Residential Income Property’s New Profit and Loss Statement
Consequently, investors considering the purchase of income property want yield now. They won’t accept a negative cash flow, and NOIs are expected to reflect the realism of existing rents and operating expenses in the marketplace.
The following recommendations introduce changes for altering the business model on the income side of income property’s P&L. In the future, NetGain will describe the possibilities for changing the business model for income property from the expense side of the P&L statement.
Because the income streams from different income property types vary, NetGain will use residential income property as the example.
Presently, approximately 95% of the income collected by residential income property is from rent with the remaining 5% being non-rent related. The lessor’s use of resources is a reflection of that philosophy. The present reporting system, and more importantly the accountability of funds collected, support perpetuating the current financial configuration. It’s time for a change!
The following suggestion is a challenge to the financial personnel responsible for residential income properties. Using 95% occupancy as an example, the chart provides the current look of the income section (without dollars) of the P&L statement for residential income properties. Figure 1:
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