Appraisal Form 216 Operating Income Statement: How to Fill It Out

Fannie Mae Form 216, the Operating Income Statement, is completed in three hands: you supply the rental schedule, the income figures, and the expense and replacement reserve estimates; the appraiser reviews your numbers and writes their own alongside yours; the underwriter makes the final adjustments. To fill out Fannie Mae Form 216 correctly, you need current leases, two years of operating statements, utility bills, service contracts, and realistic estimates for every expense category the form lists, including costs you don’t currently pay out of pocket.¹

The form accompanies Form 1025, the Small Residential Income Property Appraisal Report, and it applies to two-to-four-unit properties financed with a conventional mortgage sold to Fannie Mae. Single-unit investment properties use Form 1007 instead, which only estimates market rent.²

Who Fills In Which Parts

The form uses a side-by-side column layout (shown on the page as entries like “Applicant/Appraiser 288/300”) so the lender can see where the appraiser’s figures depart from yours.¹

Your job as the applicant is to complete the initial rental schedule for each unit (rental status, lease expiration, current rent, market rent, who pays utilities) and all income and expense projections. For an existing property, you also provide actual year-end operating statements for the past two years. For a newly built property, you submit projections instead.

The appraiser then reviews your figures and writes adjustments in their column. If the lender hires the appraiser to prepare the form rather than you, the lender must still forward your operating statements and other data like mortgage insurance premiums, HOA dues, and subordinate financing to the appraiser.

The underwriter has the last word, revising any income or expense entry that looks unreasonable for the local market. Most disagreements surface here. Expense estimates that run noticeably below neighborhood norms get adjusted upward, which lowers the net income the lender credits to you.

Documents to Gather Before You Start

Pulling the paperwork together before you open the form saves time and cuts down on follow-up requests.

Current lease agreements for all occupied units, with rent amounts, expiration dates, and tenant utility responsibilities.
Year-end operating statements for the past two years, for existing properties.
Utility bills for electricity, gas, water and sewer, and any fuel accounts, covering at least 12 months.
Service contracts for pest control, trash removal, snow removal, landscaping, and property management.
Maintenance and repair records with invoices or receipts from the past two years.
Component condition estimates for major systems such as roofing, HVAC, appliances, and carpeting, with approximate remaining useful life and replacement cost. A recent home inspection report covers most of this.

If the property is new construction or you haven’t operated it yet, projections replace historical statements. Expect closer scrutiny of those numbers, since there’s no track record to check them against.¹

Filling In the Rental Schedule and Income Section

At the top of the form, list each unit with its current monthly rent taken straight from the lease. For a vacant unit, use the appraiser’s estimated market rent. Multiply each unit’s monthly rent by 12 and total them for the gross annual rental income line.

Below the gross figure is a deduction for vacancy and collection losses, which covers turnover gaps, late payments, and empty periods between tenants. The form sets no fixed percentage. The appraiser picks a figure based on local market conditions. Separately, when Fannie Mae calculates the rental income that actually counts toward loan qualification, it reduces gross rent by 25% to absorb vacancy and maintenance, regardless of what vacancy factor appears on Form 216.²

Filling In the Expense Section

This is the longest part of the form and where most applicants slip. Every category needs an annual figure.¹

Electricity, gas, fuel oil, and other fuel. Annual cost for each source. If tenants pay their own, note that, but include common-area energy costs you cover as owner.
Water and sewer. Full annual cost if the owner pays.
Trash removal. Annual waste hauling fees.
Pest control. Annual extermination or prevention service costs.
Other taxes or licenses. Any local business or rental licenses beyond property taxes.
Casual labor. Public-area cleaning, snow removal, and similar services. The form expects a figure here even if you haven’t contracted for the work yet.
Interior paint and decorating. Contract labor and materials to maintain unit interiors between tenants.
General repairs and maintenance. Contract labor and materials for public corridors, stairways, roofs, mechanical systems, and grounds.
Management expenses. What a professional management company would charge, even if you self-manage. Underwriters watch this line closely; leaving it at zero signals that the real cost of your time isn’t accounted for.
Supplies. Light bulbs, janitorial supplies, and similar consumables.
Miscellaneous. Anything that doesn’t fit elsewhere.

The categories total to an annual operating expense figure. Combined with gross income minus vacancy, that produces the property’s net operating income.

Calculating Replacement Reserves

The second page carries a replacement reserve schedule that often catches applicants off guard. Replacement reserves are money set aside each year to cover eventual replacement of building components with a limited useful life. The form requires you to calculate adequate reserves whether or not you keep a reserve fund, and whether or not reserves are customary in your market.¹

The math is simple: for each component, divide replacement cost by remaining useful life in years. A roof that costs $12,000 to replace and has eight years of life left produces a $1,500 annual reserve entry. Run that calculation for every component with more than a year of remaining life. Common items include refrigerators, stoves, washers and dryers, furnaces, roofing, and carpeting. The total feeds into operating expenses and reduces the net income the lender uses.

Mistakes That Slow the Review

Underwriters see the same errors repeatedly, and each one can delay the loan or shrink your credited income.

Entering zero for management on a self-managed property. The underwriter will insert a market-rate fee, typically around 8% to 10% of gross rent, and your qualifying income drops.
Underestimating replacement reserves by skipping components or stretching useful-life estimates. The appraiser is specifically tasked with catching this.
Using asking rents instead of lease-verified rents. For an occupied unit, the current lease amount governs; using a higher market rent overstates income.
Omitting historical operating statements for existing properties. The instructions require two years of actual year-end statements, and leaving them out creates a documentation gap on day one.
Leaving casual labor blank. The form explicitly expects cleaning, snow removal, and similar costs even if you haven’t yet contracted for them.

Why Each Entry Matters

Once the underwriter finalizes the form, Fannie Mae credits 75% of gross monthly rent as qualifying rental income, assuming the other 25% is lost to vacancy and maintenance. Form 216’s expense breakdown is what lets the underwriter confirm that cushion fits the particular property.² A tight, well-supported expense section protects the income number you want credited; a thin or inflated one invites upward adjustments on expenses and downward adjustments on net income.

The three-party structure also makes padding the numbers risky in a way the form itself warns against. Knowingly making a false statement to a financial institution in a mortgage application is a federal crime punishable by up to 30 years in prison and a fine of up to $1,000,000.³ The appraiser and underwriter each check your figures against comparable properties, so an expense line that reads unusually low for the neighborhood will draw questions at two separate stages before closing.

1
The Jordan Real Estate Group. Operating Income Statement
2
Fannie Mae. B3-3.8-01, Rental Income
3
Office of the Law Revision Counsel. 18 USC 1014 – Loans and Credit Applications Generally