How to Complete the Rate of Return Worksheet for Co-op Units

For most rental properties, the rate of return calculation is straightforward: you know your assessed value, your mortgage, and your income. Co-ops introduce two complications that make this harder.

Ownership structure. You do not own real property outright. You own shares of stock in a corporation (the co-op association), and those shares entitle you to occupy a specific unit under a proprietary lease. Because of this, the city cannot assess your unit individually — the real estate tax bill goes to the building as a whole.

Building-level debt. The co-op association itself may carry a mortgage on the building. That debt is shared across all shareholders. Your proportionate share of that building mortgage interest is a legitimate operating expense, and your proportionate share of the outstanding balance is a legitimate encumbrance that affects your equity calculation.

Both of these factors affect how you fill out the Rate of Return worksheet, and neither of them appears on any document you personally own. You will need to contact your co-op association or management company to get some of this information before you begin.

Gather the following before opening the worksheet.

From your own records:

• Your proprietary lease or share certificate (you need the number of shares you own)
• Your rental income for the 12-month reporting period
• Your out-of-pocket operating expenses for that same period (maintenance, repairs, fixed costs)
• Your personal mortgage on the unit, if applicable — specifically the interest paid during the reporting period and the outstanding principal balance at the end of the period

From the co-op association or management company:

• The total number of shares issued for the building
• The outstanding balance of any building-level or underlying mortgage
• The total mortgage interest paid by the association during your reporting period
• Your ownership percentage, if the association has already calculated it (some do, some don't)
• A breakdown of what your monthly carrying charge or maintenance fee covers

From DC Office of Tax and Revenue (OTR):

• The assessed value of the building. Search at mytax.dc.gov using the building's address. Because co-ops are taxed as a single parcel, you will find one assessment for the entire building — not your unit. In complexes with more than one building sharing an address or campus, confirm with your management company which tax record corresponds to your specific building before pulling the number.

Step 1: Set Your Reporting Period

DC RAD requires a reporting period of 12 consecutive months falling within the 15 months prior to registering your unit. Choose your beginning and ending month and year before you start filling in any numbers. All income and expense figures must fall within this same period.

Step 2: Calculate Your Ownership Percentage

Your ownership percentage is your shares divided by the total shares issued for the building, expressed as a decimal. You will use this percentage repeatedly throughout the calculation.

Formula: Your shares ÷ Total building shares = Ownership percentage

Example: 2,203 shares ÷ 1,000,000 total shares = 0.002203 (or 0.2203%)

If your management company gives you the percentage directly, confirm it matches this math. Some associations state the percentage in the proprietary lease; others only list the share count, which means you have to calculate it yourself. Do not assume the percentage in any document is correct without verifying the total share count.

Step 3: Calculate Your Assessed Value

Using the ownership percentage from Step 2, multiply the building's total assessed value by your ownership percentage. This is the figure DC RAD uses to represent the assessed value of your investment.

Formula: Building assessed value × Ownership percentage = Your assessed share

Example: $32,572,110 × 0.002203 = $71,756.36

Important note for multi-building complexes. If your co-op consists of more than one building on the same site, each building will have its own separate tax assessment and its own tax bill. Make sure you are using the assessed value for the specific building your unit is in — not a combined figure and not the other building's number. When in doubt, ask your management company to confirm which tax parcel corresponds to your unit before pulling any numbers from OTR.

Step 4: Calculate Gross Income

A. Total Scheduled Gross Income
Add together all income sources for the reporting period:

• Maximum rental income at 100% occupancy
• Parking income (if applicable)
• Any other fees charged above rent (late fees, appliance fees, etc.)
• Any commissions or fees (laundry, vending, etc.)
• Any other sources of income

If a line does not apply, enter zero. The system requires a value in every field.

B. Subtract Vacancy Losses
Deduct any rent that was uncollectable due to vacancy or non-payment during the period:

• Vacancy losses (rent lost due to vacant unit)
• Uncollected rents

Note: DC RAD caps deductible vacancy losses at 6% of maximum rental income. Any vacancy loss amount above that threshold cannot be deducted.

Gross Income = Total Scheduled Gross Income − Total Losses

Step 5: Calculate Operating Costs

DC RAD allows the following categories of operating expenses:

• Administrative costs (management fees, advertising, legal fees, telephone)
• Operating costs (trash collection, payroll, security, supplies)
• Fixed costs (insurance, licenses, permits)
• Maintenance and repair costs (painting, cleaning, repairs, service contracts)
• Property taxes
• Mortgage interest payments (interest only — not principal)

Important notes for co-op owners on two of these categories:

Property taxes. You do not receive a separate property tax bill — the tax is assessed on the building as a whole and paid by the association. Your proportionate share of that tax obligation is legitimately embedded in your monthly carrying charge. Do not attempt to deduct property taxes as a separate line item. Instead, include your full carrying charge under operating costs, which already captures your share of the building's taxes along with other building expenses.

Mortgage interest. DC RAD allows mortgage interest as an operating expense but explicitly excludes mortgage principal payments. For co-op owners this applies in two ways. First, if the association carries an underlying building mortgage, your proportionate share of the interest paid by the association during the reporting period is deductible. Second, if you carry a personal mortgage on your shares, only the interest portion of your payments during the reporting period is deductible — not the principal.

Critical warning on double-counting. Your monthly carrying charge already includes your proportionate share of the building's mortgage interest and property taxes. If you include your full carrying charge as an operating expense and then also separately add your proportionate share of the association's mortgage interest, you will be counting that interest twice. In most cases, including your full carrying charge is the simpler and more complete approach, provided you do not then add mortgage interest or property taxes as separate line items. If your carrying charge breakdown is unclear, ask your management company for an itemized statement before completing this section.

