Course 3 Deriving Multifamily Income and Expenses Flashcards
What are the components to the operating statement?
Residential income,
commercial income,
other/ancillary income,
potential gross income,
vacancy/collection loss,
effective gross income,
fixed expenses,
variable expenses,
replacement reserves,
net operating income
What is not included on the operating statement?
Security Deposits,
Depreciation
How are management fees determined?
Usually based on a percentage of either PGI or EGI income
What is Physical Vacancy Rate?
The vacancy rate describes the percentage of all units that are unoccupied and do not produce income.
Number of unoccupied units / Total number of units = Physical Vacancy Rate
What is Economic Occupancy/Vacancy Rate?
Economic vacancy considers the loss from physical vacancy as well as the loss from occupied units that are underperforming. This includes model units, staff units, vacant units, discounted units, concessions, and downtime during turnover.
Net Effective Income / Gross Potential Rental Income = Economic Occupancy rate
100 – Economic Occupancy Rate = Economic Vacancy Rate
What is Breakeven Occupancy?
Breakeven measures the minimum occupancy of the property that will generate enough cash flow to pay all property expenses and debt service.
Operating Expenses + Debt Service (including MIP) / Potential Gross Income = Breakeven Occupancy
What is Operating Expense Ratio?
The operating expense ratios measures the cost to operate a property compared to the income the property brings in.
Operating Expenses / Effective Gross Income = Operating Expense Ratio
What is Debt Service Coverage Ratio (DSCR)?
The debt service coverage ratio measures the amount of net operating income available to meet the annual debt service payment obligation, Including MIP.
Net Operating Income / Annual Debt Service (includes MIP) = Debt Service Coverage Ratio
What is Other Income Percentage?
Other income percentage measures a property’s reliance on other income.
Other Income / Gross Potential Residential Income = Other Income Percentage
What is Operating Expense Per Unit Per Annum (PUPA)?
The amount of operating expenses per unit.
Total Operating Expenses / Total number of units = Operating Expenses per Unit per Annum
