How to Calculate NOI
To calculate NOI, subtract operating expenses from effective gross income. NOI is before debt service and is used for cap rate, DSCR, and property-level income analysis.
Estimates are based on your inputs and assumptions. DealSharp does not provide financial, investment, legal, tax, or lending advice.
Run the number, then pressure-test the assumptions.
To calculate NOI, subtract operating expenses from effective gross income. NOI is before debt service and is used for cap rate, DSCR, and property-level income analysis.
Use this page to understand the metric directionally, then compare it against financing, reserves, repair risk, cash flow, and your own constraints.
NOI = effective gross income - operating expenses
If effective gross income is $60,000 and operating expenses are $22,000, NOI is $38,000.
Use the formula inside a full deal model
DealSharp helps compare assumptions, debt service, cash flow, and risk flags so this metric is not reviewed in isolation.
Open DealSharpHow to read this number
The useful move is not treating one number as a final answer. Use it to decide which assumptions deserve more review, then compare the result against cash flow, financing, reserves, repair risk, and your own constraints.
Inputs required
- Metric inputs shown in the formula or calculator.
- Income, expense, debt, value, and cash assumptions where relevant.
- Investor-provided numbers that should be checked against source documents.
Outputs explained
- Scenario estimate based on the inputs.
- Plain-English context for comparing the metric.
- Limitations and assumptions to review before relying on the result.
Assumptions to review
- Inputs are estimates supplied by the user.
- Market rent, lender terms, taxes, insurance, repairs, and legal details can change the result.
- DealSharp does not provide financial, investment, legal, lending, tax, or accounting advice.
What this tells you
- NOI estimates the property's operating income before financing.
- It helps compare properties before considering a specific buyer's loan.
- It is central to cap rate and DSCR.
What this does not tell you
- NOI does not include mortgage payments, depreciation, income taxes, or owner-specific financing.
- It depends on accurate rent, vacancy, and expense assumptions.
Common mistakes
- Subtracting debt service inside NOI.
- Forgetting vacancy or credit loss.
- Using seller expenses without validating future taxes, insurance, and management.
FAQ
Is NOI monthly or annual?
NOI can be monthly or annual, but annual NOI is common for cap rate and DSCR. Keep periods consistent.
Does NOI include capital expenditures?
Treatment varies. Conservative investors often model CapEx separately even if it is not included in formal NOI.
Run the full deal before deciding
This page helps with one metric or workflow. DealSharp is built for full real estate deal analysis: assumptions, financing, cash flow, repair scenarios, DSCR, cap rate, and risk flags based on your inputs.
Open DealSharpDisclaimer
DealSharp provides calculation and scenario-modeling tools for informational purposes only. Outputs are estimates based on your inputs and assumptions. DealSharp does not provide financial, investment, legal, lending, tax, or accounting advice. Verify important decisions with qualified professionals.