Income-property math that keeps gross, effective, and net income separate.
Build NOI, solve direct capitalization in every direction, and keep monthly GRM separate from annual GIM with every step visible.
Fence NOI first. Subtract vacancy and collection loss, then operating expenses. Keep debt service outside. Use NOI for cap rate and gross income for GRM or GIM.
Subtract vacancy and collection loss before operating expenses.
Debt service stays outside property-level NOI.
Use the cap-rate decimal, such as 0.075 for 7.5%.
Monthly gross rent produces GRM. Annual gross income produces GIM.
Choose the income level before choosing the formula.
Cap rate uses NOI. GRM and GIM use gross income.
Use known NOI when the question supplies it. Use build-up when it supplies income, vacancy, and expenses.
Vacancy and expenses are applied on an annual basis.
Use the expenses supplied by the question. Enter 0 if none.
Excluded from NOI. Enter it only to compare NOI with cash flow before taxes.
Basic exam NOI is property income after vacancy and operating expenses, but before debt service, depreciation, owner income taxes, and capital improvements.
Debt service is excluded from NOI and cap rate. This calculator shows cash flow before taxes separately when debt service is entered.
Cap rate is NOI divided by value. It is not the mortgage interest rate or a guaranteed investor return.
Expense and reserve treatment can vary by question and professional assignment. Follow the amounts and definitions supplied in the exam stem.
The calculator keeps full precision and rounds displayed dollar amounts to cents and rates or multipliers to four decimal places when needed. Pearson VUE says to use standard rounding where applicable.
Email this income-property setup for later review.
Keep every income level, formula, and result together.
Try five income-property traps without the calculator.
Potential gross income is $120,000, vacancy and collection loss is 5%, and operating expenses are $24,000. What is NOI?
Name the income level before calculating.
Most errors happen before the arithmetic, when gross income, NOI, and financing are placed in the wrong formulas.
The question asks for NOI
Start with potential gross income, subtract vacancy and collection loss, then subtract operating expenses. Stop before debt service.
The question asks for cap rate
Find or identify NOI first. Divide NOI by property value, then convert the decimal to a percentage.
The question asks for value
With direct capitalization, divide NOI by the cap-rate decimal. With a multiplier, multiply gross income by a market-derived multiplier.
The question uses monthly or annual gross income
Monthly gross rent belongs with GRM. Annual gross income belongs with GIM. Keep the income and multiplier periods consistent.
Four patterns worth knowing cold.
These cover the NOI sequence, both directions of direct capitalization, and the monthly multiplier period trap.
$120,000 potential income, 5% vacancy loss, $24,000 expenses
The $114,000 intermediate amount is effective gross income, not NOI.
$90,000 NOI and $1,200,000 value
Debt service does not enter this property-level ratio.
$90,000 NOI at a 7.5% cap rate
Divide by 0.075, not 7.5.
$300,000 comparable sale and $2,500 gross monthly rent
Using $30,000 annual rent would produce a 10 GIM, a different scale.
Four details that protect the answer.
Gross, effective, and net are different
Potential gross income is before vacancy. Effective gross income is after vacancy. NOI is after operating expenses.
Debt service stays outside NOI
Subtracting debt service from NOI produces a cash-flow measure, not the numerator used for the basic cap-rate formula.
GRM and GIM need matching periods
The GSE appraisal definition uses sale price divided by actual gross monthly rent for GRM. Annual income belongs with GIM.
A formula result is not an appraisal
Professional valuation requires supported market income, expenses, comparable data, a market-derived rate or multiplier, and reconciliation.
Connect income math to the rest of the exam.
What does the current Texas sales agent exam outline cover?+
The January 2026 Pearson VUE sales outline lists the income approach and gross rent and gross income multipliers under Property Value and Appraisal. Its sales math section specifically lists NOI and capitalization rate under property valuation. The broker math outline explicitly adds GRM and GIM calculations.
How do you calculate net operating income?+
Subtract vacancy and collection loss from potential gross income to find effective gross income. Then subtract operating expenses. In a basic exam problem, NOI is calculated before debt service, depreciation, owner income taxes, and capital improvements.
How do you calculate cap rate?+
Divide annual NOI by property value and convert the decimal to a percentage. A $90,000 NOI divided by $1,200,000 is 0.075, or a 7.5% cap rate.
How do you find value from NOI and cap rate?+
Divide annual NOI by the cap-rate decimal. A $90,000 NOI divided by 0.075 indicates $1,200,000 by direct capitalization.
What is the difference between GRM and GIM?+
GRM commonly compares value or sale price with gross monthly rent. GIM compares value or sale price with gross annual income. Both use gross income, but their periods and numerical scales differ.
Why is mortgage debt service excluded from NOI?+
NOI measures property operations before an individual owner's financing structure. Subtracting annual debt service from NOI produces cash flow before taxes in this calculator, while leaving NOI unchanged.
Does a higher cap rate always mean a better investment?+
No. For the same NOI, a higher cap rate produces a lower indicated value, but the rate can also reflect risk, growth expectations, property condition, lease quality, and market conditions. Cap rate alone is not a complete investment decision.
Is this a professional appraisal or investment underwriting tool?+
No. It is an educational formula checker for exam preparation. A real appraisal or investment analysis requires verified property data, market-supported assumptions, professional judgment, and often more detailed cash-flow analysis.