Income and Expense Analysis

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Income and Expense Analysis
Chapter 21
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• Estimating and Adjusting Market Rent
• Lessee and lessor are typically motivated.
• Both parties are well-informed.
• A reasonable time is allowed for exposure.
• The rent is in terms of cash in US dollars.
• The rental amount represents normal consideration
  for the property leased, unaffected by special
  fees.

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• Income and Expense Data
• Rent
• Rent Concessions
• Division of Expenses
• Renewal Options
• Expense Caps
• Escalation Clauses
• Expense Recovery Clause
• Purchase Options
• Escape or Kick-Out Clause
• Continued Occupancy Clause
• Tenant Improvement Clause
• Non-Compete and Exclusive Use Clauses

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• Developing Reconstructed Operating Statements
• Estimating Potential Gross Income
• From Comparable Leases
• From the Current Subject Leases
• From Subject History

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Table 21.1 Lease Comparison Grid
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• Estimating Vacancy and Collection Losses
• From Comparables
• From History
• Estimating
• Operating Expenses Using Comparables
• Operating Expenses Using Property History
• Reserves for Replacement Using Contractors
  Estimates
• Tenant Improvements Expense
• The Net Income Ratio

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Table 21.2 Income Capitalization Approach
Calculations for Eight-Unit Property
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Problems

• Suggested solutions begin on page 365.

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Problem 1
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Problem 2