NOI
 
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NOI

  1. Net Operating Income- the net operating income is the amount of cash flow after deducting the operating expenses from the effective rent. 
  2. Operating Expenses- the operating expenses can be reported with several variations depending on preferred method and who is viewing them. Many operating expense amounts may be reported as actual or from CMHC’s known and accepted numbers. CMHC numbers for management, staff, maintenance, and a few other expenses may be reported as actual or the acceptable cost of a particular expense acceptable to CMHC. Representation of these expenses are dependent on many variables and financing will have the final say.as there is buildings either format may be the most suitable. CMHC tracks all income & expense historical numbers and distributes these findings. Remember if CMHC believes that their way of representing is the fit format then they are going to use their numbers and change the financing aspects of the transition.  This is why it is so important to understand the way CMHC calculates their income and expenses. If you understand this, you have just tremendously increased your odds of success from the beginning. Having a full grasp of this process will prevent agreements from falling apart for financing and save plenty of disappointment for both the seller and the buyer.
  3. MANAGEMENT FEES- Management fees will vary depending on several variations such as who is going to be managing the building/s and the typical range is between 3.5 & 5.0 percent of the effect rent. Best to us the actual and understand that a prospective purchaser and/or financing institution including CMHC may make an adjustment up or down depending on their criteria and their observation.  
  4. SUPERINTENDENT- Superintendent Fees will vary from building to building depending on location and size of class. For example, a building with an elevator versus a walk-up under standard conditions will have different fees associated with the building. On average you will find superintendent fees to be between 350 per a door to 450.00 per door depending on the size of building and the location.
  5. OTHER WAGES- Other wages that are a fixed wage other than the superintendent. Such as superintends assistant, additional cleaner or other wage.
  6. MAINTENANCE- Maintenance is also another number that can a large variance and all variances may be correct to the person in belief. This is an important expense to understand and how much the actual expense and the amount CMHC or lending institution would like to see and use when they are reviewing the keys numbers. 
  7. ELEVATOR- Elevators must have a contract so reporting is straight forward and that is the contract amount and the expiree of the contract. 
  8. WASTE DISPOSAL- Disposal cost will either be included in the taxes or at least partial or third party. It is best to know what the actual is and what new quotes for similar contracting are available in the marketplace.
  9. INSURANCE- Insurance contracts are non-transferable, so you know better what the present cost is and the future cost with a new contract in place. Do this sooner than later because it is a condition that needs to be fulfilled on or before closing.
  10. LAUNDRY- Laundry may have an expense column being missioned in the formula/reporting. It is best to double check for contracts and large repair expenses or even replacement. 
  11. ADVERTISING- Advertising may or may not be a required field.
  12. TAXES- Tax reporting is always the same and that is the most currently released number from the municipality.  
  13. UTILITIES- Utility expenses should be listed independently and current for the past twelve months. 
  14. OTHER CONTRACTS- Other contracts include any non-transferable, transferable, needed or not needed.
  15. Disclaimer- all these numbers and categories may have a variance for each different set of eyes viewing them. Including utilities, as we all know these expenses are increasing year over year and if your purchase is closing at the end of the year what will these expenses be in twelve months from the date of closing. Equally or even of greater importance is the inclusion of all or a partial list of the above categories. The best defense is to understand a comprehensive list of categories and acknowledge the absence of any missing category. 
  16. Example- I would rather receive an NOI with the knowledge of the management and superintendent fees not being included then an incorrect representation or fair representation of the proper management style verses possible more stringent management as seen by the buyer or lending institutions. This way you can use CMHC’s number and have a better picture of the overall view.