Operating expenses
Property taxes, insurance, repairs, utilities the owner pays, management, payroll, marketing and administrative costs.
NOI calculator
Work out a rental property's net operating income from rent, vacancy, other income and operating expenses, and see its expense ratio.
On this page
Net operating income calculator
The starting figures are the OCC's income-property example. Enter yearly amounts.
- Net operating income
- $694,000
- $57,833 a month
- Effective gross income
- $950,000
- Rent after vacancy, plus other income
- Operating expense ratio
- 26.9%
- Expenses ÷ effective gross income
Formula: NOI = (gross scheduled rent − vacancy and collection loss + other income) − operating expenses.
Starting figures are hypothetical examples, except where a section names its source. Results are screening estimates, not appraisals, loan approvals or investment advice.
How to calculate net operating income
The National Apartment Association defines NOI as the revenue left after all operating expenses, before mortgage payments and capital expenditures. The OCC's lending handbook works through it like this.
List gross scheduled rent
$1,000,000 a year if every unit is leased at its scheduled rent.
Subtract vacancy and collection loss
5% of $1,000,000 is $50,000, leaving effective gross income of $950,000. Add any other income here.
Subtract operating expenses
Real estate taxes $63,000, insurance $18,000, repairs and maintenance $45,000, management $50,000 and replacement reserves $80,000. Total: $256,000.
Read the result
$950,000 − $256,000 = $694,000 of net operating income, with an expense ratio of about 26.9%.
Leave out mortgage principal and interest, depreciation and income tax. They depend on the owner, not the property.
What counts and what does not
Not operating expenses
Loan payments, depreciation, income tax and owner distributions. These sit below NOI.
Reserves and capital spending
Conventions differ. The NAA places capital expenditures and reserves below NOI, while the OCC example deducts reserves. Lenders such as Fannie Mae underwrite net cash flow after reserves. State which basis you used.
Use real numbers
Build NOI from rent rolls and trailing 12-month statements where you can. A pro forma with low vacancy or missing management fees overstates NOI and every ratio built on it.
Frequently asked questions
QUICK ANSWERS
No. Cash flow is what remains after you also pay the mortgage and capital costs. A property can have positive NOI and negative cash flow if the loan payment is larger than the NOI.
No. NOI is measured before debt service, so it describes the property regardless of how it is financed.
Use the property's own history and local vacancy data. The OCC example uses 5% and notes that vacancy and collection loss can rise to 10% or more in a weak economy.
It feeds the cap rate (NOI ÷ price), the debt service coverage ratio (NOI ÷ debt service) and lender sizing of commercial loans.
How we reviewed this
Sources reviewed October 16, 2026. The worked example uses the OCC handbook's published figures.