@David Jiang Expense reimbursements should always be shown as a revenue item, not (as some folks try to do) as a negative expense. A proper presentation shows the full expense amounts under "operating expenses."
Keep in mind also that the reimbursement may not be for the full amount of a given expense. In some situations, the tenants may be obligated to reimburse for the expense over a base amount. This is not uncommon with property taxes, where there may occur what is called an "expense stop" -- i.e., an amount up to which the landlord will pay (in this case, the property taxes as they were in the base year), and the tenant then reimburses the amount of increase in the expense over that base year amount.
Vacancy should definitely affect your projected revenue for reimbursement. Clearly, if there is no tenant in place, there is no one other than the owner to pay the expense.
The way to parse this all is is like this:
Gross Scheduled Base Rent
plus Scheduled Expense Reimbursements
= Total Gross Scheduled Income (this is the total you would expect if no loss from vacancy)
less Vacancy Allowance (typically as a percentage of total gross)
= Gross Operating Income
less Operating Expenses
= Net Operating Income
By applying the vacancy allowance to the total of the base rent plus reimbursements, you automatically account for the impact of vacancy on those reimbursements.
I have to thank you for asking this questions, because I needed a reminder to finish a two-part article on this topic. Part one is here -- but I got so wrapped up in completing a new online course on income-property analysis (it would be bad form to link to it here, but ask me by direct message if you want to find it) that I never wrote Part 2.
Hope this helps.
Frank
