Calculator
NOI Calculator: Net Operating Income
Net operating income (NOI) is a property's total income after vacancy and credit loss, minus operating expenses. It excludes debt service, capital expenditures, depreciation and income taxes. NOI is the base for cap rate valuation, DSCR and debt yield.
Formula
How underwriters use it
Underwriters rebuild NOI from the rent roll and the trailing twelve month operating statement rather than accepting a seller's figure. Common adjustments: market vacancy instead of current full occupancy, a management fee even if the owner self-manages, and real estate taxes reassessed at the purchase price.
Replacement reserves are often deducted below NOI for valuation but included in lender underwritten NOI, so confirm which convention a lender or appraiser is using.
Frequently asked questions
Does NOI include mortgage payments?
No. NOI is measured before debt service, so it reflects the property's performance independent of how it is financed. Debt service is subtracted after NOI to get cash flow before tax.
Does NOI include capital expenditures?
Typically no. Capital expenditures and replacement reserves sit below NOI, though many lenders deduct a reserve when computing underwritten NOI for loan sizing.
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