How it works
Net operating income describes the property before financing, depreciation and income taxes. It connects rental collections to recurring costs needed to operate the building.
The formula
Keep currency, units and time periods consistent. Percentage inputs use percentage points (enter 5 for 5%). Results are rounded only for display; tiny nonzero values may use scientific notation. Undefined ratios are shown as unavailable.
$60,000 rent plus $3,000 other income less 5% vacancy ($3,150) gives $59,850 effective income. Subtract $19,850 operating expenses for $40,000 annual NOI and a 33.17% expense ratio.
Calculation method
Vacancy applies to total potential income unless you enter an explicit loss amount. The expense total and itemized expenses are alternatives. Monthly mode annualizes the result by multiplying all period amounts by twelve.
Interpretation
Routine repairs belong in operating expenses. Capital replacements and reserves for future replacements are excluded from core NOI here; rental cash-flow tools show them below NOI. Mortgage principal and interest are also excluded.
Limitations
All rents, values, vacancy, expenses and financing terms are your assumptions. Figures exclude income tax and appreciation. Inputs stay in your browser. These calculations do not predict loan approval or investment outcomes.
Method and reference sources
Method and content checked 2026-09-20. These sources provide background, not endorsement or professional certification. The formula and limitations above define this calculator.
- CFPB — How lenders calculate mortgage paymentsLoan principal-and-interest context; property operating expenses and underwriting assumptions are separate.
Frequently asked questions
Should mortgage principal be deducted from NOI?
No. NOI separates property operations from financing. Use a cash-flow tool to include debt service and distinguish it from operating profitability.
What is a worked example for NOI?
$60,000 rent plus $3,000 other income less 5% vacancy ($3,150) gives $59,850 effective income. Subtract $19,850 operating expenses for $40,000 annual NOI and a 33.17% expense ratio.