Finance formula
How to calculate net operating income
NOI measures property income before financing costs, income taxes, depreciation, and capital spending.
Direct answer
Formula
NOI = gross operating income - operating expenses
Use the table below to match each symbol with the right input. Keep units consistent before you start.
Net operating income formula
Start here when you only need the equation and variable names.
Formula
NOI = gross operating income - operating expenses
NOI measures property income before financing costs, income taxes, depreciation, and capital spending.
Variable meanings
Check each symbol, meaning, and unit before you calculate.
| Symbol | Name | Description | Unit |
|---|---|---|---|
| gross operating income | Gross operating income | Rental and other property income. | currency per year |
| operating expenses | Operating expenses | Recurring costs to run the property. | currency per year |
When to use this formula
Check that your situation matches the formula before you trust the result.
- Useful for rental property analysis, cap rate checks, and operating performance reviews.
Step-by-step method
Follow these steps when you are solving it by hand.
- 1Add rental income and other operating income.
- 2Add recurring operating expenses.
- 3Subtract operating expenses from gross operating income.
- 4Leave out loan payments, depreciation, and income taxes.
Examples
These sample numbers show the order of operations and units.
Multifamily property
gross operating income
$150,000
operating expenses
$62,000
- 1.NOI = 150000 - 62000
- 2.NOI = 88000
Result
Net operating income is $88,000.
Single rental
gross operating income
$96,000
operating expenses
$41,000
- 1.NOI = 96000 - 41000
- 2.NOI = 55000
Result
Net operating income is $55,000.
Mistakes to avoid
Small input or unit errors can change the answer a lot.
- Using an annual rate where the net operating income formula needs a monthly or period rate.
- Entering 8 instead of 0.08 when the formula calls for a decimal rate.
- Comparing results across different time periods without converting them first.
- Rounding each step instead of rounding the final answer.
Open the Net Operating Income Calculator
Open the calculator for the answer without rewriting the formula.
Enter your values in the related calculator, then compare the output with the hand method above.
Open Net Operating Income CalculatorFAQs
Short answers for common formula questions.
Can I calculate Net operating income by hand?
Yes. Write the units next to each value, convert rates or measurements first, and round only the final answer.
Why does my Net operating income result differ from another calculator?
Most differences come from rounding, unit conversions, rate timing, or a slightly different version of the formula.
When is the NOI Calculator better than hand math?
Open the NOI Calculator to check several scenarios or skip the hand arithmetic.