Net Operating Income on a $150,000 Rental Property

A $150,000 rental at $1,275 a month in rent produces about $9,369 of net operating income a year under standard expenses, an expense ratio of 36% and a 6.2% cap rate. At a 6.5% market cap rate that NOI is worth $144,134.

The income statement on a $150,000 property

Assumptions: 5% vacancy, taxes at 1.2% of price ($1,800 a year), insurance at 0.5% ($750), and 5% maintenance, 5% capital reserves and 8% management on collected income. Taxes vary the most by state, so replace them with the real bill.

Gross scheduled income: $1,275 a month (0.85% of price), $15,300 a year
Effective gross income after vacancy: $14,535
Taxes and insurance: $2,550
Maintenance, reserves and management: $2,616
Total operating expenses: $5,166 (35.5% of collected income)
Net operating income: $9,369, or $781 a month

See what $10,000 of NOI is worth at every cap rate.

NOI at different rents on a $150,000 property

Rent as a percent of price is the fastest screen. Each $100 a month of rent adds $935 of NOI after vacancy and percentage expenses, and the expense ratio falls as rent rises because taxes and insurance are fixed.

Monthly rent	Rent / price	NOI	Expense ratio	Cap rate
$750	0.5%	$4,461	48%	2.97%
$900	0.6%	$5,863	43%	3.91%
$1,050	0.7%	$7,265	39%	4.84%
$1,200	0.8%	$8,668	37%	5.78%
$1,350	0.9%	$10,070	35%	6.71%
$1,500	1.0%	$11,472	33%	7.65%
$1,650	1.1%	$12,874	32%	8.58%
$1,800	1.2%	$14,276	30%	9.52%

How property taxes change the NOI

At $1,275 rent. Effective tax rates run from under 0.5% in Hawaii to over 2% in New Jersey, Illinois and parts of Texas, and NOI moves dollar for dollar.

Tax rate	Annual taxes	NOI	Expense ratio	Cap rate
0.5%	$750	$10,419	28%	6.95%
0.8%	$1,200	$9,969	31%	6.65%
1.0%	$1,500	$9,669	33%	6.45%
1.2%	$1,800	$9,369	36%	6.25%
1.5%	$2,250	$8,919	39%	5.95%
2.0%	$3,000	$8,169	44%	5.45%
2.5%	$3,750	$7,419	49%	4.95%

How vacancy changes the NOI

Each point of vacancy costs $125 of NOI at this rent. A month empty every two years is about 4%.

Vacancy	Lost income	NOI	Cap rate
0%	$0	$9,996	6.66%
3%	$459	$9,620	6.41%
5%	$765	$9,369	6.25%
8%	$1,224	$8,992	5.99%
10%	$1,530	$8,741	5.83%
15%	$2,295	$8,114	5.41%

What this NOI is worth at market cap rates

$9,369 of NOI valued at each cap rate, and the gap to the $150,000 price. A buyer in a 5% market and a buyer in an 8% market are not looking at the same property.

Market cap rate	Implied value	vs $150,000
4%	$234,218	$84,218
5%	$187,374	$37,374
6%	$156,145	$6,145
7%	$133,839	-$16,161
8%	$117,109	-$32,891
9%	$104,097	-$45,903
10%	$93,687	-$56,313

Run the $150,000 property yourself

Preloaded with the numbers above. Change the rent, taxes, insurance or expenses to match the property.

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%$765 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)

$9,369

$781 a month

Typical expenses · 36% 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: $15,300
Vacancy and credit loss: -$765
Effective gross income: $14,535
Property taxes: -$1,800
Insurance: -$750
Maintenance: -$727
Capital reserves: -$727
Management: -$1,163
Total operating expenses: -$5,166
Net operating income: $9,369
Expense ratiooperating expenses / effective gross income: 35.5%
NOI marginNOI / effective gross income: 64.5%

What this NOI is worth

Value at a 6.50% cap rate: $144,134
Cap rate at this price$9,369 / $150,000: 6.25%
Priced above that value by: $5,866
Gross rent multiplierprice / gross scheduled income: 9.8

What moves it

Each $100/mo of rent addsof annual NOI after vacancy and percentage expenses: $935
Each point of vacancy costsof annual NOI: $125
Each $1,000 of NOI is worthat a 6.50% cap rate: $15,385

$150,000 rental NOI questions

What is the NOI on a $150,000 rental property?

At $1,275 rent with 5% vacancy, taxes of $1,800, insurance of $750 and 18% of collected income for maintenance, reserves and management, net operating income is about $9,369 a year, or $781 a month. That is an expense ratio of 36%. Your taxes and insurance will move it.

What is a good NOI for a $150,000 property?

One that produces the cap rate comparable rentals sell at. In a 5% market a $150,000 property needs about $7,500 of NOI to be fairly priced; in an 8% market it needs $12,000. At $1,275 rent this one produces $9,369, a 6.2% cap rate.

How much do property taxes change the NOI on a $150,000 rental?

Dollar for dollar. Taxes at 0.5% of price cost $750 a year and at 2.5% they cost $3,750, a $3,000 swing in NOI on the same rent. At a 6.5% cap rate that is a $46,154 difference in what the property is worth. Use the bill you will pay after the sale, not the seller's.