Income Statement

An income statement reports revenue, expenses and profit over a period, usually a month, quarter or year. For a rental property, the operating section of the income statement ends at net operating income. Everything below that line, such as interest, depreciation and income tax, belongs to the owner rather than the building.

Laid out for the default $500,000 house, the statement reads: $48,000 of scheduled rent, less $2,400 of vacancy, gives $45,600 of effective gross income. Operating expenses of $16,708 come off next, leaving $28,892 of NOI.

Sellers often send a trailing twelve month statement, called a T12, with the listing. Check that it runs a full year, that management and reserves appear as lines, and that one-time items such as an insurance claim payout are not counted as rent.