Projected Rental Income Calculator Fannie Mae

Fannie Mae Projected Income Formula:

\[ \text{Projected Income} = \text{Rent} \times \text{Occupancy Rate} \times 12 \times 0.75 \]

Projected Income:

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1. What is the Fannie Mae Projected Income Formula?

The Fannie Mae Projected Income formula calculates the annual projected rental income by multiplying the monthly rent by the occupancy rate, annualizing it (×12), and applying a 25% vacancy factor (×0.75). This is the standard method used by Fannie Mae for underwriting rental properties.

2. How Does the Calculator Work?

The calculator uses the Fannie Mae formula:

\[ \text{Projected Income} = \text{Rent} \times \text{Occupancy Rate} \times 12 \times 0.75 \]

Where:

\( Rent \) — Monthly rental amount in USD
\( Occupancy Rate \) — Expected occupancy rate (0 to 1)
\( 12 \) — Months in a year
\( 0.75 \) — 25% vacancy factor

Explanation: The formula accounts for potential vacancy by reducing the gross rental income by 25%, which is Fannie Mae's standard underwriting practice.

3. Importance of Projected Income Calculation

Details: Accurate projected income calculation is crucial for mortgage underwriting, determining property cash flow, and assessing investment viability for rental properties.

4. Using the Calculator

Tips: Enter the expected monthly rent in USD and the anticipated occupancy rate as a decimal (e.g., 0.95 for 95% occupancy). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does Fannie Mae use a 25% vacancy factor?
A: The 25% reduction accounts for potential vacancies, maintenance costs, and other expenses, providing a conservative estimate of net rental income.

Q2: What's a typical occupancy rate for rental properties?
A: Most well-managed properties maintain 90-95% occupancy, but this varies by market and property type.

Q3: Can I use actual rental income instead?
A: For existing rentals, Fannie Mae may allow actual income with proper documentation, but projected income is used for new acquisitions.

Q4: Does this calculation include other income sources?
A: No, this calculates only base rental income. Additional income (parking, laundry, etc.) would be calculated separately.

Q5: Is this calculation used for all property types?
A: This is standard for 1-4 unit properties. Multifamily properties may use different underwriting standards.