Pro Forma calculations. %-ages off Gross Rent or Operating Income

[Petra M.]

Do you use Gross Rent or Operating Income (Gross Rent - Vacancy Losses) to calculate your expenses?

For example:

$1000 monthly rent.

8% vacancy

$920 gross rent.

Property Management 10%

$100 or $92?

[Jesse Waters]

I would use the $92.  You are only paying management when the property is rented.  However, be sure to account for a placement fee if your manager charges it.

In my situation I figured that my units turn over every 2 years, so I turn half a year.  My manager charges me 8% for management and 1/2 month's rent for placement.  So, 1/2 months rent over 24 months per unit.  

At $500/mo rent - $250 placement fee/24 months or about $10/month per unit.

Its not exact, but it helps in my analysis.