NOI in Real Estate: Formula, Example, and Calculator
Last reviewed: 2026 · 7 min read
What Is NOI?
Net operating income, or NOI, is the income a rental property produces after vacancy and operating expenses, but before mortgage payments, income taxes, depreciation, and capital expenditures. Investors use NOI to calculate cap rate, DSCR, and property-level profitability.
NOI Formula
NOI = Effective Gross Income - Operating Expenses
Effective gross income is rental income plus other recurring income after vacancy. Operating expenses include property taxes, insurance, repairs, maintenance, management, utilities paid by the owner, HOA dues, and similar recurring costs.
What NOI Includes and Excludes
Usually Included
- Property taxes
- Insurance
- Repairs and maintenance
- Property management
- Vacancy allowance
- Owner-paid utilities or HOA dues
Usually Excluded
- Mortgage principal and interest
- Income taxes
- Depreciation
- Major capital expenditures
- One-time acquisition costs
- Personal investor expenses
Worked NOI Example
- Monthly rent: $2,400
- Vacancy allowance: 5% ($120)
- Effective gross income: $2,280/month
- Monthly operating expenses: $1,090
- Monthly NOI: $1,190
- Annual NOI: $14,280
Why NOI Matters
NOI separates property performance from financing. That makes it useful when comparing properties with different loan terms or buyer strategies. A lender may use NOI to estimate DSCR, while an investor may use NOI to calculate cap rate and compare a property against local market alternatives.
Calculate NOI From Your Own Inputs
Use the Rental Property Cash Flow Calculator to calculate NOI, cash flow, cap rate, DSCR, and cash-on-cash return from the same set of income and expense assumptions.
Educational Disclaimer
All calculations are estimates for educational and planning purposes only. PropertyFlowTools.com does not provide financial, tax, legal, lending, or investment advice. Verify calculations and consult qualified professionals before making property or financing decisions.