Estimating your rental expenses, as important as that is, wouldn’t be successful if it wasn’t for the fact that you had a great math teacher (hopefully) back when you were in high school. Seriously. You have to know a lot about numbers — not as much as a CPA, but just enough. Don’t bang your head against the wall, calling yourself “stupid,” though. That won’t do you any good.
The Good News Is That You Can Get Used to This
The operating expenses percentage gets easier as you get more and more into calculations, though. So no worries on the brain tumors due to calculus. This is what you need to know regarding that operating expenses percentage — you’re looking at a big window range of around 35% to 80% of your gross operating income. It’s a big window to consider given the type of rental property you might have.
For an example, consider perhaps you’re collecting rent on a piece of property. When factoring your operating expenses percentage to see if you’re on the mark, look at your own numbers as a matter of fact. Are you collecting $1.2K in monthly rent? What are your own operating expenses? $450 a month? Fantastic. Do the math, and you’ll see that you’re at an operating expenses percentage of 37.5%. That’s when you divide 450 with 1,200.
The Last Thing to Know About That Operating Expenses Percentage….
Given the window, just know that it may vary. As long as you’re within that window, you’re kosher. Basic rule of thumb is if the building’s a bit higher scale in luxury or materials, you could look at a higher operating expenses percentage, and that’s okay — as long as you don’t go above 80%. Beach real estate, for instance, just might get up there close to 80%.
When it comes to renters, rentals, and financial assistance, this rules the chalkboard with an iron protractor. Guaranteed. Just in case you hate numbers, though, better get your old math teacher back on board. The numbers are a priority.