Understanding Below the Line Expenses in Multifamily Real Estate Accounting

What is the line anyway?

Anything that is involved in the operations of the deal are considered above the line. If you break down the term NOI, it's even in there. Net Operating Income. There are also non-operating expenses.

What items are non-operating?

Items that are variations from buyer to buyer are usually the items below the line.

Debt service payments are considered below the line. Every buyer is going to get a different type of loans or even no loan at all.

Capital expenditures (Capex) are considered below the line. Each buyer is going to have a different plan to what they're going to improve on the property.

Certain interest payment that relate to a specific way the deal is structured is also the other item I've seen below the line.

So what's your actual bottom line?

Even though the line is typically the NOI mark, there are almost always more expenses to be accounted for case by case. Non-operating expenses are most certainly still expenses.

Net free cash flow is usually a better metric for your actual bottom line number because it accounts for your debt payments. Your Capex budget does still need to be accounted for and should add to your operating income with the improvements.