Net Operating Income on a $350,000 Rental Property

A $350,000 rental at $2,975 a month in rent produces about $21,860 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 $336,312.

The income statement on a $350,000 property

Assumptions: 5% vacancy, taxes at 1.2% of price ($4,200 a year), insurance at 0.5% ($1,750), 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: $2,975 a month (0.85% of price), $35,700 a year
Effective gross income after vacancy: $33,915
Taxes and insurance: $5,950
Maintenance, reserves and management: $6,105
Total operating expenses: $12,055 (35.5% of collected income)
Net operating income: $21,860, or $1,822 a month

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

NOI at different rents on a $350,000 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
$1,750	0.5%	$10,409	48%	2.97%
$2,100	0.6%	$13,681	43%	3.91%
$2,450	0.7%	$16,953	39%	4.84%
$2,800	0.8%	$20,224	37%	5.78%
$3,150	0.9%	$23,496	35%	6.71%
$3,500	1.0%	$26,768	33%	7.65%
$3,850	1.1%	$30,040	32%	8.58%
$4,200	1.2%	$33,312	30%	9.52%

How property taxes change the NOI

At $2,975 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%	$1,750	$24,310	28%	6.95%
0.8%	$2,800	$23,260	31%	6.65%
1.0%	$3,500	$22,560	33%	6.45%
1.2%	$4,200	$21,860	36%	6.25%
1.5%	$5,250	$20,810	39%	5.95%
2.0%	$7,000	$19,060	44%	5.45%
2.5%	$8,750	$17,310	49%	4.95%

How vacancy changes the NOI

Each point of vacancy costs $293 of NOI at this rent. A month empty every two years is about 4%.

Vacancy	Lost income	NOI	Cap rate
0%	$0	$23,324	6.66%
3%	$1,071	$22,446	6.41%
5%	$1,785	$21,860	6.25%
8%	$2,856	$20,982	5.99%
10%	$3,570	$20,397	5.83%
15%	$5,355	$18,933	5.41%

What this NOI is worth at market cap rates

$21,860 of NOI valued at each cap rate, and the gap to the $350,000 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 $350,000
4%	$546,508	$196,508
5%	$437,206	$87,206
6%	$364,338	$14,338
7%	$312,290	-$37,710
8%	$273,254	-$76,746
9%	$242,892	-$107,108
10%	$218,603	-$131,397

Run the $350,000 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%$1,785 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)

$21,860

$1,822 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: $35,700
Vacancy and credit loss: -$1,785
Effective gross income: $33,915
Property taxes: -$4,200
Insurance: -$1,750
Maintenance: -$1,696
Capital reserves: -$1,696
Management: -$2,713
Total operating expenses: -$12,055
Net operating income: $21,860
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: $336,312
Cap rate at this price$21,860 / $350,000: 6.25%
Priced above that value by: $13,688
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: $293
Each $1,000 of NOI is worthat a 6.50% cap rate: $15,385

$350,000 rental NOI questions

What is the NOI on a $350,000 rental property?

At $2,975 rent with 5% vacancy, taxes of $4,200, insurance of $1,750 and 18% of collected income for maintenance, reserves and management, net operating income is about $21,860 a year, or $1,822 a month. That is an expense ratio of 36%. Your taxes and insurance will move it.

What is a good NOI for a $350,000 property?

One that produces the cap rate comparable rentals sell at. In a 5% market a $350,000 property needs about $17,500 of NOI to be fairly priced; in an 8% market it needs $28,000. At $2,975 rent this one produces $21,860, a 6.2% cap rate.

How much do property taxes change the NOI on a $350,000 rental?

Dollar for dollar. Taxes at 0.5% of price cost $1,750 a year and at 2.5% they cost $8,750, a $7,000 swing in NOI on the same rent. At a 6.5% cap rate that is a $107,692 difference in what the property is worth. Use the bill you will pay after the sale, not the seller's.