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
- 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.
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