Valuation · 28 May 2026 · 9 min read
Prague Apartment Buildings: How Investors Assess Income and NOI
An investor looks at your building twice: once in person, once in a spreadsheet. The second view determines the price. Understanding how investors read operating figures also means knowing which mistakes in your supporting documents can cost millions.
From gross income to NOI
Investors always follow the same sequence, and you should prepare your figures in the same format:
- Potential gross income: all rental income, assuming the building is fully occupied.
- Vacancy and collection losses: empty flats and unpaid rent, typically 2–5% for residential units and more for commercial premises.
- Effective gross income: rent actually collected.
- Operating expenses (OPEX): insurance, property tax, management, routine maintenance, non-recoverable utilities and services, and statutory inspections.
- NOI (net operating income): effective income less operating expenses. This is the figure used to calculate value.
Why every thousand crowns matters
Building value = NOI / required yield. At a yield of 4%, every CZK 100,000 increase or decrease in annual NOI translates into approximately CZK 2.5 million in value. Service costs not recharged to tenants, overlooked rent from advertising space or an inflated management invoice therefore feed directly into the price.
A typical mistake: advance payments for services that are recharged to tenants are recorded in the supporting documents as a cost borne by the building. This makes NOI appear lower than it actually is.
OPEX and CAPEX: operating costs versus capital expenditure
Investors draw a strict distinction between day-to-day operating expenses (OPEX) and capital expenditure (CAPEX). Replacing the roof, windows or service risers does not belong in NOI, but an investor will deduct the cost from the price as required capital expenditure.
If you cannot document the building’s condition, investors will assume the worst-case scenario. It is therefore worth having at least a basic technical report setting out what was repaired and when, and what will be needed over the next five years.
What investors look for behind the figures
Beyond NOI itself, investors assess the quality and sustainability of the income:
- The gap between current and market rents (reversionary potential), and how long it will take to realise it.
- Lease structure: fixed-term versus open-ended leases, indexation and deposit amounts.
- Risk concentration: a single large commercial tenant may account for 30% of income.
- The history of rent defaults and litigation.
How to prepare the figures
We recommend a simple spreadsheet covering the last two to three years in the format above, accompanied by a rent roll and a schedule of capital expenditure with dates and invoices. It does not have to be perfect, but it must be accurate and traceable. Investors will verify every figure during due diligence, and discrepancies between the spreadsheet and supporting documents undermine both trust and price.
Frequently asked questions
What is NOI?
Net operating income: rent actually collected less operating expenses borne by the owner. It excludes loan repayments, depreciation and major capital expenditure.
Is property tax included in operating expenses?
Yes, investors include it in the building’s operating expenses unless it is recharged to tenants.
Do I need an audit?
No. Accurate, verifiable statements are sufficient. Audited accounts are more common in share deals, where the company itself is sold.
Next step
Send us your rent roll and the building’s costs for the past year. We will show you how an investor reads the figures and where value is being lost.
Sources
Author: Michal Kopřiva, Pura Vida Property Advisory. Published 28 May 2026. This article is for information only and does not replace legal or tax advice.
