EXPENSE SECTION
Transcript
Welcome to this video. I will cover the expense section in the ARGUS Excel Model. Let’s get into it.
Input Expenses
There are three sub-sections in the expense section. Per-square-foot based expense section, percentage-based expense section and reserve expense section. I am going to type in the first expense – insurance. Click the input expense button. An expense window pops up. This is basically the same window as we see in the existing rent roll section. I have the three buttons on the top. The operation box on the top left corner. I have talked about them in detail in the existing rent roll section video. I will say the insurance expense is 36 cents per square foot per annum. Copy down and across. It grows by 2% each year. Times 1.02. Click the first calc button. I can notice that I am inputting expenses for 20 years regardless of my holding period. Click Save.
Reimbursable Expenses
Is this expense reimbursable? Yes. Reimbursements are expenses which are paid back to a landlord by tenants. If an expense is defined as non-reimbursable, it will not be counted towards the basis of reimbursements in this model. I will say this expense is 100% fixed. Whether or not there is a tenant in the property, the insurance expense will still be incurred. The next expense is Salaries and Benefits. Click the Input Expense button again. 71 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 100% fixed. The next expense is General & Administrative. Click the Input Expense button again. 18 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 100% fixed. The next expense is Repairment & Maintenance. Click the Input Expense button again. 94 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 100% fixed. The next expense is Electricity. Click the Input Expense button again. 1 dollar 32 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 80% fixed. An empty suite consumes less electricity and utilities than an occupied one. I am assuming that an empty space consumes 80% of the electricity that an occupied space does. For example, the ventilation system might be still running in an empty space. The next expense is utilities. Click the Input Expense button again. 25 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 80% fixed. The next expense is contract services. Click the Input Expense button again. 3 dollars and 43 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 100% fixed. The last one is property taxes. Click the Input Expense button again. 2 dollars and 92 cents per square foot per annum. It grows by 2% each year. Save. It is reimbursable and 100% fixed. Now I finish inputting all the per-square-foot based expenses.
Percentage-based Expenses
Let’s move onto the percentage-based expense. There are 2 built-in expenses in this section: the management fee and the asset management fee. The management fee is based on the effective gross rental income and the asset management fee is based on the equity amount raised for this deal. I will input 4% for the management fee. 1% for the asset management fee. I will say the management fee is not reimbursable and the asset management fee is not reimbursable by nature. The expense associated with the reserve will be covered later when we talk about the total reserve cell. Let’s go to the annual cash flow summary tab. I can see the expenses have been modeled out.
Alright, I complete the expense section in the ARGUS Excel Model. Thanks for watching this video. I will see you in the next one.