Quick Answer — What Is Net Operating Income?
NOI is Effective Gross Income minus Total Operating Expenses, where Effective Gross Income is gross rent and other income after subtracting vacancy loss. It is deliberately calculated *before* debt service (mortgage payments), income taxes, depreciation, and capital expenditures — those are ownership-structure and financing decisions, not property-operating performance, and mixing them in is the most common NOI mistake.
The formula in one line: NOI = (Gross rent + Other income − Vacancy loss) − (Property tax + Insurance + Maintenance + Utilities + Other opex + Management fee).
Quick reference (annual NOI, $2,000/month rent, 5% vacancy, typical expense mix): roughly $14,500–$15,000/year after taxes, insurance, maintenance, utilities, and an 8% management fee — meaning operating expenses consume close to 40% of effective income on a fairly typical single-family rental. That expense ratio is worth remembering: if your own number comes in well under 30% or well over 50%, it's usually a sign an expense line is missing or overstated.
NOI feeds directly into cap rate (NOI ÷ property value) and, from there, into valuation — this calculator shows an implied cap rate automatically if you enter a property value, but its main job is getting the NOI number itself right.