Understanding Net Operating Income
How we calculate. NOI = EGI (or operating income) − OpEx (excludes mortgage principal/interest). The form uses the same arithmetic as the worked examples on this page. See our methodology and accuracy policy.
Real-world scenario: A typical Net Operating Income case uses operating income / egi 120000 and operating expenses 45000. Enter the same figures below to reproduce the worked path.
What is Net Operating Income?
The core input to cap rate and many DSCR models. Do not subtract loan payments in OpEx.
- Exclude debt service from expenses
- Exclude income taxes
- Match the same year
The Formula
Worked Example
Common Use Cases
- Cap rate inputs: valuation screens
- Lender packages: underwriting NOI
- Asset reviews: year-over-year NOI
Pro Tips
- Normalize one-time expenses
- Use trailing or forward NOI consistently
- Pair with OpEx ratio
Limitations: Net Operating Income results are educational real-estate planning aids—not appraisals, loan offers, or investment advice. Confirm figures with qualified professionals.
FAQ
Is mortgage in OpEx?
No. Debt service sits below NOI. Use annual cash flow for NOI − debt service.
Gross rent or EGI?
Prefer effective gross income after vacancy. This tool uses the income figure you enter.
Authoritative References
For real estate investing concepts, consult:
- National Association of Realtors — market context
- Investopedia — NOI — net operating income basics
- CFPB — homebuying education