Net Operating Income on a $200,000 Rental Property

A $200,000 rental at $1,700 a month in rent produces about $12,492 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 $192,178.

The income statement on a $200,000 property

Assumptions: 5% vacancy, taxes at 1.2% of price ($2,400 a year), insurance at 0.5% ($1,000), 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: $1,700 a month (0.85% of price), $20,400 a year
Effective gross income after vacancy: $19,380
Taxes and insurance: $3,400
Maintenance, reserves and management: $3,488
Total operating expenses: $6,888 (35.5% of collected income)
Net operating income: $12,492, or $1,041 a month

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

NOI at different rents on a $200,000 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
$1,000	0.5%	$5,948	48%	2.97%
$1,200	0.6%	$7,818	43%	3.91%
$1,400	0.7%	$9,687	39%	4.84%
$1,600	0.8%	$11,557	37%	5.78%
$1,800	0.9%	$13,426	35%	6.71%
$2,000	1.0%	$15,296	33%	7.65%
$2,200	1.1%	$17,166	32%	8.58%
$2,400	1.2%	$19,035	30%	9.52%

How property taxes change the NOI

At $1,700 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%	$1,000	$13,892	28%	6.95%
0.8%	$1,600	$13,292	31%	6.65%
1.0%	$2,000	$12,892	33%	6.45%
1.2%	$2,400	$12,492	36%	6.25%
1.5%	$3,000	$11,892	39%	5.95%
2.0%	$4,000	$10,892	44%	5.45%
2.5%	$5,000	$9,892	49%	4.95%

How vacancy changes the NOI

Each point of vacancy costs $167 of NOI at this rent. A month empty every two years is about 4%.

Vacancy	Lost income	NOI	Cap rate
0%	$0	$13,328	6.66%
3%	$612	$12,826	6.41%
5%	$1,020	$12,492	6.25%
8%	$1,632	$11,990	5.99%
10%	$2,040	$11,655	5.83%
15%	$3,060	$10,819	5.41%

What this NOI is worth at market cap rates

$12,492 of NOI valued at each cap rate, and the gap to the $200,000 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 $200,000
4%	$312,290	$112,290
5%	$249,832	$49,832
6%	$208,193	$8,193
7%	$178,451	-$21,549
8%	$156,145	-$43,855
9%	$138,796	-$61,204
10%	$124,916	-$75,084

Run the $200,000 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%$1,020 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)

$12,492

$1,041 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: $20,400
Vacancy and credit loss: -$1,020
Effective gross income: $19,380
Property taxes: -$2,400
Insurance: -$1,000
Maintenance: -$969
Capital reserves: -$969
Management: -$1,550
Total operating expenses: -$6,888
Net operating income: $12,492
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: $192,178
Cap rate at this price$12,492 / $200,000: 6.25%
Priced above that value by: $7,822
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: $167
Each $1,000 of NOI is worthat a 6.50% cap rate: $15,385

$200,000 rental NOI questions

What is the NOI on a $200,000 rental property?

At $1,700 rent with 5% vacancy, taxes of $2,400, insurance of $1,000 and 18% of collected income for maintenance, reserves and management, net operating income is about $12,492 a year, or $1,041 a month. That is an expense ratio of 36%. Your taxes and insurance will move it.

What is a good NOI for a $200,000 property?

One that produces the cap rate comparable rentals sell at. In a 5% market a $200,000 property needs about $10,000 of NOI to be fairly priced; in an 8% market it needs $16,000. At $1,700 rent this one produces $12,492, a 6.2% cap rate.

How much do property taxes change the NOI on a $200,000 rental?

Dollar for dollar. Taxes at 0.5% of price cost $1,000 a year and at 2.5% they cost $5,000, a $4,000 swing in NOI on the same rent. At a 6.5% cap rate that is a $61,538 difference in what the property is worth. Use the bill you will pay after the sale, not the seller's.