Do utilities count in NOI?
Only the ones you pay. Tenant-paid utilities never appear in NOI at all — they are not your income and not your expense. Owner-paid utilities are ordinary operating expenses and reduce NOI.
Why it matters
Who pays the utilities is a lease term, and it changes the property's NOI without changing the rent. Two identical buildings at the same rent have different cap rates if one owner pays water and the other does not.
What it does to the number
Assuming a small multifamily is tenant-paid because a single-family house usually is. Older 2–4 unit buildings are frequently on one water meter, and owner-paid water and sewer on a fourplex is a real four-figure annual expense that goes missing from most quick underwriting.
Worth knowing
- Tenant-paid: not income, not expense, does not appear.
- Owner-paid water, sewer, trash, common-area lighting and landscaping are all operating expenses.
- Check the meter arrangement before you model it, not the listing description.
- A utility bill-back or RUBS arrangement is ancillary income, and it belongs in other income rather than as a negative expense.
The rule this calculator locks
Utilities are an operating-expense line; the default is $0 because most single-family leases are tenant-paid.