1. What is Net Operating Income (NOI)?

Net Operating Income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property minus all reasonably necessary operating expenses.

2. How Does the Calculator Work?

The calculator uses the NOI formula:

Where:

• Rental Income — Total income from property rentals
• Vacancy — Lost income due to unoccupied units
• Expenses — All property operating expenses

Explanation: NOI measures the property's ability to generate income after accounting for necessary operating expenses.

3. Importance of NOI Calculation

Details: NOI is crucial for determining a property's value, assessing investment performance, and securing financing. It's used to calculate cap rates and debt service coverage ratios.

4. Using the Calculator

Tips: Enter all values in USD. Include all rental income, estimated vacancy costs, and all operating expenses (maintenance, taxes, insurance, etc.).

5. Frequently Asked Questions (FAQ)

Q1: What expenses should be included in NOI?
A: Include property taxes, insurance, utilities, maintenance, property management fees, but exclude mortgage payments, capital expenditures, and income taxes.

Q2: How is NOI different from profit?
A: NOI doesn't account for financing costs (mortgage payments) or capital expenditures, while profit does.

Q3: What is a good NOI for a rental property?
A: This varies by market and property type, but generally 40-60% of gross income is considered good.

Q4: Can NOI be negative?
A: Yes, if operating expenses exceed rental income, but this is usually unsustainable long-term.

Q5: How often should I calculate NOI?
A: Regularly - monthly for active management, quarterly for most investors, and always before making investment decisions.