Quick answer: a Central Arkansas rental P&L tells you in 5 minutes whether the property is actually making money, or just looking like it on the bank statement. The lines that matter most are effective gross income, controllable operating expenses, NOI, and capital reserves. The ones that mislead are cash flow and “profit” without depreciation, vacancy, or reserves accounted for.
This is how we read a P&L across 150+ Central Arkansas rental doors, and how owners should read the statements coming from any property manager.
The Six-Layer Income Statement
Layer 1: Gross Potential Rent (GPR)
The rent the property would generate at 100% occupancy with current lease rates. NOT what you collected, what you would collect if everything was full and paid.
Layer 2: Vacancy and Credit Loss
Subtract: lost rent from vacant days + unpaid rent that won’t be collected. Industry-standard assumption is 5%–8%. Our portfolio runs under 5%. If a P&L shows 0% vacancy, the numbers are stale or wrong.
Layer 3: Effective Gross Income (EGI)
GPR minus vacancy and credit loss. Plus any other income (laundry, application fees, late fees, pet rent). This is the real revenue number.
Layer 4: Operating Expenses
What it actually costs to keep the property running:
- Property management fee (8%–10% of collected rent, see our PM cost breakdown)
- Property taxes (~0.6%–0.9% of value in Central AR)
- Insurance (DP-3, see our AR rental insurance guide)
- Repairs and maintenance (3%–5% of EGI for stabilized SFR)
- Utilities (if landlord-paid)
- HOA fees
- Lawn / pest / pool
- Leasing commissions (annualized)
- Administrative
Layer 5: Net Operating Income (NOI)
EGI minus operating expenses. NOI is the property’s earning power independent of how it’s financed.
Cap rate = NOI ÷ purchase price.
Layer 6: Capital Reserves and Debt Service
Below NOI, account for capital reserves (5%–8% of EGI for roof, HVAC, water heater, big-ticket replacements). Then subtract mortgage payment (principal + interest). What’s left is true cash flow.
The Red Flags in a Rental P&L
0% vacancy assumed
Even a perfectly run portfolio has turnover. 0% is a model error, not a result.
Repairs and maintenance under 3% of EGI
Either the property is brand new or the manager is delaying deferred maintenance. Look at the trend, if R&M was $4,000 last year and $400 this year, something’s getting deferred.
No line for vacancy and turn costs
Turn costs ($1,500–$3,000 per turn) need to land somewhere. If they’re not on the P&L, they’re hiding in capex.
“Management fee” missing or rounded
Should be calculated as a percentage of collected rent, not a flat number. If the line is round, the math wasn’t done.
Insurance under $80/month per SFR
That’s a homeowner’s policy, not a DP-3. Coverage gaps will surface at claim time.
No reserves disclosure
If the P&L shows “net income” without reserves, it’s overstating true cash flow by $50–$200 per door per month.
The Operator P&L vs. the Marketing P&L
Listing brokers and wholesalers sometimes present pro formas designed to sell, not to inform. Differences to watch:
- “Market rent” higher than actual current rent
- Vacancy modeled at 3% when the area runs 8%
- R&M modeled at $50/month per SFR (real is $80–$150)
- Management modeled at 6% when local market is 8%–10%
- Property taxes assumed flat when reassessment is coming
- No leasing commission line
Underwrite from real operating numbers, not the seller’s spreadsheet.
Sample P&L: Little Rock SFR
| Line | Monthly | Annual |
|---|---|---|
| Gross Potential Rent | $1,450 | $17,400 |
| Vacancy & Credit Loss (5%) | ($72) | ($870) |
| Other Income | $25 | $300 |
| Effective Gross Income | $1,403 | $16,830 |
| Property Management (9%) | ($126) | ($1,515) |
| Property Taxes | ($90) | ($1,080) |
| Insurance | ($90) | ($1,080) |
| Repairs & Maintenance | ($65) | ($780) |
| Leasing Commission (annualized) | ($60) | ($720) |
| Admin & Other | ($15) | ($180) |
| Operating Expenses | ($446) | ($5,355) |
| Net Operating Income | $957 | $11,475 |
| Capital Reserves (6%) | ($84) | ($1,010) |
| NOI After Reserves | $873 | $10,465 |
| Debt Service (75% LTV, 30yr, 7.5%) | ($760) | ($9,120) |
| Cash Flow | $113 | $1,345 |
What This P&L Tells You
On a $145,000 purchase: 7.9% cap rate, modest cash-on-cash, room for appreciation, but cash flow is thin. A $50/month rent increase or a 1% rate reduction would dramatically change cash-on-cash. This is the actual underwriting math we walk every Central Arkansas rental through.
FAQ
What’s the difference between NOI and cash flow?
NOI is income after operating expenses, before debt service. Cash flow is what’s left after debt service and reserves.
What vacancy rate should I use to underwrite a Central Arkansas rental?
5%–8% for stabilized SFR; higher for student-driven or transient markets like parts of Conway.
How much should I reserve for capital expenses?
5%–8% of EGI is the operator standard. Higher on older properties, lower on new build.
What’s a good cap rate in Central Arkansas?
6.5%–8% on stabilized SFR; 7%–8.5% on duplexes; 8%–10%+ on value-add.
Why don’t most listing pro formas include reserves?
Because reserves reduce the marketed cash flow. Always add them back before underwriting.
Want a property manager who delivers a real P&L every month, not a check stub? Call Chase at 501-650-5137.
About the Operator
Chase Calhoun is the founder and principal of Chase Calhoun Real Estate, LLC, a vertically integrated Central Arkansas real estate, property management, construction, and investment company. The portfolio operates against documented benchmarks: 95%+ occupancy, sub-30 day vacant, sub-10 day turns across 150+ units. Reach Chase directly at 501-650-5137. Full bio · Operator profile · Operator results.
Markets we serve: Little Rock · North Little Rock · Sherwood · Conway · Benton · Bryant · Maumelle · Cabot · All Locations
Operator services: Property Management · Build-to-Rent · Real Estate Sales · Cash Offers · All Services
Thinking about handing this off to a pro?
If you own a rental in Central Arkansas and you would rather spend your time on the next deal than on midnight maintenance calls, we can help. Start with a free rental analysis to see what your property should rent for and how we would manage it. Learn more about our property management approach.
