Compute Net Operating Income, cap rate, and expense ratio for any rental — exactly how lenders and appraisers underwrite.
NOI is the load-bearing number in real estate underwriting. It strips out financing and tax noise so you can compare properties on their underlying performance. This calculator turns rent, vacancy, and operating expenses into NOI, monthly NOI, cap rate, and expense ratio in real time.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
Effective gross income minus operating expenses — before any debt service or taxes.
NOI is the cash a rental property generates from operations after paying every recurring expense it takes to run the building (taxes, insurance, management, maintenance, utilities, HOA) — but before mortgage payments, depreciation, and income tax. It is the single number lenders, appraisers, and buyers use to value income property.
NOI measures the property itself, independent of how you financed it.
Two investors can buy the same building with very different loans. NOI strips out financing so the property's underlying performance is comparable. Cash flow (NOI minus mortgage P&I) is the investor-specific number; NOI is the asset-specific number. That separation is why cap rate uses NOI, not cash flow.
Cap rate = NOI ÷ property value. NOI is the numerator that drives valuation.
If a property has $50,000 of NOI and is worth $1,000,000, the cap rate is 5%. Every extra dollar of NOI at a 5% cap is worth $20 in value at sale. That leverage is why operators obsess over expense ratios, vacancy, and rent bumps — a small NOI improvement compounds into a much larger value increase.
Most stabilized residential rentals run 35–50% of effective gross income.
The 50% rule says operating expenses (excluding mortgage) tend to be roughly half of gross rent over the long run for small residential properties. Newer single-family rentals can run 25–35%; older multifamily often 45–55%; class-C urban can exceed 60%. If your modeled ratio is much lower than the benchmark for your asset class, you are probably under-budgeting maintenance or vacancy.
The mechanics in short answers — no jargon, no upsell.
Add scheduled gross rent to any ancillary income (laundry, parking, pet fees, vending). Then subtract a vacancy allowance — typically 5–10% — to get effective gross income (EGI), the realistic top line.
Property taxes, insurance, property management, repairs and maintenance, owner-paid utilities, HOA fees, landscaping, ads. Anything required to keep tenants in place and the asset operating. Mortgage and capex are intentionally excluded.
The difference is what the property generates before financing and income tax. Divide by 12 for monthly NOI. Divide OpEx by EGI for the expense ratio. Divide NOI by property value for the cap rate.
Two properties with identical NOI can sell for very different prices depending on the market cap rate. Lower cap = higher price = lower yield. NOI is the lever you actively control as an operator; cap rate is set by the market.
Designed so anyone can model their situation in under a minute, with or without a finance background.
Strip out financing noise and look at the asset on its own merits — the way appraisers, lenders, and serious buyers underwrite.
Compare your modeled OpEx to the 35–50% benchmark for residential rentals and catch missing line items before you close.
Cap rate falls out of NOI ÷ value. Enter both and the calculator turns guesswork into a single, comparable yield number.
At a 6% cap, every $1,000 of NOI you add is worth $16,667 in property value. The calculator makes that lever visible.
Use NOI to normalize across properties with different mortgages, down payments, and tax situations — the only fair comparison.
Dial vacancy and maintenance up to stress-test. A deal that pencils at 10% vacancy is more durable than one that needs 3% to work.
Everything you might ask before, during, or after using this tool.
Because NOI is a property-level metric, not an investor-level one. The same building generates the same NOI whether you pay all cash or finance 80%. By stripping out debt service, NOI lets you compare properties on the underlying asset — which is exactly what cap rate, appraised value, and lender DSCR calculations require.
Strictly speaking, no. Operating expenses are recurring costs needed to keep the building running this year — taxes, insurance, repairs, management. Capex covers big one-time replacements (roof, HVAC, parking lot) that get capitalized over many years. Most underwriters do set aside a capex reserve (often 5–10% of EGI) when stress-testing cash flow, but it does not reduce NOI itself.
NOI is income from operations before debt and income tax. Cash flow is what hits your bank account after subtracting mortgage principal and interest (and ideally a capex reserve). A property can have strong NOI but weak cash flow if it is highly leveraged, and vice versa. Lenders care about NOI for DSCR; you care about cash flow for monthly take-home.
The classic 50% rule says expenses run roughly half of gross rent for residential rentals over the long run. New single-family rentals with low maintenance can run 25–35%. Older multifamily and class-C commonly land at 45–55%. Anything below 30% on an older building is almost certainly missing line items — usually maintenance, capex, or owner-paid utilities.
Enter scheduled (100% occupied) gross rent at the top, then apply a vacancy percentage. That mirrors how a lender or appraiser works: the property's rent roll defines potential, vacancy converts it to realistic. If you enter already-collected rent and also apply vacancy, you double-count the loss.
A higher cap rate means a higher yield but typically also higher risk or a less desirable market. Class-A urban properties trade at 4–5% caps; class-C in secondary markets can be 8–10%+. If your cap rate is much higher than the market for your asset class, double-check that your NOI is realistic — under-budgeting maintenance or vacancy inflates NOI and cap rate.
No. Depreciation is a non-cash accounting deduction, and income tax depends on the owner's situation (entity type, other income, passive activity rules). Both are deliberately excluded from NOI so the number reflects pure operating performance. They reappear when you calculate after-tax cash flow or total return.
