GuidesCommercial
Assessing net income on a commercial property
Collected rents, real expenses, vacancy and management fees.
Municipal and school taxes
Building insurance
Energy and heating for common areas
From gross rent to net income
Start from rents actually collected. Then subtract the expenses paid during the year.
- Municipal and school taxes
- Building insurance
- Energy and heating for common areas
- Maintenance, snow removal and repairs
- Management fees, even if you manage yourself
Vacancy
Lenders often apply a vacancy rate, even when the building is full today.
Income beyond rent
- Parking billed separately
- Storage space rented out
- Advertising signage on the facade
- Telecommunications antennas on the roof
These count when recurring and documented. A verbal arrangement is not enough.
Adjusting an unusual year
A year marked by damage distorts the average. Lenders look at two or three years instead.
The gap between your figures and theirs
Lenders add management fees and a reserve. Your net income drops five to ten percent.
Comparing with similar properties
Net income far above the market draws the appraiser’s attention.
They will check whether expenses were omitted or deferred.
A property with credible figures finances faster.
