone doesn't give you, which is why the DSCR test matters.

A 1,400-square-foot house renting at $1.10 per square foot, no additional income.

• Potential Gross Income: $1,540/month = $18,480/year
• Occupancy Rate: 92% → Vacancy Loss: $1,478/year
• Effective Gross Income: $17,002/year
• Operating Expenses: Taxes $3,800 + Insurance $1,600 + Maintenance $2,200 + Repairs $1,800 + Other $800 = $10,200
• NOI: $6,802/year ($567/month)

That OER is 60%. For every dollar this property earns, sixty cents goes right back out the door. That's a problem.

But the question is whether it's a fixable problem. Look at the details: $3,800 in property taxes on a property earning under $19K in rent is disproportionately high. That assessment might be worth appealing -- a successful challenge could save $500-$1,000/year. The $2,200 in maintenance on a single-family home suggests deferred upkeep. Once you've caught up on those accumulated repairs, annual maintenance should settle closer to $1,200-$1,500. And at $1.10 per square foot, you should check comparables -- if the market supports $1.25, that rent bump alone adds $2,520/year to your NOI, bringing it up to around $9,300. Suddenly the numbers look different.

The takeaway: a weak NOI isn't always a "walk away." Sometimes it's a negotiation tool. If you can identify why expenses are high or income is low, you can either fix the problem or use it to negotiate a lower purchase price.

A 6,000-square-foot office at $2.25 per square foot per month, with $600/month from reserved parking.

• Potential Gross Income: (6,000 × $2.25) + $600 = $14,100/month = $169,200/year
• Occupancy Rate: 85% → Vacancy Loss: $25,380/year
• Effective Gross Income: $143,820/year
• Operating Expenses: Taxes $16,000 + Management (8%) $11,506 + Insurance $5,200 + Maintenance $9,500 + Repairs $6,000 + Other $8,000 = $56,206
• NOI: $87,614/year

OER is 39.1% -- operationally tight. This building is well-managed. The challenge is the 85% occupancy rate, but here's the context: the national office vacancy rate hit 16-19% in 2025, so this building is actually outperforming the market. Still, that vacant 15% represents over $25,000/year in lost income. Filling even one additional suite to reach 90% occupancy would add roughly $8,460 straight to your NOI -- and to the property's value. At a 9% cap rate, that extra occupancy translates to about $94,000 in additional property value.

That last point is worth lingering on. In real estate, improving NOI doesn't just increase your income. It increases what the property is worth. Every dollar you add to NOI gets multiplied by the inverse of the cap rate when you calculate value. At a 5% cap rate, $1 of additional NOI adds $20 to property value. At a 9% cap rate, it adds about $11. NOI improvement is the single most direct lever you have for building equity.

NOI is the most important operating metric in real estate, but it has blind spots. Knowing them keeps you from making decisions with half the picture.

It ignores your debt. A property with strong NOI can produce negative monthly cash flow if you've borrowed too much. Always run a cash-flow analysis alongside NOI, especially above 75% loan-to-value. The duplex example above showed exactly how a property with a healthy $21,500 NOI could still leave you short each month.

It doesn't budget for capital expenditures. That $80,000 NOI looks solid until the roof needs replacing at $35,000 next year. For properties over 15 years old, experienced investors set aside 5-10% of gross income as a capital reserve and mentally subtract it from NOI. A property with $80,000 in NOI but a $6,000 annual capital reserve is really more like a $74,000 earner in practical terms.

It's a snapshot, not a crystal ball. Today's NOI reflects today's rents, occupancy, and costs. But insurance premiums have been climbing aggressively since 2022, especially in flood and hurricane zones. Property tax reassessments after a sale can spike your tax bill 20-40% overnight. And tariffs on imported construction materials have been pushing repair costs higher in 2025-2026. Any of these shifts can materially change your NOI within a year of purchase.

It treats all tenants as equal. A building with one tenant paying $10,000/month shows the same NOI as one with ten tenants paying $1,000 each. But the single-tenant building carries far more risk -- one vacancy wipes out 100% of your income. Tenant diversification matters, and NOI won't flag the difference.

It says nothing about the neighborhood. Two buildings can show identical NOI, but if one is in a growing market with rising rents and the other is in a declining area with falling demand, their futures look very different. NOI is backward-looking by nature. Pair it with market research.

Every dollar you add to NOI does double duty -- it increases your cash flow and, through the cap rate relationship, increases your property's value. Here are the highest-impact levers.

