As a real estate investor, your real estate investment spreadsheet can be one of the most important tools you have at your disposal. Not only will having a cohesive spreadsheet help you keep track of your income and expenses on a monthly basis, it will also help you gauge the profitability of your investment. To that end, here is a guide on how to organize your spreadsheet. Read it over to get a better sense of how to keep all your numbers straight.
Step 1: Enter all the relevant information on your rental property
The first thing you’re going to want to include in your real estate investment spreadsheet is all the relevant information about your rental property. Not only is it essential to keep this information close at hand for your records but a lot of it will serve as the building blocks for the calculations you’ll be doing later on. With that in mind, it’s essential to make sure the information is readily available and easy to find.
To make navigating the sheet easier, you’ll want to break it down into four separate sections. We’ve written an overview of what information should be included in each section below:
Basic Rental property management information
This section should include basic information about the property, including:
- Property address.
- Property location: This is particularly important if you’re a remote investor.
- Type of property: single-family property, duplex, office building.
- Property size: Number of square feet and any applicable acreage.
Next, if you used the financing to purchase your investment property, you’ll want to include that information in its own section of the sheet. However, if you bought the rental with cash, you can feel free to skip ahead to the next section.
This section should include:
- Loan amount.
- The monthly payment amount.
- Interest rate.
- Loan term.
- Amortization period.
Initial investment information
Finally, the initial investment section will include information regarding how much money you invested in the property when you first bought it. Obviously, this will cover your down payment and any closing costs, but you’ll want to be sure to include information about any initial repairs or renovations as well.
It should include the following information:
- The home’s purchase price.
- Your down payment amount.
- The amount you paid in closing costs.
- The amount you paid for renovations or repairs.
- Your total initial investment.
Step 2: Include your income and expenses
After you have all that information squared away, the next step is to take an in-depth look at your income and expenses for the property. You’ll likely want to put this information on a separate sheet in your workbook so it doesn’t get confused with the basic property information and you can also get in touch with Access Corporate Relocation Services Inc experts for any assistance.
In total, the sheet should include the following subsections:
Total monthly income
First, you’ll want to take a look at the total monthly income your real estate investment is bringing in. Obviously, the bulk of the income will be rental income, but don’t forget to account for income from other sources as well. In addition, it can be helpful to calculate these figures on both a monthly and an annual basis.
You should break this section down into the following information:
- Total number of units.
- The average rent per unit: You can find this by asking a real estate agent to do a comparative market analysis.
- Potential rental income: The total amount of money you’d make if the building was fully rented.
- Projected vacancy rate: You can ask your agent for local information or find the national figure in the most recent census. The national average is 5.7% as of the second quarter of 2020.
- Projected vacancy loss: Your projected rental income multiplied by the vacancy rate.
- Gross rental income: Also known as gross rent, this figure is your potential rental income minus your projected vacancy loss.
- Additional income: Any non-rent income, such as income from laundry machines, etc.
- Gross operating income: This figure is your gross rental income plus any additional income.
Total monthly operating expenses
Next, it’s time to take a look at your operating expenses. For the most part, in this section, you’re going to be listing various expense amounts rather than doing any formal calculations. However, it can be useful to refer back to your bills here so you have a realistic idea of what your expenses will be. Again, it can be helpful to list these figures both monthly and annually.
While your expenses will likely be unique to your property, they might include these items:
- Property tax rates.
- Rental property management fees.
- Leasing fees.
- Insurance fees.
- Homeowners association fees.
- Utility payments.
- Replacement reserve.
- Pest control.
- Accounting and legal.
- Advertising fees.
Step 3: Calculate your rates of return
The last sheet you’ll want to set up is a sheet for calculating your rates of return. In Rental property management Omaha NE, a rate-of-return calculation shows you how much profit you stand to make versus the money you’ve put into your investment. There are a few separate calculations you should consider:
Net operating income
As you might expect, your net operating income (NOI) is an important measure of profitability for a real estate business because it shows you how much you stand to make versus how much you’ve spent. Put simply, it’s a measure of the amount of rental income you’ll receive as profit once all your operating expenses are accounted for and subtracted.
The formula for net operating income:
Gross Operating Income – Operating Expenses = Net Operating Income