The Income (Operating Statement)

The income & expense (also known as operating) statement is a strong indicator of a commercial property's performance. Lenders require that this statement be submitted to support a commercial loan request for income producing properties.

The income & expense statement shows the property's gross income and operating expenses. Besides the obvious expenses like taxes, insurance, water / sewer, utilities, etc., there are other expenses deducted from the gross income such as management fees, a vacancy factor, and replacement reserves. The net operating income (NOI) of a building is the gross income minus the expenses. The NOI is critical when understanding a building's value from both the appraisal's market approach and income approach to value.

Lenders will usually want to see the prior two years operating performance data, a year to date, and pro forma (projected statement) for the next twelve months.