NOI vs cash flow on a rental

Two investors can buy identical flats on the same street, one for cash and one with an interest-only loan, and the NOI is the same number for both: $36,000 here, from $48,000 of gross rent less $2,400 of vacancy and $9,600 of operating expenses. That blindness is the point. It lets a buyer compare buildings without comparing balance sheets.

It is also what makes NOI the input to a cap rate, because dividing a financing-free income by a price gives a yield that is about the property. Net operating income is a property number; the moment a mortgage payment goes into it, it stops being comparable to anything.

Financing turns NOI into cash flow. On this property $24,000 of annual debt service leaves $36{,}000 - 24{,}000 = 12{,}000$ before capital spending, which is the same as saying coverage is 1.5. Change the loan and that figure changes while NOI does not move at all.

Then come the costs that do not arrive monthly: a roof, a boiler, a void between tenants that runs longer than the vacancy allowance. Operating expenses already sit inside NOI, but capital items do not, and an owner who treats coverage of 1.5 as spare money will meet them unfunded. The rental cash flow calculator runs the whole chain, and how rental cash flow works walks it in order.

Ask the property question first and the position question second. NOI of $36,000 says what the building produces; coverage of 1.5 says the loan is comfortably served; cash flow says what reaches you. A deal can look strong on the first and thin on the last, which is exactly what a lender is testing with debt service coverage. The NOI calculator and the DSCR calculator sit either side of that line. This is educational material, not financial advice.