Non-Revenue Units in Rent Roll

  • Anonymous
    Inactive
    4 years, 3 months ago #2764

    Hi,

    I wanted to see what your take is on modeling non-revenue units into the model that are in an existing rent roll. Is it best practice to factor that unit into the GPR, take a vacancy, and then subtract the non-revenue income? Or does the vacancy calculation already account for the non-revenue unit?
    My thoughts on doing the math are below:
    100 units x $1,200 = $120,000 – 5% vacancy = $114,000 – Model unit = $112,800
    99 units x $1,200 = $118,800 – 5% vacancy = $112,860

    I appreciate the feedback

    Anonymous
    Inactive
    4 years, 3 months ago #3310

    You should model the number of units for which you could receive market rent. Non-revenue units are usually:
    • Down or off-line units that cannot be rented without significant capital expense (new kitchen, windows, e.g.)
    • Rent-free unit for employee (if an employee pays under market for the unit, then the delta should be in your Personnel OpEx
    • Unit converted for amenity, model, office, storage, or other use

    Sometimes you should return a model unit to the rental pool if:
    • More than one model of that floorplan or configuration (you may not need a model for every 1/1 unit you have)
    • Market does not require fully furnished model (you can partially furnish a vacant unit)
    • Your model can double as an Airbnb/STR unit (although this really should go in other income)
    • Demand is high enough to justify removal of a model

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