How to build a simple rental property pro forma before you buy

Start with rent and vacancy

Use rents you can point to: listings of similar homes nearby, not the seller's number. Multiply the monthly rent by 12, then subtract an allowance for vacancy, the weeks a unit sits empty between tenants. Use a number you can defend, such as one month a year, and say why.

List every cost

• Property tax: ask the county for the current bill and how a sale changes the assessment.
• Insurance: get a quote for a landlord policy.
• Repairs and maintenance: a yearly allowance for ordinary fixes.
• Reserves for big items: roof, heating and cooling, water heater, flooring.
• Utilities you pay, lawn care or snow removal if the lease puts them on you.
• HOA dues if any.
• A management fee, even if you plan to self manage, so the number holds if that changes.
• Accounting and any filing fees.

The IRS says deductible rental expenses include costs to manage, conserve and maintain the property, and that repair costs that keep a property in working condition differ from improvements that add value. Plan for both kinds of spending.

A worked example

Example a made-up house rents for $1,900 a month. Yearly rent is $22,800. Vacancy of one month is $1,900, so expected rent is $20,900. Costs: property tax $3,600, insurance $1,500, repairs $1,800, reserves $2,400, lawn care $600 and a management fee of 8 percent of $20,900, which is $1,672. Total costs are $11,572. Net operating income is $20,900 minus $11,572, or $9,328 a year.

Now subtract the loan payments for the year, which are the loan's principal and interest. If the payments are $7,800 a year, cash left is $1,528, or about $127 a month. If a single repair or an extra empty month appears, that cushion is gone, and the reserves line is the reason you plan for it.

Stress test it

Run the same sheet with rent 5 percent lower, vacancy at two months and repairs 25 percent higher. If the property still pays its loan, the plan has room. If it does not, the answer was already in the sheet before you bought.

Write down every assumption so that a year later you can compare it to what happened and improve your next estimate.

Update it after the first year

• Copy the pro forma into a sheet with a column for actual results.
• Fill in the real rent, vacancy, tax, insurance and repairs at year end.
• Note the three lines that missed by the most and why.
• Use those corrections as the starting assumptions for the next property.

A pro forma is only as good as the habit of checking it. Owners who compare estimates to actual results end up with their own numbers for vacancy and repairs instead of rules of thumb, and those numbers are the ones that matter for the next purchase. Keep the old sheets: they become your own history. Two habits make the sheet more honest. First, price every cost from a real source, such as the county tax bill and an insurance quote, not from memory. Second, keep a separate line for big replacements, so a roof or a furnace shows up as a planned cost and not as a surprise in year six.

How DoorKeeping handles it

After you buy, DoorKeeping's property books show the real figures next to your estimates. You can ask Claude or ChatGPT, for example, "How do last quarter's repairs compare with what I budgeted?" and use the answer for the next purchase.

Tenants pay rent to your own bank account by bank transfer, free from DoorKeeping, and DoorKeeping marks rent paid when the deposit matches.

Sources

1. Topic no. 414, Rental income and expenses, IRS, read Oct 30, 2026
2. Publication 527, Residential Rental Property, IRS, read Oct 30, 2026

Questions

What is a pro forma for a rental property?

A written estimate of a year's rent and costs, made before you buy.

How much vacancy should I plan for?

Use a number you can defend for your area, such as one month a year, then test a worse case.

What is net operating income?

Rent after vacancy, minus operating costs, before loan payments.