NOI Calculator
Build net operating income the way an appraiser does — potential gross income less vacancy, plus other income, less operating expenses. Excludes debt service, capex and depreciation by definition.
NOI Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- A single-period figure. It says nothing about lease rollover, future capital needs or changes in value over time.
- Assumes a uniform rent across units. A varied rent roll should be entered as an average, or unit by unit elsewhere.
- Excludes debt service by definition, so it is not a measure of what the owner actually receives.
In short: NOI is effective gross income minus operating expenses. Effective gross income is potential rent less vacancy and credit loss plus other income. NOI deliberately excludes mortgage payments, capital expenditure, depreciation and income tax, so the same building produces the same NOI for every owner.
Formula
PGI − vacancy + other income = EGI
NOI = EGI − operating expenses
[('PGI', 'potential gross income, all units let for all months'), ('vacancy', 'lost rent from empty units and non-payment'), ('EGI', 'effective gross income, what actually arrives'), ('operating expenses', 'taxes, insurance, management, maintenance'), ('NOI', 'net operating income, before financing and capital costs')]
Worked Example
- Multiply the unit count by the monthly rent by twelve to get potential gross income.
- Subtract vacancy and credit loss as a percentage of that figure.
- Add other income — parking, laundry, storage, reimbursements — to reach effective gross income.
- Subtract operating expenses only: taxes, insurance, management, maintenance, utilities.
- Stop there. Do not subtract the mortgage, capital works, depreciation or income tax; those all sit below the line.
Ten units at 1,200 a month is 144,000 of potential gross income. Five per cent vacancy removes 7,200 and 3,600 of laundry and parking income is added, giving 140,400 of effective gross income. Operating expenses of 56,160 leave an NOI of 84,240 — an expense ratio of 40%. At an 8% cap rate that NOI supports a value of 1,053,000.
Strengths & Limits Of This Model
Where this engine is strong
- Follows the appraisal waterfall exactly
- Reports the operating expense ratio as a sanity screen
- Shows NOI with and without a replacement reserve
Where it stops
- Single period only
- Uniform rent assumption for multi-unit properties
Practical Use Cases
Valuing an income property
Producing the numerator for the income approach before applying a market cap rate.
Preparing a loan application
Giving a lender the figure they will divide by annual debt service to test coverage.
Comparing two buildings
Putting assets with different loans side by side on an unlevered basis.
Auditing a broker's pro-forma
Checking whether costs have been moved below the line to flatter the income.
Testing an operating improvement
Seeing what a reduction in expenses is worth once capitalised.
Methodology & Editorial Standards
The calculation follows the standard appraisal waterfall: potential gross income, less vacancy and credit loss, plus other income, equals effective gross income; less operating expenses equals NOI. Debt service, capital expenditure, depreciation and income tax are structurally excluded — there is no field for them, because admitting one would make the output something other than NOI. The replacement reserve is offered separately and reported both ways, since appraisal and institutional practice genuinely differ on whether it belongs above the line.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
NOI Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
Does NOI include the mortgage payment?
No, and this is the single most common error. Debt service is a financing cost that belongs to the owner, not the building. Including it would mean the same property had a different NOI for every buyer, which would destroy the comparability that makes the measure useful. Subtract debt service from NOI and you get cash flow, which is a different and equally valid number.
Are capital expenditures part of NOI?
No. A new roof, an HVAC replacement or a car park resurfacing are capital items and sit below the line. Routine repairs and maintenance are operating expenses and sit above it. The boundary matters because capex is lumpy: including it in one year would make that year look catastrophic and every other year look better than it is.
What is the difference between NOI and cash flow?
NOI is unlevered and ignores capital costs. Cash flow is what reaches your bank account after debt service and capital spending. A property can show a healthy NOI and still bleed cash if the loan is large enough, which is exactly why lenders look at both.
Should a replacement reserve be deducted?
Practice genuinely differs. Appraisers commonly exclude reserves from NOI; institutional underwriters commonly deduct 200 to 300 per unit per year as a proxy for normalised capital spending. Neither is wrong, but the two produce different values at the same cap rate, so always state which basis you are on. This page shows both.
What counts as an operating expense?
Property taxes, insurance, property management fees, repairs and maintenance, utilities paid by the landlord, landscaping, pest control, marketing, and legal or accounting costs of running the property. Not the loan, not major capital works, not your income tax, not depreciation.
Is depreciation in NOI?
No. Depreciation is a non-cash accounting entry that depends on the owner's tax basis and holding structure, not on how the building performs. NOI is a cash-based operating measure, so depreciation is excluded even though it materially affects after-tax returns.
What is a good operating expense ratio?
For stabilised multifamily, roughly 35% to 50% of effective gross income, varying with age, location and whether the landlord pays utilities. A ratio well under 30% should be treated as a warning that something has been omitted rather than as evidence of exceptional management.
Why does my NOI differ from the broker's?
Usually because of vacancy assumption, management fee, or reserves. A pro-forma often shows market rents at low vacancy with no management fee, on the theory that you will self-manage. Underwrite it with a real vacancy rate and a real management fee even if you intend to manage it yourself — your time is a cost, and the next buyer will price it in.
What is the difference between PGI and EGI?
Potential gross income assumes every unit is let for every month at the stated rent. Effective gross income is that figure after vacancy and credit loss, plus other income. EGI is what the building realistically collects, and it is the correct starting point for NOI.
Can NOI be negative?
Yes, when operating expenses exceed effective gross income. It happens with heavily vacant buildings, properties in repositioning, and assets where taxes or insurance have risen sharply. A negative NOI makes the income approach to value meaningless, and the asset is then valued on land, replacement cost or comparable sales instead.