Because the number on the listing and the number that matters are often very different things
If you’ve spent any time looking at RV parks, campgrounds, or commercial real estate you’ve seen the term NOI everywhere. Net Operating Income. It’s the number brokers lead with, sellers brag about, and buyers base their offers on.
And it’s also one of the most manipulated numbers in a deal.
I don’t say that to scare you. I say it because understanding how NOI gets inflated, and how to find the real number, is one of the most valuable skills you can develop as a real estate investor. It’s the difference between buying a great asset and buying a great story.
Let’s break it down.
What is NOI really?
Net Operating Income is the income a property generates after operating expenses but before debt service, taxes, depreciation, and capital expenditures.
The formula is simple:
Gross Revenue − Operating Expenses = NOI
A property with $738,000 in gross revenue and $338,000 in operating expenses has a $400,000 NOI. Simple right?
Sure, until you start asking what’s actually in those two numbers.
The revenue side and what to verify
Sellers and brokers present gross revenue in the most favorable light possible. That’s not dishonest, it’s how deals get done. But your job as a buyer is to verify every dollar.
Here’s what to look for on the revenue side:
One time or non-recurring income. Did they have an unusually strong season last year due to a local event, a viral social media moment, or a competitor closing? One time revenue inflates the T12 and won’t repeat. Back it out.
Owner managed revenue. If the current owner is personally managing the property and not taking a salary that income looks great on paper. The moment you hire a manager that expense hits and your NOI drops. Always underwrite a management fee even if the current owner doesn’t take one, a safe number to use would be 8-10% of gross revenue for an RV park or campground.
Projected or pro forma revenue. Some listings include “projected” revenue from planned improvements or expansions that haven’t happened yet. That is not T12 income. It’s a dream. Underwrite only what the property is actually producing right now.
Gross vs net revenue. If the property uses OTA platforms like Airbnb, Hipcamp, or Booking.com those platforms take 15-25% in commissions. Make sure you’re looking at net revenue after commissions, not gross bookings.
The expense side and what gets left out
This is where the real manipulation happens. Expenses get minimized, forgotten, or deliberately excluded to make NOI look bigger. Here’s what to watch for:
Owner salary or management fee. As mentioned above. If the owner runs the property themselves and takes no salary add a market rate management fee back in. This alone can drop NOI by $50,000-$80,000 on a mid-size park.
Deferred maintenance. The roof that needs replacing next year, the electrical hookups that are aging out, the roads that need grading. These aren’t on the income statement but they’re coming out of your pocket. A thorough property inspection and a CapEx analysis will surface these. Budget 5% of gross revenue annually for CapEx and make sure your NOI can absorb it.
Property management software and booking systems. Small line items but real costs that often get buried or omitted in seller financials.
Insurance. Was the property underinsured? I’ve talked to some owners recently who are not insured! Get your own insurance quote before you close and make sure the actual cost is in your underwriting not the seller’s potentially outdated number.
Utilities. Did the seller get a sweetheart rate that won’t transfer to you? Verify utility costs independently especially if the property has well water, septic, or propane infrastructure.
Seasonal labor. Some sellers understate seasonal staffing costs. Ask for payroll records not just the summary expense line.
Non-arm’s-length expenses. Did the seller’s brother-in-law do the landscaping for below market rates? Did they use their own equipment instead of hiring out? Real world costs may be higher than what the books show.
The adjustments that give you REAL NOI
Once you’ve verified the revenue and normalized the expenses you’re ready to calculate what I call Adjusted NOI; the number that actually tells you what the property will perform to under YOUR ownership.
Here’s the adjustment process:
Start with the seller’s stated NOI. Then:
+Add back any non-arm’s length expenses that were below market
-Subtract any one time or non-recurring revenue that won’t repeat
-Subtract a market rate management fee if not already included
-Subtract a CapEx reserve (5% of gross revenue)
-Subtract any expenses that were omitted or understated
-Subtract OTA commissions if not already netted out
What you’re left with is your Adjusted NOI; the real number. And I promise you it is almost always lower than what was on the listing.
That doesn’t mean it’s a bad deal. It means you’re buying it with your eyes open.
Why this matters so much
NOI drives valuation. Most commercial properties are valued using a cap rate; you divide NOI by the cap rate to get value. If a broker is using an inflated NOI to set the asking price the property is overvalued relative to what it will actually produce for you.
A $50,000 difference in NOI at a 7% cap rate is a $714,000 difference in value. That’s not a rounding error. That’s the difference between a great deal and a very expensive mistake.
Know your NOI. Know how it was calculated. And always, always, build your own adjusted number from verified data before you make an offer.
You can do this
I know this might feel like a lot, but I promise you it’s learnable. Every sophisticated real estate investor goes through this process on every deal. It becomes second nature.
And if you want a partner to help you work through the numbers on a specific acquisition, that’s exactly what I do. Acquisition underwriting is one of my favorite things because there’s nothing more satisfying than helping an investor see a deal clearly and make a confident decision.
Whether you decide to buy or walk away, you deserve to do it with full clarity!
Visit me at https://www.pvifinancial.com and let’s talk about your next deal.
— Wendi | PVI Financial | Fractional CFO & Bookkeeping Services for Small Business & Outdoor Hospitality
Click here to read “5 Financial Mistakes New RV Park Owners Make in Year One”
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