What is the difference between a P&L and NOI?

NOI is income minus operating expenses. A P&L goes further and deducts mortgage interest and depreciation to reach net income.

Why is my profit different from my bank balance?

Principal payments and improvements leave your bank but are not expenses, and depreciation is an expense that costs no cash. Add and subtract those to reconcile.

How often should I read my P&L?

Monthly, after you close the month. Compare to the same month last year, and look at each line as a share of income.

How to Read a Rental Property P&L

A rental property P&L has three parts: income at the top, operating expenses below it, and the items that sit under net operating income, mainly mortgage interest and depreciation. Read it from the top, ask what each line is as a share of income, and compare it to last year. Loan principal and improvements never appear on it, which is why profit and cash in the bank rarely match.

What a P&L shows, and what it leaves out

A profit and loss statement (also called an income statement) covers a period of time, such as a month or a year, and answers one question: did the property earn more than it cost to run? It shows income earned and expenses incurred in that period. It does not show the loan balance, the cash you have, or the deposits you hold; those are on the balance sheet, covered in our post on the rental property balance sheet.

The expense lines in a good rental P&L match the lines on Schedule E, where individual owners report rental income and expenses, so the report doubles as tax-time homework. See Schedule E expense categories.

A made-up P&L for a 12 unit building

Here is one year for an imaginary, self-managed 12 unit building. Every number is made up and the totals add up.

Line	Amount
Rent income	$178,200
Late fees	$1,800
Laundry and other income	$2,400
Total income	$182,400
Advertising	$600
Cleaning and maintenance	$9,200
Insurance	$7,800
Legal and professional	$2,400
Repairs	$11,500
Supplies	$1,100
Property taxes	$14,600
Utilities	$12,300
Other	$1,500
Total operating expenses	$61,000
Net operating income (NOI)	$121,400
Mortgage interest	$46,000
Depreciation	$38,000
Net income	$37,400

Check the math: expenses are $600 + $9,200 + $7,800 + $2,400 + $11,500 + $1,100 + $14,600 + $12,300 + $1,500 = $61,000. NOI is $182,400 - $61,000 = $121,400. Net income is $121,400 - $46,000 - $38,000 = $37,400.

Reading the income section

Start with rent. Twelve units at an average of $1,300 a month would bill 12 x $1,300 x 12 = $187,200 a year. This building collected $178,200, so $9,000 went to vacancy, concessions and unpaid rent. That gap is the first number worth watching, because it is the one you can influence.

Late fees and other income are small here but worth separating. A late-fee line that grows can mean tenants are stretched, not that income is healthy. Keeping them on their own lines lets you see that. For how to book them, see rent and late fee entries.

Reading the expenses

Divide each expense by total income. Here total operating expenses are $61,000 of $182,400, about 33%. Property taxes at $14,600 are about 8%, repairs at $11,500 about 6%, and utilities at $12,300 about 7%. Your own ratios matter more than any rule of thumb: what you want is to notice when a line moves.

Repairs jumping year over year: look for one big job that should have been capitalized, or a unit with a recurring problem.
Utilities rising faster than rent: a leak, or a rate change, or a tenant mix that changed.
Other growing: a dumping ground. Every item should be named, and anything repeating deserves its own account.
A line that is zero: something is missing, or an expense is hiding in another category.

Compare the same month in two years, not neighboring months, because insurance, taxes and snow move in lumps.

Read it monthly, not once a year

A yearly P&L tells you what already happened. A monthly one lets you act. After each close, look at three things: income against the same month last year, the two expense lines that moved most, and any line that is suspiciously empty. Write one sentence for each in a note kept with the report. After a year you will have a short history of why the numbers moved, which is what a lender or buyer will ask about. Our month-end close checklist shows the steps that come before the read.

If one property's P&L looks off, check the books before you check the building. Misfiled bills and a payment posted to the wrong unit are far more common than a real change in how the property performs.

What sits below NOI

NOI stops before financing and depreciation, so lenders and buyers can compare buildings no matter how each is paid for. Our post on calculating NOI has the formula. Below it, the P&L deducts mortgage interest and depreciation to reach net income, which is what a tax return starts from.

Two items are missing on purpose. Loan principal is not an expense; it reduces what you owe. Improvements, such as a new roof, are capitalized and show up as depreciation over time (the IRS describes the 27.5 year recovery period for residential rental property in Publication 527).

Example to see cash, start with NOI of $121,400, subtract interest of $46,000 and principal payments of $22,000. Cash left is $121,400 - $46,000 - $22,000 = $53,400, before reserves and improvements. Check it the other way: net income $37,400 plus depreciation $38,000 (no cash left the bank) is $75,400, minus $22,000 principal is $53,400. Same answer.

How DoorKeeping handles it

Each property in DoorKeeping has its own P&L, and its expense accounts map to Schedule E lines. You can ask Claude or ChatGPT for a property's profit and loss, or see every property together, and month-end close and owner statements are built from the same books. DoorKeeping does not give tax advice, so your tax preparer still reviews the return.

Sources

IRS, Instructions for Schedule E (Form 1040), read Oct 30, 2026
IRS, Publication 527, Residential Rental Property (depreciation, 27.5 years), read Oct 30, 2026

Questions

What is the difference between a P&L and NOI?: NOI is income minus operating expenses. A P&L goes further and deducts mortgage interest and depreciation to reach net income.
Why is my profit different from my bank balance?: Principal payments and improvements leave your bank but are not expenses, and depreciation is an expense that costs no cash. Add and subtract those to reconcile.
How often should I read my P&L?: Monthly, after you close the month. Compare to the same month last year, and look at each line as a share of income.