Net operating income (NOI) is the income a rental property produces after operating expenses but before the mortgage. It is the foundation of cap rate, DSCR and most lender underwriting, because it measures the property itself rather than how it is financed.
Enter your own rent and expenses in the free RentScope calculator to get NOI together with cash flow, cap rate, DSCR and IRR — or use the worked example below to see how each line item flows into NOI.
Formula
NOI = Effective gross income − Operating expenses
Effective gross income is gross rent plus other income, minus a vacancy and credit-loss allowance. Operating expenses include management, maintenance, property taxes, insurance, HOA dues and owner-paid utilities. NOI excludes the mortgage, capital expenditures and income taxes.
How to calculate it
- Add rent and any other income (laundry, parking, fees).
- Subtract a vacancy/credit-loss allowance (typically 5–10%).
- Subtract operating expenses: management, maintenance, taxes, insurance, HOA and utilities.
- The result is NOI — do not subtract the mortgage.
Worked example
Assume a $300,000 property renting for $2,500/month with typical expenses and a 6.75% loan. Running those numbers through the RentScope engine gives:
Open the free calculator with your own numbers →
FAQ
Does NOI include the mortgage?
No. Debt service is excluded, which is what lets you compare properties on an unlevered basis. After you subtract the mortgage you have cash flow, not NOI.
Is NOI the same as cash flow?
No. NOI is income before financing; cash flow is NOI minus the mortgage payment.
Should NOI include capital expenditures?
Strictly, NOI excludes capital expenditures, but many investors subtract a capex reserve when they want a conservative number. RentScope lets you fold maintenance or a reserve into operating expenses.
What is a good NOI?
NOI is a dollar amount, so its size depends on the property. Compare it to price through the cap rate (NOI ÷ price) rather than judging it on its own.
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