PM 08-01-01-b.

  1. Determine the net income from rental by subtracting rental expenses from the gross income. Expenses may include:
    • repairs,
    • utility expenses paid by the landlord,
    • taxes,
    • insurance, and
    • mortgage payments (principal and interest).

      When the client and the tenant(s) occupy the same building, rental expenses may not be divided easily because the expenses are not billed separately. When this happens, use the number of rooms occupied by the tenant(s) compared to the total number of rooms in the building to figure the percentage for expenses. For example, if the tenant(s) occupies 5 out of 12 rooms, the expenses of rental are 5/12 of the total expenses. 

  2. Deduct rental expenses as incurred. Do not prorate over the year.
  3. Carry expenses that exceed gross rental income over to the following month. There is no income available for the month expenses exceed gross rental income.