On the income side:

• Audit your rents against the market. If comparable properties charge 5-10% more, you're leaving money on the table every single month. Even modest annual increases of 2-3% compound meaningfully over a hold period.
• Add ancillary revenue. Coin laundry ($75-$200/unit/month on multi-family), reserved parking ($50-$150/spot/month), and storage units ($50-$100/unit/month) are relatively low-cost additions. Pet rent ($25-$50/month per pet) is nearly pure profit.
• Prioritize tenant retention. Every turnover costs $2,500-$4,000 in cleaning, repairs, vacancy, and re-leasing. A $50/month rent increase that keeps a good tenant is worth far more than a $100 increase that drives them out and costs you two vacant months.
• Screen thoroughly. One non-paying tenant can cost more than a year's worth of vacancy. Credit checks, income verification, and reference calls are cheap insurance.

On the expense side:

• Shop your insurance every 2-3 years. Premiums vary dramatically between carriers, and staying loyal to one insurer almost never pays off. Getting three quotes annually takes a few hours and can save hundreds or thousands.
• Appeal your property tax assessment. Many owners never challenge their assessment, but the process is often straightforward. If your assessed value exceeds what comparable properties actually sold for recently, you have a case.
• Invest in preventive maintenance. A $200 HVAC tune-up twice a year costs $400. An emergency compressor replacement in August costs $3,000-$5,000. The math isn't subtle.
• Negotiate vendor contracts in bulk if you manage multiple properties. Landscaping, pest control, and snow removal companies will often discount 15-25% for multi-property contracts.
• Evaluate your management arrangement. At 8-12% of collected rent, property management is often the second or third largest expense. If you have a small portfolio and the bandwidth, self-management saves thousands annually. If you're hiring a manager, negotiate -- fees are more flexible than most companies let on, especially for multi-unit or multi-property clients.

Counting your mortgage as an operating expense. The single most common NOI error. Your mortgage is a financing cost -- it reflects your loan terms, not the property's performance. NOI should be identical whether you paid cash or financed 90%.

Trusting the seller's pro forma. Pro formas project future income under ideal assumptions: full occupancy, above-market rents, below-average expenses. Always request at least 12 months of actual income and expense records -- the trailing 12-month statement, or T-12. Better yet, ask for two years of T-12s and compare them. Discrepancies between pro forma and actuals tell you where the seller is being optimistic.

Plugging in 100% occupancy. Even the tightest rental markets experience turnover. Between lease-up periods, unit renovations, and the occasional problem tenant, most residential properties run at 93-96% occupancy in healthy markets. Assuming 100% inflates your NOI by thousands of dollars and can lead you to overpay. Use real data.

Confusing repairs with capital expenditures. Replacing a leaky faucet is a repair -- it goes into your NOI calculation. Replacing the entire plumbing stack is a capital expenditure -- it doesn't. Mixing them distorts your NOI in both directions. The general rule: if it restores something to its original condition, it's a repair. If it significantly extends the useful life or upgrades the property, it's capex.

Looking at one year in isolation. A single year's expenses can be misleading. Maybe maintenance was unusually low because the previous owner deferred it. Maybe legal costs were high due to a one-time eviction. Look at 2-3 years of operating data to find the real baseline. One-year snapshots hide problems and exaggerate strengths.

Formulas used in this calculator:

• Potential Gross Income = (Property Area × Rental Rate per Area) + Other Income
• Vacancy Loss = Potential Gross Income × (1 − Occupancy Rate ÷ 100)
• Effective Gross Income = Potential Gross Income − Vacancy Loss
• Total Operating Expenses = Property Taxes + Management Fees + Insurance + Maintenance + Repairs + Other
• Net Operating Income = Effective Gross Income − Total Operating Expenses

Related metrics you can derive from your NOI:

• Cap Rate = NOI ÷ Property Value
• Property Value = NOI ÷ Cap Rate
• DSCR = NOI ÷ Annual Debt Service
• OER = Total Operating Expenses ÷ Gross Operating Income
• NOI Margin = NOI ÷ Gross Operating Income

Sources: NOI methodology follows standard real estate appraisal practices as defined by the Appraisal Institute. Vacancy rate data from the U.S. Census Bureau Housing Vacancies and Homeownership Survey (Q3 2025). Cap rate benchmarks from CBRE U.S. Cap Rate Survey H1 2025. Operating expense ratio benchmarks from NMHC Industry Benchmarks and CBRE research. Turnover cost data from the National Apartment Association and Harvard Joint Center for Housing Studies.

Disclaimer: This calculator provides estimates for educational and planning purposes. Actual property performance depends on local market conditions, lease structures, property condition, and factors unique to your situation. This is not financial advice. Consult with a qualified real estate professional, CPA, or financial advisor before making investment decisions.