Developing the net operating income on an income producing property may be one of the most important functions  you can perform.  We furnish you with an abbreviated income/expense analysis that will show your recipient you have included all of the expense items necessary to verify the project's net operating income.  Read carefully the following expense items that a borrower (or property seller) may forget to include in their report. These omissions are especially prevalent in those properties that are "owner-managed."  These may be trash removal, lawn care and management fees. Remember, lenders and appraisers will include these costs in their income expense reports, therefore, it is important to include all items and their typical related costs to the project, regardless of the fact the owner may be performing these duties. Also, don’t forget reserves for replacements on all projects and franchise fees on motel/hotel operations. If you have questions on developing the typical reserves for a particular property, your local appraisal firms are usually more than willing to assist with these numbers. Remember this: The net operating income drives both the maximum loan potential and the estimated value of a property based on the income approach, so it is of utmost importance to your overall analysis.