Creating a Pro Forma

2 Replies

While analyzing a potential deal, I'm creating a pro forma and wanted to see what expense line items that I'm potentially missing.  Can you guys offer some advice?  It's a 7 unit apt building...

Here's what I have:

Fire Insur, Liability Insur, water, mgmt fees, sewer, r/e taxes, gas/electric for common area, garbage removal.  Anything else?

Also, has anyone ever put in a heating system that runs a meter to each unit so each renter pays for their heat.  It's gas/steam heat now.



You should be including your maintenance items (i.e. Landscaping, painting & decorating, maintenance labor, maintenance contracts) as well at Administrative line items (i.e. management fee, personnel expense, telephone, office supplies etc.) Also, do not forget your fixed costs with taxes and insurance.

Take caution when looking at historical data provided by the seller. This data is easily manipulated and the numbers are often times hysterically inaccurate. You should really be aiming to develop a Zero Based budget based off the information developed in your pro forma. With aggressive management and sustainable financials you should be able to stabilize a property of that size within 2-3 years.

As far as your question regarding the tenant paying their own heat I am unclear what the scenario is. It sounds like you have a centralized boiler system at the property in which case you would not be able to- in a financially feasible manner- convert it to tenants paying their own heat. One option in a scenario such as this is to setup a Ratio Utility Billing System (RUB) where each tenant pays a percentage of the properties heating costs based on their leased square footage. You can find more information on this by searching BP.

Snow removal, Vacancy, Turnover cost, Capital expense reserves

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