Quote from @Randall Alan:
Quote from @Ali Nurmohamed:
Quote from @Randall Alan:
Quote from @Ali Nurmohamed:
Do you calculate your NOI over you Gross scheduled income or just your Gross income?
Not exactly sure the difference in your terminology... but if you are calculating the NOI of a property it is all revenue (of the property) less all expenses (of the property)... usually across a year, so that you capture property taxes, property insurance, etc. I would exclude security deposits as revenue. If you are trying to forecast an NOI, you would want to also factor in anticipated expenses for repairs, vacancy, capital expenses (Major repairs - roof / AC systems, etc.)
Randy
@Ali Nurmohamed
Im sorry for not breaking the question down.
gross scheduled income is your annual potential gross income of the property for instance if you have an apartment complex with 10 units and you actually rent out all 10 units not only 5 or 6 of them so it’s your income to the max as one would say. And your gross income means basically the income your property generates not what your property potentially could make. I hope you understand my question better now.
hope to here from you.
So it comes down to what your purpose is. If you own this property already and someone asks you, what is your NOI, you would base it on your actual rental income and actual expenses for the year… and probably notate only 6 of 10 units were operating / occupied. (Your vacancy shows up as less revenue). Anyone looking at your NOI would expect you to be operating at capacity, so if you were not… like "several units were being renovated throughout part of the year) you would want to notate that somehow to not make it not look like you couldn't rent them. The lower NOI obviously looks worse for the property. You could offset that figure by saying, "but hey we were making improvements and anticipate revenues to return to full occupancy after the renovations."
But as a forecasting tool (ie you don't own it yet) but you want to understand what your NOI could be, you would usually expect all units to be occupied and would use the maximum occupancy and anticipated expenses - including an allowance for expenses such as vacancy and repairs, taxes, insurance, capex, etc. so there you would reduce your NOI by all those anticipated expenses you might not know yet and estimate them.
Be sure to anticipate your property taxes resetting after they factor in your new purchase price, that can sometimes dramatically increase your expenses. Look and see what your current taxes are based on the appraiser’s website. If your seller paid $100,000 for the property, but you will pay $300,000 for the property your taxes will likely come close to tripling down the line. You can reach out to your appraiser to know exactly how they calculate that.
Again, knowing your purpose would help with this discussion.
Randy
@Ali Nurmohamed
@Randall Alan
Thank you for your reply. I understand it much better now. I was reading a book and in the book the author said that when you calculate your NOI you have to calculate it from the gross scheduled income. So it got me a bit confused.
Because of you I now understand it, thank you!
