Net Operating Income on a $750,000 Rental Property

A $750,000 rental at $6,375 a month in rent produces about $46,844 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 $720,669.

The income statement on a $750,000 property

Assumptions: 5% vacancy, taxes at 1.2% of price ($9,000 a year), insurance at 0.5% ($3,750), 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: $6,375 a month (0.85% of price), $76,500 a year
Effective gross income after vacancy: $72,675
Taxes and insurance: $12,750
Maintenance, reserves and management: $13,082
Total operating expenses: $25,832 (35.5% of collected income)
Net operating income: $46,844, or $3,904 a month

See what $50,000 of NOI is worth at every cap rate.

NOI at different rents on a $750,000 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
$3,750	0.5%	$22,305	48%	2.97%
$4,500	0.6%	$29,316	43%	3.91%
$5,250	0.7%	$36,327	39%	4.84%
$6,000	0.8%	$43,338	37%	5.78%
$6,750	0.9%	$50,349	35%	6.71%
$7,500	1.0%	$57,360	33%	7.65%
$8,250	1.1%	$64,371	32%	8.58%
$9,000	1.2%	$71,382	30%	9.52%

How property taxes change the NOI

At $6,375 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%	$3,750	$52,094	28%	6.95%
0.8%	$6,000	$49,844	31%	6.65%
1.0%	$7,500	$48,344	33%	6.45%
1.2%	$9,000	$46,844	36%	6.25%
1.5%	$11,250	$44,594	39%	5.95%
2.0%	$15,000	$40,844	44%	5.45%
2.5%	$18,750	$37,094	49%	4.95%

How vacancy changes the NOI

Each point of vacancy costs $627 of NOI at this rent. A month empty every two years is about 4%.

Vacancy	Lost income	NOI	Cap rate
0%	$0	$49,980	6.66%
3%	$2,295	$48,098	6.41%
5%	$3,825	$46,844	6.25%
8%	$6,120	$44,962	5.99%
10%	$7,650	$43,707	5.83%
15%	$11,475	$40,571	5.41%

What this NOI is worth at market cap rates

$46,844 of NOI valued at each cap rate, and the gap to the $750,000 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 $750,000
4%	$1,171,088	$421,088
5%	$936,870	$186,870
6%	$780,725	$30,725
7%	$669,193	-$80,807
8%	$585,544	-$164,456
9%	$520,483	-$229,517
10%	$468,435	-$281,565

Run the $750,000 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%$3,825 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)

$46,844

$3,904 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: $76,500
Vacancy and credit loss: -$3,825
Effective gross income: $72,675
Property taxes: -$9,000
Insurance: -$3,750
Maintenance: -$3,634
Capital reserves: -$3,634
Management: -$5,814
Total operating expenses: -$25,832
Net operating income: $46,844
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: $720,669
Cap rate at this price$46,844 / $750,000: 6.25%
Priced above that value by: $29,331
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: $627
Each $1,000 of NOI is worthat a 6.50% cap rate: $15,385

$750,000 rental NOI questions

What is the NOI on a $750,000 rental property?

At $6,375 rent with 5% vacancy, taxes of $9,000, insurance of $3,750 and 18% of collected income for maintenance, reserves and management, net operating income is about $46,844 a year, or $3,904 a month. That is an expense ratio of 36%. Your taxes and insurance will move it.

What is a good NOI for a $750,000 property?

One that produces the cap rate comparable rentals sell at. In a 5% market a $750,000 property needs about $37,500 of NOI to be fairly priced; in an 8% market it needs $60,000. At $6,375 rent this one produces $46,844, a 6.2% cap rate.

How much do property taxes change the NOI on a $750,000 rental?

Dollar for dollar. Taxes at 0.5% of price cost $3,750 a year and at 2.5% they cost $18,750, a $15,000 swing in NOI on the same rent. At a 6.5% cap rate that is a $230,769 difference in what the property is worth. Use the bill you will pay after the sale, not the seller's.