Failure to anticipate the loss of rental
revenue due to vacant units and non-payment
of rent will lead to lost profitability in
your clients' income producing real estate
investments.
Determine an expected percentage of loss
due to vacancy and non-payment by checking
that of comparable properties and the recent
loss experienced by the subject property.
In today's marketplace its around 3 to 5 %.
Adjust your net operating income for
next year by any anticipated rent increases.
If you are anticipating a 5% increase in
rent, and net operating income this year is
$44,000, then:
$44,000 X 1.05 = $46,200
Calculate the expected monetary loss for
next year due to vacancy and credit losses:
$46,200(net operating income) X .0360
(3.6%) loss estimate = $1663.20.
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