Taxes, Insurance, and Reserves expenses are expenses incurred by any property. Enter annual costs for each of the following:

Real Estate Taxes and Other Taxes and Licenses. Contact your local taxing and licensing authorities (local government, school districts, utility districts) to estimate these amounts for the project and enter that estimate on a annual basis. The Template will calculate these expenses as a percentage of effective gross income (EGI) in the Additional Information column. Note that the Template uses EGI from Year 2 of operations for this calculation. Because the rent-up period occurs during Year 1, the Year 1 EGI may not represent stabilized property income.

Property Insurance. Consult an insurance company for a quote of annual insurance costs for the project.

Reserve for Replacement. As the project uses funds in the reserve for replacement to pay for large or unexpected rehabilitation or repair costs, it will need to replenish the reserve from project income. When you enter the average annual contribution to the reserve for replacement in the Operating Expenses tab, the Template will calculate the expense on a per-unit, per year basis. Properties typically fund the reserve for replacement by at least $720 per unit, per year.

While the amount of funds withdrawn from the reserve for replacement each year will stabilize once the property has been operating for a few years, expenditures are likely to be higher than average for the first five years of operations. For example, existing structures acquired at the beginning of the project may require rehabilitation shortly after the project begins operating. When you reach the bottom of the Operating Expenses tab, you will have the opportunity to apply additional funds toward the reserve for replacement for Years 1-5 of operations. These additional inputs will allow you to anticipate higher than average contributions to the reserve for replacement during these first five years.

The adequacy of the reserve for replacement is an important factor in determining the profitability and viability of a project. To help you ensure that the amount you entered for funding the reserve for replacement is realistic, the Template includes two adequacy tests at the bottom of the Operating Expenses tab.

Operating Reserve. The project will periodically use funds in the operating reserve to cover operating expenses when they exceed income. When you enter the average annual contribution to the operating reserve in the Operating Expenses tab, the Template will calculate the expense as a percentage of EGI in the Additional Information column.

Other Operating Expenses. Some properties may incur other operating expenses, not included elsewhere on the Operating Expenses tab. To accommodate atypical operating expenses, the Template provides six Other Operating Expenses fields. For each expense you wish to add, enter a label (replacing the "Other Operating Expense" text) and an amount. Leave blank any of the six fields that you do not need.