NOI Calculation: What Counts, What Doesn't, and Why Lenders Strip Out the Difference

Net Operating Income is supposed to be a clean number: gross income minus operating expenses. In practice, "NOI" on the offering memo and "NOI" in the lender's underwriting are routinely 8–15% apart, sometimes more. The gap is where deals fall apart at term-sheet stage.

Lenders strip out: non-recurring income (one-time settlement fees, COVID rent relief), management addbacks (especially "owner-managed, no fee"), below-market replacement reserves, capital expenditures booked as expenses, related-party rent, and any income from POH or chattel that is not part of the collateral package. Then they add back: a market-rate management fee (typically 4–5% of EGI), capex reserves ($300–$500/unit/year for multifamily), and structural reserves where applicable.

The result is "underwritten NOI," and it is what every lender quote, DSCR calc, and valuation will be based on. If you are running deals against broker NOI, you are running them against a number that won't hold up at submission. The fix is to underwrite to lender-NOI on every deal — and the fastest way to do that is to use a tool that applies the standard adjustments automatically.

Full guide coming soon. Want lender-grade NOI on a specific deal today? Run a free screening — the report computes both broker and underwritten NOI side-by-side.