Setting up income and expenses

Enter the total current potential rents.  This represents the amount collected if all units were full and paying at the current rate.  Enter the total annual potential here.

Enter the current vacancy factor for the property.  Make sure that the factor you use "backs into" the current adjusted gross as reported by the seller.  For example, if the seller is reporting 200,000 in total potential rents, but the property is showing 188,000 in gross receipts - the vacancy factor would be 6%.

Enter the total current fixed expenses for the property.  Fixed expenses are expenses that occur even if the property is 100% vacant.  An example of fixed expense would be insurance, real estate taxes, or some portion of utilities.  We break out fixed and variable expenses to determine what the break even occupancy point is.

Enter the annual amount of total variable expenses.  Variable expenses are expenses that vary according to occupancy levels.  An example of a variable expense would be unit maintenace or unit electricity.  In theory, if the unit is vacant - there are no variable expenses.