Give each number a period and a source
A useful budget begins with a consistent period. Enter scheduled rent by month and convert expenses to annual totals, noting whether each value comes from an invoice, quote or assumption. Avoid mixing this year’s insurance with an old tax bill without marking the difference. Unknown expenses are work to complete, not zero-cost items. Keep one-time opening costs outside the recurring operating baseline.
- Record the reference date beside each assumption.
- Separate owner-paid expenses from renter-paid inclusions.
- List unknown costs before calculating distributable cash.
Separate operating performance from financing
Scheduled rent is the amount at full occupancy. Apply a stated vacancy or collection-loss assumption to estimate effective rental income, then subtract recurring operating expenses to estimate net operating income. Subtract annual debt payments and reserve contributions separately to see the remaining cash before tax. Keep this simplified estimate separate from accounting statements and any investment valuation.
- Do not subtract mortgage principal when reporting net operating income.
- Include total debt payments when estimating cash after financing.
- Keep reserves distinct from actual capital work to avoid double counting.
Test assumptions before relying on the result
Run the same model with lower collected rent, higher repairs and a longer empty period. Compare the change in cash, not only the headline rent. A break-even occupancy above 100% means the entered costs exceed the scheduled rent even before vacancy; it is a signal to revisit the inputs or project, not a prediction. Review the budget against actual collections and invoices as operations begin.
- Keep a base case and a downside case with explicit differences.
- Show cash needs during an empty month, even if annual totals look positive.
- Reconcile actual results before changing the next forecast.