Net Income

Also known as the net operating income, net income is the total earnings an investment property makes after taxes and other operating expenses have been deducted. Operational expenses include repairs, salaries, municipal taxes, utilities, and depreciation, all of which are subtracted from gross income. When calculating the net income, we use the taxes paid by corporations and owner distributions. Net income is the taxable amount minus depreciation as a non-cash expense. In most cases net cash (ex. tenant rent) is typically more than the Net Income. Income statements on larger investment properties start with the total gross income that the property would generate if it had full occupancy. Interest paid on loans and owner distributions reduce the income from operations to calculate the pretax income.