Net operating income

Commercial real estate loans (on apartment buildings, offices, warehouses, shops, hotels) are repaid from the property's income, so every lending decision starts with one number: net operating income, or NOI. It's what the property earns in a year after running costs, before paying the loan.

Start with potential gross rent: what every unit would pay at market or contract rent, for twelve months. Take off vacancy and credit loss (empty units and tenants who don't pay), add other income (parking, laundry, fees), and you have effective gross income (EGI). Take off operating expenses (property taxes, insurance, repairs and maintenance, utilities the owner pays, management, payroll) and what's left is NOI.

units, rent = 40, 1500          # monthly rent per unit
gross = units * rent * 12
vacancy = 0.05                   # 5% vacancy and credit loss
other_income = 18_000
egi = gross * (1 - vacancy) + other_income
opex = 310_000
noi = egi - opex
print(gross, round(egi), round(noi))

What NOI leaves out matters as much: the loan's payments (debt service), income taxes, depreciation, and usually big one-off capital spending like a new roof. Lenders often deduct a yearly replacement reserve (so much per unit or per square foot) as if it were an expense, to cover that capital spending over time.

A seller's NOI and a lender's NOI are rarely the same. Sellers show their best year, leave out vacancy because the building is full today, or skip a management fee because they manage it themselves. Underwriters adjust: a market vacancy rate even if the building is full, a management fee even if the owner does it, taxes as they'll be after the sale (many places reassess on a sale), and income only from leases that actually exist.