NOI Calculator
Calculate net operating income for rental properties with vacancy, expenses, and property taxes. Get NOI, cap rate, and interactive expense breakdown charts.
About This Calculator
Net Operating Income (NOI) is the foundational metric for real estate investment analysis. It measures the profitability of a rental property by subtracting all operating expenses from the effective gross income, before financing costs and taxes. Real estate investors, property managers, and appraisers use NOI to evaluate property performance and compare investment opportunities across markets.
Our NOI calculator computes effective gross income from your gross rental income and estimated vacancy rate, deducts itemized operating expenses (property management, repairs and maintenance, insurance, property taxes, and other costs), and outputs your net operating income. When you provide the property value, it also calculates the capitalization rate (cap rate), a key metric for comparing investment properties.
NOI Formula:
NOI = Effective Gross Income - Total Operating Expenses
Effective Gross Income = Gross Rental Income x (1 - Vacancy Rate)
Cap Rate = NOI ÷ Property Value x 100
Regional Notes:
India: NOI is used by Indian real estate investors alongside rental yield (typically 2-4% in metro cities). Operating expenses in India commonly include society maintenance fees, property tax (municipal tax), and repair funds. The cap rate for residential properties in India typically ranges from 2-5% depending on the city.
US: NOI is the standard metric for commercial and residential real estate investment analysis. Lenders use NOI to calculate the debt service coverage ratio (DSCR). Typical operating expense ratios in the US range from 35-45% of effective gross income. Cap rates vary by market and property type, generally 4-10%.
UK: UK property investors use NOI alongside net rental yield. Operating expenses include letting agent fees (typically 8-15% of rent), building insurance, ground rent, and service charges for leasehold properties. The NOI excludes capital allowances and mortgage interest.
Features:
- Effective gross income with vacancy deduction
- Itemized operating expense breakdown
- Net operating income and cap rate analysis
- Income waterfall and expense breakdown charts
- Shareable calculation links with URL state
Frequently Asked Questions
What is NOI in real estate?
Net Operating Income (NOI) is the annual income generated by a rental property after deducting all operating expenses but before mortgage payments and taxes. NOI = Effective Gross Income - Total Operating Expenses. It is the most important metric for determining a property's profitability.
How to calculate NOI?
NOI is calculated as: Effective Gross Income - Total Operating Expenses. Effective Gross Income = Gross Rental Income - Vacancy Loss. Operating expenses include property management fees, repairs & maintenance, insurance, property taxes, and other expenses. NOI excludes mortgage payments, capital expenditures, and income taxes.
What expenses are included in NOI?
Operating expenses included in NOI are: property management fees, repairs and maintenance, insurance premiums, property taxes, utilities (if paid by landlord), HOA fees, legal and professional fees, advertising and marketing, and other regular operating costs. Excluded are: mortgage payments, capital improvements, depreciation, and income taxes.
What is a good NOI for rental property?
A good NOI depends on the property value and market. Generally, the NOI margin (NOI / Gross Income) should be 50-70% for well-managed properties. A higher NOI margin indicates better expense management and property efficiency. NOI should be positive and growing over time for a healthy investment.
What is the difference between NOI and cash flow?
NOI represents income before debt service (mortgage payments), while cash flow is NOI minus mortgage payments. NOI shows the property's operating performance independent of financing, while cash flow shows the actual cash you receive after paying the mortgage. NOI is useful for comparing properties, while cash flow matters for your personal finances.
How does vacancy rate affect NOI?
Vacancy rate directly reduces NOI by lowering the effective gross income. A 5% vacancy rate on ₹6,00,000 gross income reduces effective income by ₹30,000, which flows directly to the bottom line. Higher vacancy rates significantly impact NOI and property valuation. Investors should use realistic vacancy rates (5-10%) for accurate NOI projections.
How is NOI used in property valuation?
NOI is the primary input for the income approach to property valuation. The most common method is direct capitalization, where property value = NOI / Cap Rate. For example, a property generating ₹5,00,000 NOI with a 5% cap rate is valued at ₹1,00,00,000. Lenders also use NOI to calculate the debt service coverage ratio (DSCR) to determine loan eligibility.
What is the difference between NOI and net income?
NOI (Net Operating Income) represents operating profit before financing costs, while net income includes mortgage interest, depreciation, amortization, capital expenditures, and income taxes. NOI focuses purely on the property's operational performance, making it ideal for comparing properties regardless of how they are financed. Net income reflects the actual bottom-line profit after all expenses.