If you spend any time in the condo rental world, you quickly become familiar with the terms “rental income,” “gross rental income,” and “annual rental income.” These terms and the numbers they represent are often used as a measurement of success for investment property. While it’s true these numbers are very important in calculating investment value and income potential, they’re helpful only if reported accurately and in context.

Most legitimate rental companies do a good job of reporting revenue history on a particular property. Modern reservation software makes it easy to pull this information. But, occasionally, these numbers are not reported correctly. Misrepresentation occurs when reported income includes the following: 

• Cleaning Fees
• Lodging Taxes
• Other Fees

In each of these situations, the rental income number can be inflated by 20-30%.

A nice, updated, two-bedroom condo might generate $38,000-$40,000 per year. However, when the reported rental income includes cleaning fees and lodging taxes, that “income” might be mistakenly reported at $48,000-$50,000. The owner of that property will never see the taxes or cleaning fees, so it’s unrealistic to incorporate them.

Owners who manage their own properties and MLS listings are the two sources that most frequently post exaggerated rental income numbers. So, the next time you see a figure that seems too good to be true, ask these questions to get to a reliable number:

• Is this a projection or an actual rental history?
• Does this include cleaning fees, lodging taxes, or anything other than the rental income?
• How much did owner usage impact the stats?
• Has the condo been updated recently? (Photos might help explain unusually high or low numbers.)
• Most importantly, what was the net income to the owner after the management company’s fees and commissions?