Is NOI calculated monthly or annually?

NOI is normally stated as an annual figure. Cap rates, appraisals, lender underwriting and pro formas all use twelve months of income and expenses, because taxes and insurance are annual bills and vacancy only makes sense across a full year. Monthly NOI is simply the annual number divided by twelve.

A property with $28,892 of annual NOI has $2,407.67 of monthly NOI. Both describe the same performance. The annual figure is the one to use when dividing by price for a cap rate or by annual debt service for a coverage ratio, because those denominators are annual too.

Where monthly NOI is useful is cash flow. Subtract the monthly mortgage payment from monthly NOI and you have what the property leaves in your account each month. When a listing quotes a monthly NOI, multiply by twelve before comparing it to anything else.

NOI is a yearly number. Cap rates, appraisals and lender debt coverage tests all use a full year of net operating income, because taxes and insurance are billed yearly and vacancy only averages out over twelve months. For a monthly figure, divide the yearly NOI by 12.

Worked example: the site's default house earns $28,892 of NOI a year, which is $2,407.67 a month. Never divide a monthly NOI by the price. $2,407.67 on $500,000 looks like a 0.48% cap rate, but the real one is 5.78%.