What do you include in your income/expense sheet to come up with an NOI and cap rate?
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[{"id": "hv70j4z", "text": "Not sure who the listing agent is but taxes always need to be factored in somehow in order to have an apples to apples comparison vs. your comp set. Whether it\u2019s taking in place taxes or projecting tax treatment at re-assessment, you\u2019ll always want to include them.  This is often times why sales will be reported with an as-is cap rate and tax-adjusted cap rate.", "replies": [], "depth": 1}, {"id": "hv71buf", "text": "And to answer your question- typically I would include all recurring expenses (RE taxes, insurance, utilities, R&amp;M, payroll, G&amp;A, grounds, standard management fee, professional fees, etc.) in my expenses as well as some amount budgeted for reserves. \n\nI wouldn\u2019t include non-recurring items or non-operating items like TI, leasing commissions, non-recurring capital items, depreciation, or interest. Keep in mind NOI is net OPERATING income, so you\u2019ll only focus on expense/income items that are recurring and related to the property\u2019s operating CF.", "replies": [], "depth": 1}, {"id": "hv71hmf", "text": "Lol no one calculates the tax, that is so funny.", "replies": [], "depth": 1}, {"id": "hv757t6", "text": "Everyone calculates tax. That agent is either a liar or ignorant. What are you using for maintenance?", "replies": [], "depth": 1}, {"id": "hv7fnf7", "text": "The price for everything changes every year. I would double check all her numbers. Generally when I see listings like this the agent is a realtor and most everything is wrong.", "replies": [], "depth": 1}, {"id": "hv7orfi", "text": "She is most likely confused so long as she is referring to tax from income and not real estate taxes. (You should include the r.e. Tax)\n\nCalculating NOI is a before tax figure. You are using items from a typical property income and cash flow statement. That would exclude \u201cBelow the line\u201d items such as principal and interest payments on loans, capital expenditures, depreciation, and amortization. \n\nIn another industry think of it like EBIT, earnings before interest and taxes.", "replies": [{"id": "hvab3tq", "text": "That sounds like that could be the case, maybe OP asked about income tax.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hv7u86a", "text": "The other agent sounds like a residential agent trying to do a commercial transaction. Always include taxes. Either way, Sounds like it could be a good deal, I\u2019d buy a 9 cap.", "replies": [], "depth": 1}, {"id": "hv7ye8j", "text": "The tax should be calculated on pst sale numbers", "replies": [], "depth": 1}, {"id": "hv84ala", "text": "EBITDA - Earnings Before Interest, Taxes, Depreciation, and Amortization.\n\nThat is Income Taxes, not Property Taxes. Property taxes have to come out of effective gross income to calculate NOI, along with everything you listed. I think you missed property management fees (including software fees and leasing commissions) and any business license or rental registration fees.", "replies": [], "depth": 1}, {"id": "hv8awr2", "text": "The biggest expense on the sheet? Yeah, let\u2019s just leave that out. She must be new.\n\nEdit to ask if she\u2019s actually a residential agent?", "replies": [], "depth": 1}, {"id": "hv8fn4n", "text": "Wow people can\u2019t even agree on it here either.", "replies": [], "depth": 1}, {"id": "hv979f6", "text": "The point of NOI is to take owner specific income and expenses out of the equation and show what the income is for anyone who operates the property. This makes properties more comparable when making investing decisions. \n\nNOI should include all operating revenue (base rent and recoverables for CAM, RE Tax and Insurance) less operating expenses (CAM, RE Tax, insurance and property management fees). \n\nExamples of owner specific income and expenses - interest income, depreciation, amortization, interest expense, income taxes, broker fees, tenant allowances, bank fees, legal fees, accounting and tax prep, etc. None of these are directly used to operate the property and are not calculated in NOI\n\nSome states like TN have pretty hefty F&amp;E taxes that are arguably related directly to the property and I have seen some brokers include and some exclude that from NOI.", "replies": [], "depth": 1}, {"id": "hv9r6fl", "text": "TIMMUS\n\nTaxes (property) Insurance Management, Maintenance, Utilities, Services/Supplies\n\nYou should focus on NOI.  There is no reason for an investor to be calculating a cap rate.  That is done by professional third party companies.", "replies": [], "depth": 1}, {"id": "hv9uius", "text": "OP, why do you care if the calculation is 9% or 11%?", "replies": [], "depth": 1}]