How to Set Up a Profit & Loss Projection for a Rental Property

How to Set Up a Profit & Loss Projection for a Rental Property
••• Thomas Northcut/Photodisc/Getty Images

Setting up a profit and loss projection for a rental property is not difficult and is essential for anyone investing in a rental property. Since it is a projection, you may use theoretical numbers. Just make sure that all numbers accurately reflect expected values in the real world.

Make a spreadsheet using a computer program such as Excel.

Create a row for projected gross profit. For a rental property, this equates to rent payments.

Create rows for projected costs. List each cost in a separate row and then make a row for total costs. Examples of costs include mortgage payments, management fees and renovation costs. After listing each cost, create a row for total costs, add all costs together and record the total.

Create a bottom row for projected net profit (or loss). To calculate projected profit, subtract total costs from projected gross profit.

Divide the rows into columns by month. This allows you to calculate projected profit or loss on a monthly basis.

Add monthly totals to project the yearly profit or loss. If you’re working with one set of theoretical numbers, all you have to do is multiply your total net profit by 12. If you anticipate future changes in profit or cost over the year, incorporate these into your monthly totals before calculating the yearly projection.