FOLLOW ALONG
Put the lesson into practice
Use the complete fictional scenario from lesson one. The examples use identical purchase, financing, income and expense assumptions.
- In Property Inputs, enter rent as a monthly amount. Enter property taxes, insurance, owner-paid utilities, HOA and other operating expenses as annual amounts.
- For lesson one’s example, enter 3500 for monthly rent, 4500 for annual taxes and 2200 for annual insurance.
- Separate taxes and insurance from principal and interest. Do not put a total mortgage-and-escrow payment into an annual expense field or count the same cost twice.
- Enter 5 for a 5% allowance. Maintenance, management and CapEx use effective gross income after the modeled vacancy deduction.
- Verify every zero expense. Select Analyze Deal after changing inputs and keep an independent record during beta.
Keep the units consistent
Fictional example using the OneDEAL calculation model| Input / calculation | Example value | Time period or basis |
|---|
| Total Monthly Rent | $3,500 | Monthly |
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| Property Taxes | $4,500 | Annual ($375 monthly equivalent) |
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| Insurance | $2,200 | Annual (about $183.33 monthly equivalent) |
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| Vacancy | 5% | Of $42,000 scheduled annual income |
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| Effective gross income | $39,900 | $42,000 less $2,100 vacancy |
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| Maintenance / Management / CapEx | 5% / 8% / 5% | Of effective gross income; enter 5 / 8 / 5 |
|---|
Monthly equivalents are shown for comparison. The taxes and insurance fields still require annual amounts: 4500 and 2200 in this example.
The three percentage allowances total $7,182 annually in the example: $1,995 maintenance, $3,192 management and $1,995 CapEx. Adding $6,700 of taxes and insurance produces $13,882 modeled operating expenses.
Zero utilities, HOA and other expenses are assumptions for this fictional example. Use property-specific figures when a cost applies. This tutorial demonstrates the current manual calculator; it does not retrieve bills or verify property expenses.
Read the full video transcript
Rent is monthly. Taxes and insurance are annual. Mixing those units can make a deal look much better than it is.
In Property Inputs, our fictional example uses thirty-five hundred dollars in monthly rent, forty-five hundred a year in taxes, and twenty-two hundred a year for insurance.
Do not enter a monthly escrow payment in an annual field. Separate taxes and insurance from principal and interest so you do not count them twice.
Maintenance, management and CapEx are percentages of effective gross income. Enter five for five percent. In this example, five percent vacancy reduces annual rent to thirty-nine thousand nine hundred dollars before those allowances.
Use zero only when an expense does not apply. Select Analyze Deal after changing inputs. Keep your own record because beta saving is unavailable.
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