Educating Landlords

Landlording Simplified

 

Let's  see if you are financially ready to become a landlord.

Let's say you have 3 rental properties.

In the example below your 3 rental units are sitting unoccupied for 3 months each this will give you a vacancy total of 9 months. You will then take the Total Rental Income and divide that by the number of units to get the average rental amount. You will then multiply that by the vacancy total to get the overall amount of loss. Divide this number by 12 to get an average for how much funds you should keep in reserve each month (this will come into play in the next budget sheet).

vacancy loss ss.PNG

The Operations Budget considers the rental income versus the expenses and reserves to give you a total either as income or expense for your monthly personal budget. An example of this spreadsheet is shown below. In the top portion you will enter the rental amount for each unit to get the total income. Next you will break out your expenses by:

  •  Fixed – Mortgage, Property Taxes, Insurance
  •  Flexible Fixed – Recurring monthly expenses that are flexible depending upon usage such as utilities (only complete the portion in which you will be responsible regarding the Leased Premises).
  • Maintenance – consider this as a cash reserve; dedicate a monthly amount you will set aside just to cover maintenance or repairs to the premises.
  • Major Renovations – like with the previous section, if you would like or need to do a renovation but don’t have the equity or funds yet, set aside a monthly amount toward this OR if you purchased a new appliance and placed it on store credit you should set a goal to pay it off as soon as possible, by averaging into your monthly budget you can anticipate the length it will take to do so.
  • Vacancies – by completing the previous worksheet you already know the minimum amount you should be setting aside monthly to cover for vacancies, also consider adding on the cost to advertise and prep for new tenants.
  • Office Supplies – being a landlord will require a lot of paperwork and office supplies, you should budget an average monthly amount for paper, ink, stamps, etc.
  • Professional Help – you may not need this section, but it is included for your benefit.
  • Court Fees – you will inevitably go through the eviction process as a landlord, setting aside a reserve of funds to anticipate the fees involved with evictions would be wise. It’s always better to have the funds and not use them, then to need them and have to pull from other budgeted areas.
  • Travel – You will need to travel periodically to the Leased Premises to conduct semi – annual inspections, post an eviction notice, or show the property to potential tenants so budget for these times.
  • Miscellaneous – catch all for anything unexpected or not listed in this sheet.
operational budget ss.PNG

Upon completing this worksheet, you will either have a positive or negative number in the Comparison section. If it is positive, you can add this amount to the “Other income” section on the following spreadsheet. If you have a deficit, then you will add this amount under the “Monthly household” section.


The Personal Budget will review your personal and business income against your personal expenses. An example of this spreadsheet is shown below. In the Income section, you will enter the total monthly rental income, and any positive funds gained in the operational budget can be added to the other incomes along with your own personal income (from your employment, spouse, etc.) to obtain a monthly income amount.  Next you will break out your expenses by:

  • Fixed – Mortgage, Property Taxes, Insurance
  • Flexible Fixed – Recurring monthly expenses that are flexible depending upon usage such as utilities.
  • Monthly Household – anything spent on the home or family like gas, groceries, as well as the deficit amount from the Operations Budget, if applicable.
  • Major Renovations – If you would like to or need to do a renovation but don’t have the equity or funds yet, set aside a monthly amount toward this OR if you purchased a new appliance and placed it on store credit you should set a goal to pay it off as soon as possible, by averaging into your monthly budget you can anticipate the length it will take to do so.
  • Medical – Funds spent on check-ups and prescriptions.
  • Professional Help – you may not need this section, but it is included for your benefit.
  • Miscellaneous – for luxuries (expenses made but can be reduced or eliminated if need be), savings, as well as a catch all for anything unexpected or not listed in this sheet.
Personal Budget SS 2.PNG

Upon completing this worksheet, you will either have a positive or negative number in the comparison section. If it is positive congratulations! You should consider placing any gained funds into your reserve. If you have a deficit, then you should review your budget and expenses and consider what could be reduced or eliminated.


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