What DC RAD does not allow as operating expenses:

• Mortgage principal payments
• Depreciation expenses
• Membership fees or political contributions
• Legal fees for defending against housing regulation violations
• Maintenance costs reimbursed by insurance, a tenant, or court order
• Management fees exceeding 6% of maximum rental income
• Vacancy losses exceeding 6% of maximum rental income
• Expenses paid directly by the tenant

Total Operating Costs = Sum of all allowable expenses above

Step 6: Calculate Net Income

Formula: Gross Income − Total Operating Costs = Net Income

Step 7: Calculate Equity

This step uses the outstanding mortgage balance — not the interest paid. This is an important distinction from Step 5, where you used interest only.

Your equity is your assessed share minus the total of all encumbrances on the unit. For co-op owners, encumbrances typically come from two sources that must be calculated and combined:

Building mortgage share:
Outstanding building mortgage balance × Ownership percentage = Your share of building mortgage

Personal mortgage balance:
The full outstanding principal balance of any personal mortgage you carry on the unit.

Total encumbrances = Building mortgage share + Personal mortgage balance

Formula: Assessed Share − Total Encumbrances = Equity

Example:

• Assessed share: $71,756.36
• Building mortgage share: $18,000.00 (hypothetical)
• Personal mortgage balance: $21,866.00
• Total encumbrances: $39,866.00
• Equity: $71,756.36 − $39,866.00 = $31,890.36

If the building carries no mortgage, the building mortgage share is zero. Include only your personal mortgage balance if applicable.

Step 8: Calculate the Rate of Return

Formula: (Net Income ÷ Equity) × 100 = Rate of Return %

Example: ($9,345 ÷ $49,890.36) × 100 = 18.73%

If your rate of return comes out higher than you expected — sometimes dramatically higher — this is common for co-op owners and here is why.

DC RAD's formula uses the city's assessed value of your proportionate share of the building as the basis for the equity calculation. For a standard rental property, that assessed value is reasonably close to market value. For a co-op, the city assesses the entire building as a single parcel and cannot break it down by unit. Your share of that building assessment will almost always be significantly lower than what your unit is actually worth on the open market.

The result is an equity figure that is artificially low, which in turn makes the rate of return look artificially high. This is not a math error — it is a structural limitation of how DC taxes co-op buildings, and it affects every co-op owner who goes through this calculation.

Why this matters to you as a landlord. DC rent control allows you to petition for a hardship rent increase if your rate of return falls below a certain threshold. A rate of return that looks high on paper — even if it does not reflect the economic reality of your investment — will make it very difficult to claim hardship if you ever need to justify a larger rent increase in the future. This is worth keeping in mind as you manage rents over time. If this is a concern, consult with an attorney familiar with DC rent control law before making decisions about future rent increases.

If this is the first time you are renting your unit, you will not have 12 months of actual income and expense history to draw from. That is okay — DC RAD allows you to complete the Rate of Return worksheet using projected figures based on your anticipated first year of rental activity.

Here is how to approach each section when working from projections rather than actual numbers.

Reporting Period
Choose a 12-month period starting from the date you anticipate your first tenant moving in. This does not have to be exact — use your best estimate of when the unit will be occupied.

Gross Income
Base your income figures on 100% occupancy for the full 12-month period using the rent you intend to charge. If you plan to offer a parking space, include that income as well. Since you have no vacancy history, you may enter zero for vacancy losses — you are projecting a fully occupied unit for the year.

Operating Costs
Some of your expenses will be known fixed amounts. Others will require your best estimate. Here is how to approach each category:

• Mortgage interest — use your most recent mortgage statement to calculate the approximate interest portion of your annual payments.
• Co-op carrying charge — include your full monthly carrying charge multiplied by 12. As noted above, this already covers property taxes, building mortgage interest, and building operating costs, so do not add those separately.
• Insurance — use your current annual premium.
• Licenses and permits — include the cost of your basic business license and any other permits required to rent the unit.
• Management fees — if you plan to use a property manager, include their fee. If you are self-managing, this is zero.
• Maintenance and repairs — this is the most difficult category to project if you have no rental history. Use your best estimate based on the age and condition of the unit. A commonly used benchmark is to budget between 1% and 2% of your assessed share annually for maintenance, though your actual costs may vary. Enter your best good-faith estimate.

For any line item that does not apply to your situation, enter zero. The system requires a value in every field.

A Note on Accuracy
Because these are projections, your actual rate of return in your first year of renting may differ from what you report on this worksheet. Do your best to make your estimates as realistic as possible. Significantly overstating income or understating expenses could create complications down the road if your actual figures differ materially from what was reported.

Additional Questions
If you have questions about how to complete the Rate of Return worksheet that go beyond what is covered in this article, DC RAD can provide technical guidance. Contact them directly by emailing dhcd@dc.gov or calling (202) 442-9505.

When you contact your management company, ask for the following:

• Total number of shares issued for the building
• Your share count (if not already on your proprietary lease or certificate)
• Your ownership percentage (if the association has it calculated)
• The outstanding balance of any underlying or building-level mortgage
• The total mortgage interest paid by the association during your reporting period
• Confirmation of which DC tax parcel corresponds to your building (critical in multi-building complexes)
• A breakdown of what your monthly carrying charge covers

Sample request you can send to your management company:

I am completing the DC Rent Registry Rate of Return worksheet for my unit and need the following information: the total number of shares issued for the building, the outstanding balance of any underlying building mortgage, the total mortgage interest paid by the association for the period of [start date] through [end date], and a breakdown of what my monthly carrying charge covers. Please also confirm which DC tax parcel number corresponds to my building. Thank you.