Q: Even though stabilized net operating income (NOI) in an appraisal report may not be identical to actual net operating income at the time of the appraisal, isn’t it generally close since it’s based on the borrower’s proforma and comparable properties within the market?
A: The proforma can be close, but the critical issue is to compare the proforma with actual net operating income and identify reasons for the difference. If the proforma provides a more attractive NOI than the actual operating income, use it only if there is a compelling reason to believe it is more accurate going forward than actual operating income. Otherwise, stick with actual operating results and actual operating income.
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