How it works
NOI is the property's income after operating expenses and before any mortgage payment. It's the foundation for cap rate and DSCR.
Check how any seller-provided NOI was built. Omitting management, vacancy, or reserves inflates NOI and every metric based on it.
Formula
(Rent + Other income) × 12
Potential gross income × (1 − Vacancy %)
Effective gross income − Operating expenses (mortgage excluded)
Worked example
With the hypothetical defaults:
| Net operating income | $13,660/yr |
|---|---|
| Potential gross income | $28,800/yr |
| Effective gross income | $27,360/yr |
| Operating expenses | $13,700/yr |
All figures in this example are hypothetical and chosen to illustrate the math. They are not current Houston market averages, quotes, or forecasts.
Frequently asked questions
Is the mortgage an operating expense?
No. NOI excludes principal and interest so it is comparable across buyers with different financing.
Should capex reserves be in NOI?
Conventions vary. Many investors include a reserve for conservative analysis; be consistent when comparing properties.
See how every assumption interacts
The 713 Deal Generator combines financing, income, operating costs, and upfront cash into a printable report with stress tests and the 713 Metrics Score.
Run the Full 713 Deal Generator713 Metrics provides educational and informational tools based on user-provided assumptions. Results are estimates and do not constitute financial, investment, tax, legal, lending, appraisal, brokerage, insurance, or real-estate advice. Verify property-specific information independently and consult appropriate licensed professionals.