Glendale, CA · Member since 2018 · 60 posts · 13 votes
Let's say we have our Gross Potential Rent and we add to it Utilities and Misc. Then we have to exclude Physical Vacancy and Economic Vacancy to get to our Gross Operating Income, right?
1. What info do you use for Utilities and Misc? It seems that it hard to predict it, especially if you are going through value add.
2. Why do we first add Utilities and Misc and then subtract Stabilized Vacancies out of this number? Why not in the other order?
Rental Property Investor · Johnson City TN · Member since 2016 · 386 posts · 271 votes
7y
@Vlad Denisov - You can usually find out the cost of utilities directly from the utility provider. We've had good luck with that here in Tennessee. Usually they just give it to us over the phone. Misc income is late fees, application fees, pet rent, etc. I've heard everyting from 2-3% all the way up to 10% of gross rents as a rule of thumb. I've also heard $200-400 per unit per year. On our property in Chattanooga the past couple of months it's been pushing 15%...lots of late fees.
Glendale, CA · Member since 2018 · 60 posts · 13 votes
7y
Do you include utilities for ALL of the units (kinda like gross potential utilities?) and then later subtract this income from units that don't pay because of vacancy or credit loss by multiplying it?
Let's say we have our Gross Potential Rent and we add to it Utilities and Misc. Then we have to exclude Physical Vacancy and Economic Vacancy to get to our Gross Operating Income, right?
1. What info do you use for Utilities and Misc? It seems that it hard to predict it, especially if you are going through value add.
2. Why do we first add Utilities and Misc and then subtract Stabilized Vacancies out of this number? Why not in the other order?
Honestly if the exact $ for these items are going to make or break a deal, pass.
And personally I don’t have income statements that start with full market rent as income and then loss to lease and vacancy as cost. Maybe it’s because I’m a simple guy and that’s seems silly to me. The money that comes in is the money that comes in. I do simply 100% cash accounting.
Developer · San Francisco, CA · Member since 2017 · 16 posts · 2 votes
7y
@Vlad Denisov There's common area utility charges that are going to be a cost regardless of occupancy such as hallway and exterior lights. On the other hand in-unit utilities (i.e. electricity, gas, water, etc.) will depend largely on occupancy since a vacant unit won't use any.
If you're doing a charge back for a portion of tenants' utility then it will also depend on occupancy since it's likely a percentage of the expense (depending on how your metering is setup).