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Net Operating Income (NOI) Calculator

Find the NOI and cap rate of a rental property.

How it is calculated

The tool subtracts yearly operating expenses from yearly income: NOI = income − expenses. If you also give a property value greater than zero, it shows the capitalization rate cap rate = NOI / value × 100 as a percentage. Without a value, the cap rate is left blank.

All inputs are yearly amounts in one currency; results are shown in US dollars. Negative income or expenses give no result. The tool subtracts exactly what you enter, so you decide what counts as an operating expense. Mortgage payments, depreciation and capital improvements are normally not part of NOI and should be left out of the expenses box.

Worked example

A building collects 120,000 a year in rent and costs 45,000 a year to run (taxes, insurance, maintenance, management). NOI is 120,000 − 45,000 = $75,000.00. If the property is valued at 1,000,000, the cap rate is 75,000 / 1,000,000 × 100 = 7.50%.

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Common mistakes

  • Including mortgage principal and interest in expenses. NOI measures the property before financing, so this understates it.
  • Entering monthly rent and monthly costs. Both fields expect yearly totals, so the cap rate comes out twelve times too low.
  • Using the purchase price one time and the current market value another time when comparing cap rates, which makes properties look incomparable.
  • Forgetting a vacancy allowance. If income is the full rent roll with no vacancy deducted, NOI is optimistic.

Sources

About this calculator

This calculator finds a property's Net Operating Income (NOI): NOI = Gross Rental Income − Operating Expenses (excluding mortgage payments and capital expenditures), and its capitalization rate: Cap Rate = NOI / Property Value, expressed as a percentage.

Real estate investors, property managers, and commercial appraisers use NOI and cap rate to compare rental properties on an apples-to-apples basis regardless of how they're financed, and to gauge whether an asking price is reasonable for the income it produces.

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Comments (1)

  • Editorial team

    Enter annual figures, with income after vacancy and unpaid rent, if you want a realistic number. NOI leaves out the mortgage payment, depreciation, major repairs and income tax, so it describes the property rather than your financing. The cap rate only appears when you fill in a property value. A high cap rate can reflect higher risk as much as a bargain. Do you budget for vacancy as a percentage of rent?

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