At a constant cap rate, every $1 of additional NOI translates to (1 ÷ cap rate) dollars of value. At a 5% cap, $1 of NOI growth equals $20 of value. That is why raising rent $50/month per unit can lift building value by tens of thousands of dollars — the NOI leverage is the whole game in commercial multifamily.
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Net Operating Income is the annual cash a property generates from operations after every recurring operating expense, but before mortgage payments, capital expenditures, depreciation, and income tax. That definition sounds narrow, but it is the load-bearing number behind almost every other real estate metric you will encounter.
Cap rate is NOI ÷ property value. Debt service coverage ratio (DSCR) is NOI ÷ annual mortgage P&I. Gross rent multiplier inverts to roughly NOI yield. Lender loan sizing usually starts with a target DSCR applied to underwriter-adjusted NOI. Appraisers building income-approach valuations work backward from NOI and a market cap rate.
If you get NOI wrong — by being optimistic on rent, sloppy on vacancy, or missing an expense line — every downstream number is wrong too. Conservative, realistic NOI is the single most important piece of underwriting.
New investors routinely use "NOI" and "cash flow" interchangeably. They are not the same thing, and treating them as such leads to bad decisions.
NOI is property-level. It strips out financing because two people buying the same building should arrive at the same NOI. A cash buyer and a 75% LTV buyer have identical NOI on the same asset. Their cash flows will be wildly different — the cash buyer keeps all of NOI, the leveraged buyer keeps NOI minus debt service, which might be negative.
Cash flow is investor-level. It depends on how much you borrowed, your rate, your amortization period, and your capex reserve policy. Two investors looking at the same property can rationally come to very different cash-flow conclusions.
Practical implication: when you compare deals, compare cap rates (NOI-based) first. When you decide whether you personally want a specific deal, compare cash flows (financing-specific). Conflating the two leads to either rejecting good assets because of bad personal financing, or accepting bad assets because of cheap debt that won't last.
There is no single "right" expense ratio. The healthy range varies massively by asset class, age, location, and management style. Here are the rough 2026 reference ranges most underwriters use.
New single-family rentals (built 2010+): 25–35%. Low maintenance, often no HOA, tenant pays utilities. Easy to underwrite, low capex reserve, but lower cap rates compress the value of strong NOI.
Suburban small multifamily (2–4 units): 35–50%. Higher vacancy churn, more shared maintenance, often owner-paid water. This is where the 50% rule is most accurate.
Older urban multifamily (pre-1980, 5+ units): 45–60%. Significant maintenance, capex reserves, and owner-paid utilities. Class-C in tertiary markets can push 65% in bad years.
Class-A urban high-rise: 40–55%. Lower maintenance per door but high property taxes, full-time staff, amenities, and elevator maintenance.
If your modeled expense ratio sits substantially below these ranges for your asset class, audit your line items. The most commonly under-budgeted: capex reserve, leasing commissions, turnover costs, and HVAC replacement. The cleanest way to stress test is to model both your "best case" and a "50% rule" scenario and look at how cap rate moves between them.
Cap rate compression is one of the most powerful concepts in commercial real estate. At a 5% market cap rate, every additional dollar of NOI is worth $20 in property value at sale. At a 4% cap, it is worth $25. At a 6% cap, it is worth $16.67. The math is just 1 ÷ cap rate.
That is why experienced multifamily operators obsess over small NOI improvements. A $50/month rent bump across 20 units adds $12,000/year of NOI. At a 5% cap, that's $240,000 of value created. A vendor renegotiation that cuts $5,000/year of insurance is worth $100,000 of value at the same cap rate.
The same lever works in reverse. A 3% vacancy increase or a single expensive turnover can erase a year of NOI growth. Underwriting conservatively — assuming the bad cases — is how operators protect against the downside leverage.
For passive buyers, this is also why the price you pay matters more than rent growth in the first few years. A 50 bps mistake on cap rate at acquisition (say, paying a 5.0% cap when 5.5% was fair) costs more than several years of disciplined operations can recover.
Mistake 1: under-budgeting vacancy. Brokers and sellers love to quote 3% vacancy. For most stabilized residential, 5% is more realistic, and 8–10% is right for transient markets or class-C. If you use seller numbers without adjusting vacancy, your NOI is automatically optimistic.
Mistake 2: ignoring maintenance and turnover. New investors often plug in a flat $1,000–2,000/year for maintenance. The reality on older buildings is 8–12% of gross rent, plus $1,500–3,000 per turnover (paint, cleaning, repairs, vacancy days). Underwrite both ongoing maintenance AND turnover cost.
Mistake 3: missing property management. Even if you self-manage, model 8–10% of rent for management. Your time has value, and the day you outsource (or sell), the next owner will need to plug that line item in. Pro forma NOI should reflect a third-party operating cost.
Mistake 4: forgetting capex reserves. Capex is technically excluded from NOI by definition, but every underwriter sets aside a reserve — typically 5–10% of EGI — when stress-testing cash flow. Failing to plan for the next roof or HVAC turns a "great" deal into a capital call.
Mistake 5: using teaser tax bills. Property taxes often reset on sale. A seller with a 10-year-old tax basis may pay $4,000/year; you might pay $9,000 after reassessment. Always model post-sale taxes — not what the seller currently pays.
Two short notes worth reading before you trust any number on this page.
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