This post will review estimating the income and expenses of your rental property to determine your anticipated cash flow. You can download a helpful template to summarize your numbers at the following link: Property Proforma Template
Below is an outline of the figures you will be pulling together on the template. We’ve provided guidance on each line item.
- Income could include Rent, Utilities, Repairs, Parking, Laundry, Water/Sewer, Utility, etc.
- Deduct anticipated vacancy loss, typically 4-8%.
- Expenses Incurred Before Monthly Property Manager Disbursement
- Capital Spending – Appliances, Furnaces, Air Conditioners when the need replaced
- Repairs Ongoing – Maintenance requests from tenants
- Turns – This includes all the expenses incurred while “turning over” the unit between tenants and will include costs due to needed repairs, tenant damages and tenant wear and tear
- Maintenance Recurring – This is the cost of gutter cleaning, mowing
- Utilities – If you incur regular utilities costs
- Property Management Fees – The total cost of all fees charged by your property manager
- Legal – An estimate of anticipated legal fees, evictions, tenant disputes.
- Expenses Incurred After Monthly Disbursement (To arrive at your Net Operating Income, NOI)
- Association dues
- Travel costs related to the property
- Property Taxes (Be sure to estimate the property taxes based on the current market value of the property)
- Capital Reserves (Money set aside for future large capital needs such as roofs, windows, siding, driveways, etc.)
- Accounting costs related to the property (This could include tax prep, but also could include any other professional services obtained to help operate the property investment.)
- Insurance (Property insurance, commonly known as a rental dwelling policy, RDP)
- Calculating Cash Flow
- After calculating your net operating income (NOI) above, you will now deduct any Principal and Interest payments you have on the property.
- This will determine your anticipated cash flow.
Give us a call or shoot us an email if you’d like to discuss any of these figures further. We’d love to hear from you!
If you are looking for a property management team that has several decades of experience estimating and analyzing income and expenses, do not hesitate to reach out to RL Property Management Group. Contact Us.
RL Property Management Group, the only property management company in Columbus started and run by engineers. Our clients enjoy a premium property management experience without paying a premium price. RL Property Management is designed to provide our clients reliability and performance.