What $100,000 of Net Operating Income Means

$100,000 of NOI is $8,333 a month left after vacancy and every operating expense, before any mortgage. At a 6.5% cap rate it supports a value of $1,538,462. On a $1,540,000 rental it takes about $13,500 a month in rent to produce.

What $100,000 of NOI is worth

Value is NOI divided by the cap rate comparable properties sell at. The same $100,000 is worth $1,000,000 to a buyer in a 10% market and $2,500,000 to a buyer in a 4% market. The last column is what each additional $1,000 of NOI adds at that cap rate.

Cap rate	Value of $100,000 NOI	Each $1,000 of NOI
4%	$2,500,000	$25,000
5%	$2,000,000	$20,000
6%	$1,666,667	$16,667
7%	$1,428,571	$14,286
8%	$1,250,000	$12,500
9%	$1,111,111	$11,111
10%	$1,000,000	$10,000

A property that produces $100,000 of NOI

Sized so that $100,000 is a 6.5% cap rate, the example is a $1,540,000 property. With 5% vacancy, taxes at 1.2% of price ($18,480), insurance at 0.5% ($7,700) and 18% of collected income for maintenance, reserves and management:

Rent of $13,500 a month (0.88% of price), $162,000 a year
Effective gross income after vacancy: $153,900
Operating expenses: $53,882, an expense ratio of 35.0%
Net operating income: $100,018, or $8,335 a month
Each $100 a month of rent adds $935 of NOI. Each point of vacancy costs $1,328.

Rent needed for $100,000 of NOI at other prices

Taxes and insurance rise with price, so a more expensive property needs more rent to reach the same NOI. The last column is the cap rate $100,000 represents at that price.

Price	Rent needed	Rent / price	Expense ratio	Cap rate of $100,000
$1m	$12,515	1.25%	30%	10.0%
$1.5m	$13,425	0.90%	35%	6.7%
$2m	$14,335	0.72%	39%	5.0%

Gross income needed at each expense ratio

Two properties can produce $100,000 of NOI from very different rent rolls. A lean building keeps 70% of collected income; an old one with owner-paid heat keeps 45%. This table shows the collected and scheduled income needed at each ratio, with 5% vacancy.

Expense ratio	Collected income needed	Scheduled income	Monthly rent
25%	$133,333	$140,351	$11,696
30%	$142,857	$150,376	$12,531
35%	$153,846	$161,943	$13,495
40%	$166,667	$175,439	$14,620
45%	$181,818	$191,388	$15,949
50%	$200,000	$210,526	$17,544
55%	$222,222	$233,918	$19,493

What loan $100,000 of NOI can carry

Lenders divide NOI by annual debt service to get the debt service coverage ratio and usually want 1.20 to 1.25 or better. Cash flow is what is left after the payment.

Annual debt service	Monthly payment	DSCR	Cash flow
$60,000	$5,000	1.67	$40,000
$70,000	$5,833	1.43	$30,000
$80,000	$6,667	1.25	$20,000
$90,000	$7,500	1.11	$10,000

Check your own property against $100,000

The calculator is loaded with the example property. Replace the numbers with yours to see how close you are.

Income

Monthly rent (all units)$Scheduled rent at full occupancyUnitsFor per-unit figures. 1 for a house or condo.Other monthly income$Parking, laundry, pet rent, storage, utility billbackVacancy and credit loss%$8,100 a year. 5 to 8% is typical.

Operating expenses

Annual property taxes$Use the bill after reassessment, not the seller'sAnnual insurance$Landlord policy, plus flood or wind where neededHOA dues (monthly)$Owner-paid utilities (monthly)$Water, sewer, trash, gas, common-area electricOther monthly expenses$Lawn, snow, pest, licenses, legal, accounting

Price and market (optional)

Purchase price or value$Leave at 0 if you only need NOI. Turns on the cap rate.Market cap rate%What comparable properties sell at. Values the NOI.

Net operating income (annual)

$100,018

$8,335 a month

Typical expenses · 35% ratio

Typical. 30 to 45% of collected income covers expenses, the range most single-family and small multifamily rentals land in with every cost counted.

Income statement

Gross scheduled income: $162,000
Vacancy and credit loss: -$8,100
Effective gross income: $153,900
Property taxes: -$18,480
Insurance: -$7,700
Maintenance: -$7,695
Capital reserves: -$7,695
Management: -$12,312
Total operating expenses: -$53,882
Net operating income: $100,018
Expense ratiooperating expenses / effective gross income: 35.0%
NOI marginNOI / effective gross income: 65.0%

What this NOI is worth

Value at a 6.50% cap rate: $1,538,738
Cap rate at this price$100,018 / $1,540,000: 6.49%
Priced above that value by: $1,262
Gross rent multiplierprice / gross scheduled income: 9.5

What moves it

Each $100/mo of rent addsof annual NOI after vacancy and percentage expenses: $935
Each point of vacancy costsof annual NOI: $1,328
Each $1,000 of NOI is worthat a 6.50% cap rate: $15,385

$100,000 NOI questions

What is a property with $100,000 of NOI worth?

Divide NOI by the market cap rate. At 6.5% it is $1,538,462. At 5% it is $2,000,000 and at 8% it is $1,250,000. The cap rate comes from recent sales of similar property in the same market, so the same $100,000 supports very different prices in different cities.

How much rent does it take to produce $100,000 of NOI?

On a $1,540,000 property under standard assumptions, about $13,500 a month. That covers 5% vacancy, taxes of $18,480, insurance of $7,700 and 18% of collected income for maintenance, reserves and management, an expense ratio of 35%. A cheaper property with lower taxes needs less rent for the same NOI.

Is $100,000 of NOI good?

Only relative to price. $100,000 on a $1,250,000 property is an 8% cap rate, which is strong income. The same $100,000 on a $2,500,000 property is a 4% cap rate, which only makes sense in a market with real appreciation. Judge NOI by the cap rate it produces and the expense ratio behind it, not by the dollar figure.

How big a mortgage can $100,000 of NOI support?

Commercial lenders want NOI to cover the annual loan payment by 1.20 to 1.25 times, so $100,000 supports about $80,000 of annual debt service, or $6,667 a month. At 7.25% over 30 years that is a loan of roughly $977,231. Residential DSCR lenders use gross rent instead of NOI and get a different answer.