Net Operating Income Calculator
The foundational number behind cap rate and every other rental return metric — calculated with a full expense breakdown.
Your numbers
Net Operating Income
$19,020/yr
66.74% NOI margin
- CCopy result
- DDownload PDF
- SSave this calculation
- HToggle history
- ?Show this panel
- EscClose open panel
Disabled while typing in a field.
Last updated: August 17, 2026 · Reviewed by the DoCalc team
What Is Net Operating Income?
Net Operating Income (NOI) is a rental property's income after operating expenses but before mortgage payments and capital expenditures — the foundational number that cap rate, and many other return metrics, are built from. Getting NOI right is the single most important step in evaluating any income property, since every downstream metric inherits its accuracy (or inaccuracy).
The Formula
Critically, NOI excludes mortgage principal and interest (that's debt service, a financing cost, not an operating cost) and excludes capital expenditures like a new roof (those are capital improvements, tracked separately from day-to-day operations).
Worked Example
$30,000 annual gross rent with 5% vacancy produces an EGI of $28,500. Subtract $3,300 property tax, $1,400 insurance, $2,000 maintenance, an 8% management fee on EGI ($2,280), and $500 other expenses — total operating expenses of $9,480. NOI = $28,500 − $9,480 = $19,020/year, a 66.7% NOI margin.
What Counts as an Operating Expense (and What Doesn't)
| Included in NOI | Excluded from NOI |
|---|---|
| Property tax | Mortgage principal & interest |
| Insurance | Capital expenditures (new roof, major renovation) |
| Routine maintenance & repairs | Depreciation (an accounting/tax concept, not a cash expense) |
| Property management fees | Income taxes |
| HOA dues, utilities (if owner-paid) |
Pros and Cons of Focusing on NOI
Pros: it's the cleanest, financing-independent measure of a property's actual income-generating ability, and the foundation every serious investor and lender relies on.
Cons: NOI alone doesn't tell you your personal cash return if you're financing the purchase — that requires factoring in debt service via Cash-on-Cash Return.
Who Should Use This Calculator
Use it if you're building a detailed, expense-accurate evaluation of a rental property, or verifying a number a listing or seller has provided. Pair it with Cap Rate (NOI ÷ price) and Cash-on-Cash Return (factoring in your specific financing) for a complete picture.
Frequently Asked Questions
Does NOI include mortgage payments?
No — NOI deliberately excludes mortgage principal and interest, since those are financing costs, not operating costs. This is what makes NOI (and cap rate, which is built from it) financing-independent.
What's the difference between NOI and cash flow?
NOI is income after operating expenses but before debt service. Cash flow (as used in Cash-on-Cash Return) goes one step further, subtracting mortgage payments from NOI to show what actually reaches your pocket.
Should I include a vacancy allowance even if the property is currently fully occupied?
Yes — even well-managed properties experience vacancy between tenants. Using a realistic vacancy assumption (often 5-8% depending on market) produces a more honest, sustainable NOI figure than assuming 100% occupancy forever.
Is property management fee always included in NOI, even if I self-manage?
It's good practice to include a market-rate management fee even if you self-manage, since it reflects the property's true economics — your own labor has a real opportunity cost, even if you're not paying yourself directly.
Does NOI account for major repairs like a new roof?
No — capital expenditures (major, infrequent improvements) are tracked separately from NOI's operating expenses, which cover routine, recurring costs only.
Why is NOI margin a useful number to check?
NOI margin (NOI ÷ effective gross income) shows what percentage of collected rent actually becomes profit before debt service — useful for comparing operating efficiency across different properties, independent of their absolute size.