What does a reconstructed operating statement typically include?

A reconstructed operating statement is a financial document that outlines the income and expenses associated with a property, providing a clearer picture of its operational performance. Including management costs is crucial because these expenses directly impact the net operating income of the property. Management costs encompass various fees related to the administration of the property, such as salaries for property managers, marketing expenses, and employee benefits. By detailing these costs, stakeholders can assess how efficiently the property is managed and understand its overall profitability.

While other aspects could be influential in an appraisal context, such as market trends or historical sale prices, they do not reflect the operational performance as directly as management costs do. Appreciation forecasts may provide insight into potential future value but fall outside the scope of a reconstructed operating statement, which focuses on current financial realities rather than predictions. Thus, including management costs in a reconstructed operating statement ensures a comprehensive understanding of the property's performance relative to its operational management.