Net Operating Income is the number every other real estate metric depends on. This free True NOI Calculator builds NOI the correct way: gross scheduled rent plus other income, minus vacancy to reach effective gross income, minus real operating expenses. Mortgage payments, depreciation and income taxes are deliberately excluded, so the result reflects how the property itself performs rather than how you financed it.
What's included
- Gross scheduled income, other income and vacancy loss shown separately
- Effective gross income calculated before expenses
- Eleven expense inputs including taxes, insurance, HOA, management and landscaping
- Annual and monthly true NOI
- Operating expense ratio to sanity-check your assumptions
- Mortgage, depreciation and income taxes correctly excluded from NOI
What NOI actually measures
NOI measures the income a property produces from operations, independent of the buyer. Two investors can buy the same building with completely different loans and still calculate the same NOI. That is the point: NOI isolates property performance so it can be compared, capitalized into a value, and tested against debt. When a listing shows an NOI that already subtracts a mortgage payment, it is not NOI.
Why mortgage, depreciation and income taxes are excluded
A mortgage payment is a financing decision, depreciation is an accounting entry, and income tax depends on your personal situation. None of them describe the building. Including them makes NOI unusable for comparison and inflates or deflates cap rate. Debt belongs one line lower, in cash flow and DSCR, which is exactly how the Rental Property Deal Analyzer handles it.
How to interpret your results
Look at three things. First, the operating expense ratio: single-family rentals commonly land between 35% and 50% of effective gross income, and a ratio near 20% usually means expenses are missing. Second, monthly NOI versus your likely debt service — if they are close, the deal has little margin. Third, vacancy: modelling 0% vacancy is the single most common way an NOI ends up overstated.
Key formulas
Effective Gross Income (EGI): EGI = (Gross Scheduled Income + Other Income) - Vacancy Loss True NOI: NOI = Effective Gross Income - Operating Expenses Operating Expense Ratio: OER = Operating Expenses / Effective Gross Income NOI EXCLUDES: mortgage principal & interest, depreciation, income taxes, and one-time capital improvements.
Worked example: a $1,800/month single-family rental
- Gross scheduled income: $1,800 × 12 = $21,600
- Other income (storage, pet rent): $50 × 12 = $600
- Vacancy at 6%: ($21,600 + $600) × 0.06 = $1,332
- Effective gross income: $21,600 + $600 - $1,332 = $20,868
- Operating expenses: taxes $2,400 + insurance $1,200 + management $1,728 + repairs $1,800 + utilities $600 + landscaping $480 + other $300 = $8,508
- True NOI: $20,868 - $8,508 = $12,360
Annual NOI $12,360 | Monthly NOI $1,030 | Operating expense ratio 40.8% — a realistic profile for a stable single-family rental.
Frequently Asked Questions
Does NOI include the mortgage payment?
No. NOI stops before debt service. Mortgage principal and interest are financing costs, not operating expenses. Subtract debt service from NOI to get cash flow, and divide NOI by annual debt service to get DSCR.
Should CapEx reserves be in NOI?
Lenders and appraisers usually include a replacement reserve, while many investors keep reserves out of NOI and handle them in cash flow. Either is defensible as long as you are consistent when comparing properties.
What is a good operating expense ratio?
For single-family rentals, roughly 35–50% of effective gross income is typical; small multifamily often runs higher. Very low ratios usually signal missing expenses rather than an unusually efficient property.
Is NOI the same as cash flow?
No. NOI is income after operating expenses but before debt. Cash flow is what remains after debt service. A property can have healthy NOI and negative cash flow if it is financed aggressively.
Can I use this for commercial property?
Yes, though commercial deals often need owner-paid CAM, credit loss and tenant reimbursements. The Commercial Property Deal Analyzer includes those inputs.
Educational tool only — results are hypothetical projections from your assumptions, not financial, tax, legal or investment advice.