Guide

How to build an annual budget for a rental property

A budget that omits vacancy and reserves will always look profitable and always be wrong.

Overview

A budget that omits vacancy and reserves will always look profitable and always be wrong.

Checklist

  • Start from gross scheduled rent, not collected rent.
  • Subtract a vacancy allowance based on your actual turnover rate.
  • Budget maintenance as a percentage of rent, separate from capex.
  • Fund a capex reserve for roof, HVAC, and appliances by remaining useful life.
  • Include management fees, insurance, taxes, and turnover costs.
  • Review actuals against budget monthly, not annually.
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