Net Operating Income (NOI) Calculator
Net operating income, or NOI, is the headline measure of how well a rental property performs as an investment. It is the annual income the property generates after operating expenses, but before mortgage payments and income taxes. Leaving out debt service is the point: it lets you compare two properties on equal terms, regardless of how each one is financed. This calculator builds NOI in two clear steps. First it works out effective gross income, the rent you actually expect to collect, by taking gross rental income, subtracting a vacancy and credit loss, then adding any other income such as parking or laundry. Next it subtracts your annual operating expenses, the property taxes, insurance, management, repairs, maintenance and utilities you pay, to arrive at NOI. Enter your own figures to size up a deal, set an asking rent or feed a cap rate calculation. Note that NOI deliberately excludes your loan principal and interest, depreciation and income taxes, so it reflects the property, not your tax position or financing. The expense categories follow the rental income and expense framework in IRS Publication 527, and the worked example below reconciles exactly to the calculator so you can trace every number.
Net operating income is effective gross income minus operating expenses. Gross rent of $120,000 less 5% vacancy plus 4,000 other income is 118,000; after $45,000 of expenses, NOI is $73,000.00.
Net operating income formula
Vacancy loss = gross rental income * vacancy rate
EGI = gross rental income - vacancy loss + other income
NOI = EGI - operating expenses
NOI excludes mortgage and debt service
NOI also excludes depreciation and income taxes
Start with the rent the property would earn fully occupied, then take off the vacancy and credit loss to reflect empty units and unpaid rent. Add other income to get effective gross income. Subtracting operating expenses leaves net operating income, which excludes loan payments and income taxes so it measures the property itself.
Worked example
A rental with 120,000 of gross annual rent, a 5% vacancy rate, 4,000 of other income and 45,000 of operating expenses.
- Vacancy loss = 120,000 * 5% = 6,000
- EGI = 120,000 - 6,000 + 4,000 = 118,000
- NOI = 118,000 - 45,000 = 73,000.00
The net operating income is 73,000.00 a year, before any mortgage payment or income tax. These are the calculator's default inputs, so the results above match the widget exactly.
What counts as an operating expense
Operating expenses are the costs of running the property. Debt service and income taxes are not included in NOI.
| Item | In NOI as an operating expense? |
|---|---|
| Property taxes | Yes |
| Insurance | Yes |
| Property management | Yes |
| Repairs and maintenance | Yes |
| Mortgage principal and interest | No |
| Depreciation | No |
| Income taxes | No |
Rental income and expense categories: US Internal Revenue Service, Publication 527, Residential Rental Property.
Net operating income calculator: frequently asked questions
What is net operating income (NOI)?
Net operating income is the annual income a rental property produces after operating expenses, but before mortgage payments and income taxes. You start with gross rental income, subtract a vacancy and credit loss, add any other income, then subtract operating expenses. NOI measures how well the property itself performs as an investment, independent of how it is financed.
What does NOI include and exclude?
NOI includes rent, other income such as parking or laundry, and operating expenses like property taxes, insurance, management, repairs and maintenance, and utilities you pay. It excludes mortgage principal and interest, depreciation, capital expenditures and income taxes. Leaving out debt service is what makes NOI comparable across properties regardless of how each one is financed.
What is effective gross income (EGI)?
Effective gross income is the rental income you actually expect to collect. It equals gross rental income minus the vacancy and credit loss, plus other income from the property. EGI is the realistic top line that operating expenses are subtracted from to reach NOI, rather than the gross rent that assumes the property is always fully occupied and every tenant pays.
What vacancy rate should I use?
Vacancy rate is the share of potential rent lost to empty units and unpaid rent. It varies by location, property type and management quality, so use a figure that reflects your market and your own history. A common planning assumption is around 5%, which is the default here, but you should adjust it to your situation rather than treating it as fixed.
How is NOI used to value a property?
Investors divide NOI by the capitalization rate to estimate value, or divide NOI by the purchase price to find the cap rate. A higher NOI generally supports a higher value at the same cap rate. Because NOI excludes financing, two buyers paying cash or borrowing heavily can compare the same property on equal footing using its NOI.
Official sources
- Rental income, deductible expenses and what is not an operating cost: US Internal Revenue Service, Publication 527, Residential Rental Property. As at 24 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 24 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.