Reconstructed Operating Statement

A Reconstructed Operating Statement is a statement prepared by the appraiser to accurately reflect future performance of the property based on historical income and expenses.  Data sources may include

 

Operating statements for appraisal purposes usually have to be reconstructed because they contain accounting statements, comparable properties, data provided by the owner,accounting items that are not used in appraisal.

 

Data sources may include accounting statements, comparable sales data, data provided by the owner, etc.

 

Some differences in statements used for appraisal purposes and statements used by accountants are:

 

•Depreciation is used by accountants.  A reserve account is used by appraisers.

•Accountants need not report gross potential income; effective gross income is sufficient.

•Accountants may omit rentable space used by the on-site manager.  An appraiser would include it in the gross potential income.

•Accountants would include interest as an expense.  Appraisers do not.

•Accountants categorize bad checks as an operating expense.  Appraisers categorize them as deductions from potential gross income.

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