It is not uncommon for owners to under-report income and over-report expenses. This is especially true when it comes to filing taxes. The net operating income number is the key number in multifamily investments. This number is used to determine value, profitability, and overall strength of the multifamily unit.

Net operating income is the gross income less the operating expenses. Depreciation and mortgage interest are not considered in the calculation. A different calculation will be used with consideration to proposed mortgage payments to determine a maximum loan size. This called a