How to read this result
In the default example, effective gross income is $47,500.00. Results describe this input scenario; they are not a recommendation.
Change one assumption at a time to see how it affects the scenario. Compare periods and cost definitions consistently. Negative results show a modeled shortfall; an unavailable ratio needs a valid denominator.
Formula and methodology
Apply the vacancy percentage to annual potential rent plus the other income entered in this simplified model. Subtract annual operating expenses from the resulting effective gross income to calculate NOI.
Enter percentages as whole numbers: 5 means 5%. When used as a factor, the calculation divides a percentage by 100. Percentage outputs multiply the final ratio by 100. Calculations retain precision internally; displayed amounts and rates are rounded to two decimals.
Variables and input definitions
- Annual gross potential rent (USD/year)
- Scheduled annual rent at full occupancy. Minimum: 0.
- Annual other income (USD/year)
- Parking, laundry, fees and other property income. Minimum: 0.
- Vacancy & credit loss (%)
- Vacancy/collection loss assumption. Minimum: 0. Maximum: 100.
- Annual operating expenses (USD/year)
- Recurring operating expenses excluding debt service and depreciation. Minimum: 0.
Worked example
This example uses the exact prefilled inputs above. Reset defaults to restore this scenario after making changes.
| Item | Default scenario |
|---|---|
| Annual gross potential rent | $48,000.00 |
| Annual other income | $2,000.00 |
| Vacancy & credit loss | 5.00% |
| Annual operating expenses | $15,000.00 |
| Item | Default scenario |
|---|---|
| Effective gross income | $47,500.00 |
| NOI | $32,500.00 |
Assumptions and limitations
NOI conventions vary in treatment of reserves and owner-specific expenses; debt service and depreciation must not be included as operating expenses.
Results describe this input scenario; they are not a recommendation.
The tool uses values you supply. It does not retrieve market prices, verify leases or inspect a property. Results exclude items outside the listed inputs. Review local requirements and the relevant contract when a payment, fee or allocation depends on them.
Common mistakes
Do not enter depreciation, income tax, debt service or acquisition spending as operating expenses. This model applies vacancy to both rent and other income; adjust the income assumption if an item is independent of occupancy.
Sources and method references
These references provide context for the method and terminology. They do not endorse this tool or validate your property assumptions.
- IRS — Publication 527 (2025), Residential Rental PropertyRental income and expense concepts; operating/rental expense context.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
- Appraisal Institute — Basic Formulas — Income CapitalizationIncome/cap-rate/value relationships, gross income multiplier and debt-coverage formula references.
Frequently asked questions
Which costs belong in NOI?
Property operating costs such as taxes, insurance, maintenance, management and ordinary operations belong in the operating estimate. Debt service, depreciation and investor income tax do not.
Can NOI be below zero?
Yes. If operating expenses exceed effective income, the property has negative NOI under the entered scenario. Negative NOI should prompt a review of the income and cost assumptions.