How to Complete the Rate of Return Worksheet for Traditionally Owned Rental Properties

The Rate of Return worksheet is required as part of your DC Rent Registry filing if your property is subject to rent control. It measures the gain or loss on your rental property investment over a 12-month period, expressed as a percentage. DC RAD uses this figure to establish a baseline for your property. Understanding how to complete it accurately from the start will save you significant headaches down the road.

Gather the following before opening the worksheet.

From your own records:

• Your property's assessed value from DC Office of Tax and Revenue (OTR)
• Your rental income for the 12-month reporting period
• Your operating expenses for that same period (maintenance, repairs, insurance, management fees, etc.)
• Your mortgage statement(s) — specifically the total interest paid during the reporting period and the outstanding principal balance at the end of the period
• Records of any other encumbrances on the property (home equity loans, lines of credit secured by the property, etc.)

From DC Office of Tax and Revenue (OTR):

• The assessed value of your property. Search at mytax.dc.gov using your property address. For single-family homes, rowhouses, and individually deeded condominiums, you will find an assessment specific to your unit or property. Use this figure directly — no additional calculation is needed to determine your share.

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 property. 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: Note Your Assessed Value

Look up your property's assessed value at mytax.dc.gov. This is the figure the DC Office of Tax and Revenue has assigned to your property for the current tax year. You will use this number directly in the equity calculation in Step 6.

For properties with multiple units on a single deed — such as a rowhouse with an English basement apartment — the assessed value covers the entire property. You do not need to break it down by unit.

Step 3: 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 4: 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 on two of these categories:

Property taxes. Unlike co-op owners, you receive a property tax bill directly from DC OTR. The amount you paid during the reporting period is a straightforward deductible expense. Enter the actual amount paid — do not estimate.

Mortgage interest. DC RAD allows mortgage interest as an operating expense but explicitly excludes mortgage principal payments. Use only the interest portion of your mortgage payments during the reporting period. Your lender will provide an annual mortgage interest statement — typically a Form 1098 — that shows exactly how much interest you paid. If you have more than one loan secured by the property, include the interest from all of them.

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 5: Calculate Net Income

Formula: Gross Income − Total Operating Costs = Net Income

Step 6: Calculate Equity

This step uses the outstanding mortgage balance — not the interest paid. This is an important distinction from Step 4, where you used interest only.

Your equity is your assessed value minus the total of all encumbrances on the property. Encumbrances include any loans or liens secured by the property, such as:

• Your primary mortgage outstanding principal balance
• Any home equity loan or line of credit outstanding balance
• Any other liens or encumbrances recorded against the property

Formula: Assessed Value − Total Encumbrances = Equity

Example:

• Assessed value: $400,000
• Primary mortgage balance: $250,000
• Home equity loan balance: $25,000
• Total encumbrances: $275,000
• Equity: $400,000 − $275,000 = $125,000

If you own the property free and clear with no mortgage or other encumbrances, your equity equals your full assessed value.

Step 7: Calculate the Rate of Return

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

Example: ($10,000 ÷ $125,000) × 100 = 8%

The rate of return figure this worksheet produces tells DC RAD how your rental income compares to the value of your investment after accounting for debt. A few things worth understanding:

It is based on assessed value, not market value. DC OTR's assessed value may be higher or lower than what your property would actually sell for. This can affect your rate of return in either direction. If your property is assessed well below market value, your rate of return will look higher than it actually is in economic terms. If it is assessed above market value, the opposite is true.

It matters if you ever need a hardship increase. DC rent control allows you to petition for a hardship rent increase if your rate of return falls below a certain threshold. A higher rate of return on paper makes it harder to claim hardship, even if your actual investment returns tell a different story. If this is a concern, consult with an attorney familiar with DC rent control law before making decisions about future rent increases.

It is a snapshot, not a guarantee. The rate of return you report reflects one 12-month period. It will change as your assessed value, mortgage balance, income, and expenses change over time.

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. Your Form 1098 from the prior year is a good reference point if available.
• Property taxes — use your most recent DC OTR tax bill.
• 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 the property's assessed value 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.

Before you begin, make sure you have the following:

• DC OTR property assessment (mytax.dc.gov)
• Mortgage statement showing outstanding balance and interest paid during the reporting period
• Form 1098 from your lender (annual mortgage interest statement)
• Records of all rental income received during the reporting period
• Receipts or records for all operating expenses during the reporting period
• Records of any additional encumbrances (home equity loans, liens, etc.)