Schedule E is the IRS form where individual taxpayers report rental real estate income and expenses. Core diligence document for LA multifamily transactions — buyers reconcile operating statements against Schedule E.
Schedule E reports: gross rents, operating expenses by category (insurance, taxes, utilities, maintenance, management, etc.), depreciation, and net rental income or loss. Flows to Form 1040 as part of the owner's total tax return.
LA multifamily buyer due diligence typically includes 3 years of Schedule E to verify the seller's operating statement. Discrepancies raise credibility concerns. Clean reconciliation — where Schedule E ties to operating statements with documented adjustments — supports smoother diligence and tighter closing cap rates.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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