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Build net operating income from itemized expense lines instead of one lump sum, and see the expense ratio that lump sum was hiding. Shown before and after replacement reserves.
Management is charged on collected income, not scheduled rent, so it falls when vacancy rises. That is why it is entered as a percentage here and everything else as a dollar figure.
Want your actual books to produce this statement every month instead of a spreadsheet you rebuild each quarter?
Book a free consultationIt depends who is asking, which is why this calculator shows both. Appraisers generally exclude a replacement reserve and treat capital spending below the NOI line. Lenders frequently underwrite one anyway — often $250 to $350 per unit per year — because roofs and HVAC are not optional. Use NOI before reserves to compare against market cap rates, and NOI after reserves to see what the asset really throws off.
Usually three lines. Management gets left out when the owner self-manages, so the labor is real but unpaid. Repairs get reported at a good year rather than a normal one. And reserves are absent entirely. Adding market-rate management alone often moves a small multifamily expense ratio by five to eight points.
No. Principal and interest sit below NOI, along with capital improvements, depreciation, and income tax. NOI describes the property; debt service describes your deal. Mixing them makes the asset impossible to compare against any other.
It moves with asset type, age, and who pays utilities. Rather than anchor on a rule of thumb, build the lines from actual bills and tax records, then compare the total against recent comparable sales in the same submarket.
General information, not tax or accounting advice. Your situation and current law (which changes) govern; confirm with a qualified advisor.