A key point to consider here is expenses that are not included in this calculation: interest, taxes and capital expenditures (one-time expenses such as a new roof or major renovations).Īnnual expenses = contract services + turnover expenses + utilities + management fees + repairs and maintenance + G&A + payroll + marketing. Marketing expenses, including marketing the property for a potential tenant to see in order to move in.Īll these expenses are added to form the total annual expenses and then subtracted from the gross potential income.Payroll (plus benefits and bonuses) for all employees on the property.General and administrative (G&A) expenses, including travel, office supplies, printers, subscriptions, consultant fees, office furniture, etc.Repairs and maintenance for the property during the year.Make sure to annualize all numbers for consistency.
Management fees, which are usually a percentage taken out of the monthly income.Utilities such as electricity, gas, water, sewer, trash, telephone, cable, etc.Turnover expenses to clean up and rehab the unit to make it move-in ready between tenants.Contract services such as grounds, security, lawn care, pest control, etc.Expenses include all reasonable and nonvariable annual costs, such as: Once we have determined our gross potential income, next we must determine our expenses. Gross potential income = gross potential rent - vacancy - loss to lease - bad debt - concessions.
They can also be used to waive extraneous fees to entice a new tenant to move in, or as customer service for an existing tenant to keep them from moving out.
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