Net Operating Income Calculations

The Ivy Group - Net Operating Income (NOI)Significance of Net Operating Income (NOI) Significance of Net Operating Income (NOI)
NOI is a key indicator of financial strength. Perhaps, there is no indicator more important than the NOI when it comes to performing due diligence.

The NOI is a before-tax computation of actual gross revenue less operating expenses and an allowance for anticipated vacancy. Download this spreadsheet to calculate the NOI.

NOI does not include debt service (mortgage) or income taxes.

Before Calculating the NOI, Ask For the Following Documentation (aka Financials) From the Seller Before calculating the NOI, ask for the Following documentation (aka Financials) from the seller

DOCUMENTATION REQUIREMENTS FOR NET OPERATING INCOME CALCULATION
Profit and loss (aka P & L) statements for year-to-date and the previous two yearsProfit and loss (aka P & L) statements for year-to-date and the previous two years
Current rent rollCurrent rent roll
Current list of anticipated / required capital improvementsCurrent list of anticipated / required capital improvements
Why the owner is sellingWhy the owner is selling
What is owed on the propertyWhat is owed on the property

The NOI Revelation - What You Will Learn The NOI revelation - what you will learn

NET OPERATING INCOME REVELATION
Actual monthly income and expensesActual monthly income and expenses
NOI month-by-month trends - are they increasing or decreasingNOI month-by-month trends - are they increasing or decreasing
Unusual expenses - question the sellerUnusual expenses - question the seller
Unpaid rent and concession lossesUnpaid rent and concession losses
Number of units occupiedNumber of units occupied
Actual rent for each unitActual rent for each unit
Actual vacancyActual vacancy


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