What is Net Operating Income (NOI) for Short-Term Rentals?
Net Operating Income (NOI) reveals your STR property's true earning power before debt. Learn the formula, what it means for valuation, and how to track it across your portfolio.
Net Operating Income — NOI — is the metric that separates serious real estate investors from casual hosts. It's the number banks use to evaluate your loan application, buyers use to value your property, and savvy operators use to compare properties across their portfolio.
What Is NOI in Real Estate?
Net Operating Income is the annual income generated by a property after all operating expenses are deducted, but before mortgage payments (debt service) and income taxes. It reflects the property's earning power independent of how it's financed.
NOI = Gross Rental Income − Operating Expenses
(Mortgage / debt service is NOT subtracted)
What Are STR Operating Expenses?
- Platform fees (Airbnb, VRBO, Booking.com — typically 3–15% of revenue)
- Property management fees (if using a co-host or management company)
- Cleaning and turnover costs
- Utilities (electricity, water, gas, internet)
- Insurance (STR-specific short-term rental insurance)
- Repairs and routine maintenance
- Property taxes and HOA fees (if applicable)
- Supplies and consumables
NOI Example Calculation
Your STR generates $60,000 per year in gross rental income. Annual operating expenses total $30,000 (platform fees $5,400, cleaning $7,200, utilities $4,800, insurance $2,400, property taxes $6,000, maintenance $3,000, supplies $1,200).
NOI = $60,000 − $30,000 = $30,000 per year
This $30,000 NOI is your property's earning power. If your annual mortgage payment is $24,000, your net cash flow is $6,000/year.
How Lenders and Investors Use NOI
Cap Rate = NOI ÷ Property Value. A $30,000 NOI on a $375,000 property = 8% cap rate. DSCR = NOI ÷ Annual Debt Service. Lenders require DSCR of 1.25+ to approve STR loans.
What's a good NOI for a short-term rental?
What matters more than the absolute NOI is your Operating Expense Ratio: the percentage of gross income consumed by operating expenses. Strong STR operators typically achieve an OER of 35–50%, meaning 50–65% of gross revenue flows to NOI.
Track your real NOI across every property automatically — try MagicBnB free.
About MagicBnB
MagicBnB is the portfolio intelligence platform for short-term rental operators. Connect your Hospitable or Hostfully PMS and bank account through Plaid to track true net profit, ADR, occupancy, and all the metrics that matter — per property, not just in aggregate. Milo, your AI Revenue & Profit Manager, answers questions about your portfolio in plain English. Use the Deal Analyzer to underwrite new acquisitions before you commit. Free plan available — 5 deal analyses included. Start at magicbnb.io.
