Expense Analysis
How does one properly do this? I am looking into buying a few multi-unit properties, and since property expenses are important, what is the proper due diligence that a buyer should perform in order to do the best job to analyze the expense aspect of a given property?
I asked this in addition to the rent rolls because both are aspects of the NOI calc, and when I do one for my own properties, I want to know that my numbers are as spot on as possible.
It depends now much of a security deposit you are holding. I use the following method, the IRS gives carpeting a 7 year life. If the carpet was more than seven years old, deduct the cost of cleaning, even if you are going to replace it. If it less than seven years, take the cost of replacement and multipy it by the years of life remaining, 1/7, 2/7, 3/7 etc.. That number is the amount to charge the tenant. Most of the time, this amount will exceed the deposit, then the only way to get the additional dollars is take the tenant to court. We usually write-off the difference.