Sample result
6.9%
$24,000 NOI · $350,000 price
Calculator
Cap rate calculator
NOI divided by price, or the most you can pay for the cap rate you want.
Calculator · rental investing
NOI calculator
List the rent and the running costs. You get net operating income by the year and the month, the expense ratio, and the math behind it.
NOI per year
$21,564
$34,200 of income after vacancy, minus $12,636 of operating expenses: $21,564 a year, $1,797 a month, before any mortgage payment.
- Effective gross income
- $34,200
- Operating expenses
- $12,636
- NOI per month
- $1,797
- Expense ratio
- 36.9%
NOI comes before any mortgage payment. Check each line against your own bills.
The math
How it’s calculated
Your numbers, step by step, by the year. Each percentage is rounded to the cent once, where it appears.
- Gross income $3,000 rent × 12 = $36,000 a year
- Vacancy 5% of $36,000 rent = $1,800
- Effective gross income $36,000 − $1,800 = $34,200
- Management fee 8% of $34,200 = $2,736
- Operating expenses $4,200 tax + $1,500 insurance + $3,000 repairs + $2,736 management + $1,200 utilities = $12,636
- NOI $34,200 − $12,636 = $21,564 a year, or $1,797 a month
Line by line
Where the money goes
Operating expenses take 36.9% of the income left after vacancy.
| Line | Per year | Per month | Share of income |
|---|---|---|---|
| Effective gross income | $34,200 | $2,850 | 100.0% |
| Property tax | $4,200 | $350 | 12.3% |
| Insurance | $1,500 | $125 | 4.4% |
| Repairs and maintenance | $3,000 | $250 | 8.8% |
| Management fee | $2,736 | $228 | 8.0% |
| Utilities the owner pays | $1,200 | $100 | 3.5% |
| Operating expenses | $12,636 | $1,053 | 36.9% |
| NOI | $21,564 | $1,797 | 63.1% |
Share of income is each line against effective gross income, the rent and other income left after the vacancy allowance.
FAQ
Questions people ask
What does NOI include, and what does it leave out?
NOI is rent plus other income (parking, laundry, fees), minus an allowance for vacancy, minus the costs of running the property: property tax, insurance, repairs, management, utilities the owner pays, HOA dues.
It leaves out mortgage principal and interest, depreciation, income taxes and capital expenses such as a new roof. On the example above, $36,000 of rent less $1,800 for vacancy and $12,636 of expenses is $21,564 of NOI.
What is the difference between NOI and cash flow?
Cash flow is what is left after the mortgage: NOI minus the loan payments, and usually minus a reserve for big repairs. NOI stays the same whoever owns the property and however it is paid for; cash flow depends on the loan.
With $21,564 of NOI and a $1,500 monthly mortgage payment, cash flow is $3,564 for the year, before any reserve.
What is a typical expense ratio?
The expense ratio is operating expenses divided by effective gross income. Many small residential rentals land between 35% and 50%: higher for older buildings and when the owner pays utilities, lower for newer single-family homes where the tenant pays them.
The 50% rule, which assumes half the rent goes to operating expenses, is a quick screen for listings, not a budget. Your own tax bill and insurance quote beat any rule of thumb.
Why is vacancy counted against income?
Because no rental collects every month’s rent every year. Tenants move out, units sit empty while they are cleaned and re-let, and some rent goes unpaid. The vacancy allowance sets that aside up front, so NOI reflects what the property is likely to collect rather than its best case.
Strictly it is a cut to income, not an operating expense, which is why it comes off before the expenses here. 5% is a common allowance, about 18 days a year; your own turnover history is a better guide if you have one.
What is a management fee based on?
Most property managers charge a percentage of the rent they actually collect, often around 8% to 12% for single-family homes and small buildings, plus separate fees for placing a tenant or renewing a lease.
This calculator applies the percentage to effective gross income, the income left after the vacancy allowance, which comes close to rent collected. If you manage the property yourself, a market-rate fee is still worth including when you compare properties: your time has a cost, and a buyer or lender will usually count one.