Net Operating Income on a $300,000 Rental Property

A $300,000 rental at $2,550 a month in rent produces about $18,737 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 $288,268.

The income statement on a $300,000 property

Assumptions: 5% vacancy, taxes at 1.2% of price ($3,600 a year), insurance at 0.5% ($1,500), 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: $2,550 a month (0.85% of price), $30,600 a year
Effective gross income after vacancy: $29,070
Taxes and insurance: $5,100
Maintenance, reserves and management: $5,233
Total operating expenses: $10,333 (35.5% of collected income)
Net operating income: $18,737, or $1,561 a month

See what $20,000 of NOI is worth at every cap rate.

NOI at different rents on a $300,000 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
$1,500	0.5%	$8,922	48%	2.97%
$1,800	0.6%	$11,726	43%	3.91%
$2,100	0.7%	$14,531	39%	4.84%
$2,400	0.8%	$17,335	37%	5.78%
$2,700	0.9%	$20,140	35%	6.71%
$3,000	1.0%	$22,944	33%	7.65%
$3,300	1.1%	$25,748	32%	8.58%
$3,600	1.2%	$28,553	30%	9.52%

How property taxes change the NOI

At $2,550 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%	$1,500	$20,837	28%	6.95%
0.8%	$2,400	$19,937	31%	6.65%
1.0%	$3,000	$19,337	33%	6.45%
1.2%	$3,600	$18,737	36%	6.25%
1.5%	$4,500	$17,837	39%	5.95%
2.0%	$6,000	$16,337	44%	5.45%
2.5%	$7,500	$14,837	49%	4.95%

How vacancy changes the NOI

Each point of vacancy costs $251 of NOI at this rent. A month empty every two years is about 4%.

Vacancy	Lost income	NOI	Cap rate
0%	$0	$19,992	6.66%
3%	$918	$19,239	6.41%
5%	$1,530	$18,737	6.25%
8%	$2,448	$17,985	5.99%
10%	$3,060	$17,483	5.83%
15%	$4,590	$16,228	5.41%

What this NOI is worth at market cap rates

$18,737 of NOI valued at each cap rate, and the gap to the $300,000 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 $300,000
4%	$468,435	$168,435
5%	$374,748	$74,748
6%	$312,290	$12,290
7%	$267,677	-$32,323
8%	$234,218	-$65,783
9%	$208,193	-$91,807
10%	$187,374	-$112,626

Run the $300,000 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%$1,530 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)

$18,737

$1,561 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: $30,600
Vacancy and credit loss: -$1,530
Effective gross income: $29,070
Property taxes: -$3,600
Insurance: -$1,500
Maintenance: -$1,454
Capital reserves: -$1,454
Management: -$2,326
Total operating expenses: -$10,333
Net operating income: $18,737
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: $288,268
Cap rate at this price$18,737 / $300,000: 6.25%
Priced above that value by: $11,732
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: $251
Each $1,000 of NOI is worthat a 6.50% cap rate: $15,385

$300,000 rental NOI questions

What is the NOI on a $300,000 rental property?

At $2,550 rent with 5% vacancy, taxes of $3,600, insurance of $1,500 and 18% of collected income for maintenance, reserves and management, net operating income is about $18,737 a year, or $1,561 a month. That is an expense ratio of 36%. Your taxes and insurance will move it.

What is a good NOI for a $300,000 property?

One that produces the cap rate comparable rentals sell at. In a 5% market a $300,000 property needs about $15,000 of NOI to be fairly priced; in an 8% market it needs $24,000. At $2,550 rent this one produces $18,737, a 6.2% cap rate.

How much do property taxes change the NOI on a $300,000 rental?

Dollar for dollar. Taxes at 0.5% of price cost $1,500 a year and at 2.5% they cost $7,500, a $6,000 swing in NOI on the same rent. At a 6.5% cap rate that is a $92,308 difference in what the property is worth. Use the bill you will pay after the sale, not the seller's.