For sales or re-finance purposes, Net Operating Income (NOI) is a blend of facts and fiction.
Since many variables fluctuate throughout the year, say rents, vacancies, utility costs and other are at best estimates, say insurance or property taxes or R&M, banks (but also buyers, seller and especially realtors) use assumptions that are close to reality, but not reality. Selling realtors stray most from reality, and you as a buyer or bank should stay close to it. CMHC is often unrealistically conservative, i.e. far off too.
You show what is called a pro-forma, a spreadsheet of building performance using prudent assumptions.
One such assumption is utility costs. Yours will be lower as tenants turn over. In Ontario there is a recently enacted law that forces landlords to sub-meter, and some way to cage existing leases (I am not too familiar with this as we haven't done it there). In other, non-rent-controlled provinces it is a bit easier. But yes, in most cases, it will kick in only after a tenant moves out.
However, you are adding value, like a new roof. A building with a new roof, all things being equal, is worth more than that same building with a 25 year old leaky roof. Ditto with a sub-metered electricity system.
