What your flat really earns: rent vs expense explained

"The flat brings in ৳25,000 a month." Almost every owner says something like this, and it's almost never quite true. Rent is what the tenant pays. What the flat earns is what's left after everything it costs you, across a whole year, including the months nobody lived there.

This guide shows how to work out a flat's real earnings, which costs to count, how to treat the advance, and a worked example for a typical Dhaka flat. The numbers are illustrative; your flat's will differ, and a tax adviser should check anything you file.

Rent received isn't profit

Three things separate "rent" from "earnings":

1. Costs. Service charge, repairs, repainting, holding tax, bills you pay on the tenant's behalf, broker fees.
2. Vacancy. Months between tenants when no rent comes in but the service charge still does.
3. Arrears and discounts. Rent that was due but never paid, or that you waived.

Over a year, these can easily take 15% to 30% of the headline rent. An owner who plans around ৳25,000 a month may really be living on ৳18,000 to ৳21,000.

Count on a cash basis

Keep it simple and count money when it actually moves:

• Rent is income in the month you received it. September's rent paid on 2 October is October income.
• An expense counts on the day you paid it.
• A bill you paid counts in the month it's for.

This is called cash basis. It matches how most Bangladeshi landlords keep their books, and it's what the income tax return asks about rental income. Its big advantage is that nothing is estimated. Every figure is a payment you can point to.

Costs to count

Go through a year of the flat and list every payment you made for it. Typical costs in a Dhaka apartment:

• Service charge, if you pay it: guards, lift, generator, cleaning. Often ৳2,000 to ৳6,000 a month depending on the building.
• Repairs and maintenance: plumbing, electrical work, a geyser, a door lock.
• Repainting and renovation between tenants.
• Holding tax to the city corporation, usually once a year.
• Utility bills you pay and don't recover from the tenant.
• Broker fees when finding a new tenant.
• Legal costs, such as drafting or stamping a lease.

Don't count:

• Bills the tenant paid directly. They're not your cost.
• Bills the tenant repaid you for. You paid them and got the money back, so they net to zero. If you record them, record the repayment as other income.
• Your loan instalments. They matter for your household budget, but they're not an operating cost of the flat. Keep them separate to see what the flat itself earns.

The advance isn't income

This is the most common mistake, and it distorts two years at once.

The advance a tenant pays at move-in is their money, held by you. It will be refunded, or used for their last months' rent or for damage, when they leave. If you count ৳50,000 of advance as income in the year it's paid, that year looks ৳50,000 better than it was. When you refund it, a later year looks ৳50,000 worse.

The fix: keep the advance as a separate figure, "advance held", and don't add it to income. It becomes income only when part of it is actually used:

• Advance used for rent during the notice period counts as rent income in that month.
• Deductions kept at move-out, for damage or unpaid bills, count as other income on the settlement date.
• The refunded part is never income.

Vacancy: the silent cost

A flat that stands empty for two months between tenants loses two months of rent. It still pays the service charge, and often needs repainting. That's why tracking occupancy is useful: the months the flat was let divided by the months it was available.

• 12 out of 12 months let: 100% occupancy
• 10 out of 12: 83%
• 9 out of 12: 75%

A flat at 83% occupancy earning ৳25,000 a month brings in ৳2,50,000 a year, not ৳3,00,000. Before you raise the rent by ৳2,000, consider whether the higher rent might cost you an extra empty month.

Collection: rent due versus rent received

The other measure worth watching is collection rate: rent received divided by rent due over the period. If ৳3,00,000 fell due and ৳2,85,000 arrived, the collection rate is 95%. Leave out months you deliberately waived, such as a festival discount or a month's rent given in exchange for repairs, so they don't look like non-payment.

A falling collection rate is an early warning. It usually means one tenant is slipping behind, and it's far easier to fix at one month than at three.

A worked example

A three-bedroom flat in Mohammadpur, let at ৳25,000 a month. The service charge, ৳3,000 a month, is paid by the owner. The tenant moved out at the end of February, and the flat stood empty in March while it was repainted. A new tenant moved in on 1 April at the same rent.

Net income: ৳2,77,400 − ৳79,900 = ৳1,97,500, about ৳16,460 a month.

The advance doesn't appear. The departing tenant's ৳50,000 advance covered their final two months' rent (already counted in the 11 months received). The new tenant's ৳50,000 advance sits in "advance held", outside income.

So the flat "that brings in ৳25,000" actually earned about two-thirds of that. It's a perfectly good result, but a very different number to plan a household budget around.

What to do with the number

Once you know a flat's real earnings, a few decisions get easier:

• Setting rent. Compare the net, not the gross, with what similar flats earn.
• Repairs versus vacancy. Spending ৳15,000 to keep a good tenant happy is often cheaper than one empty month.
• Choosing tenants. A reliable tenant at slightly lower rent can earn more over a year than a higher rent with late payments and early departure.
• Tax. With income and expenses already added up by income year (July to June), preparing the return is a matter of copying figures.

Let the numbers add themselves up

Doing this once a year in a spreadsheet is worthwhile. Doing it every month, for every flat, is where an app earns its place. Griho counts on exactly the cash basis above: rent on the day it arrives, bills in their month, expenses on the day paid, and the advance held apart and only counted when used. The dashboard shows income, expenses, net, occupancy and rent collected for each flat and all of them together. Reports come as PDF, as Excel, and as a tax summary for the income year. See What each flat really earns.

Quick checklist

• Count rent when received, expenses when paid, bills in their month
• List every cost the flat had, including repainting and broker fees
• Leave out bills the tenant paid directly or repaid
• Keep the advance out of income until it's actually used
• Track occupancy and collection rate, not just rent
• Work out the net per flat, per year, and plan around that number