{"id":21642,"date":"2019-02-13T05:00:16","date_gmt":"2019-02-13T13:00:16","guid":{"rendered":"https:\/\/www.yardi.com\/blog\/?p=21642"},"modified":"2020-12-25T03:30:57","modified_gmt":"2020-12-25T11:30:57","slug":"reporting-made-easy","status":"publish","type":"post","link":"https:\/\/www.yardi.com\/blog\/reporting-made-easy\/","title":{"rendered":"Reporting Made Easy"},"content":{"rendered":"

As an owner, you wear many hats and have many strengths. If interpreting reports is not among your talents, you\u2019re not alone. Many leaders aren\u2019t getting the most out of team updates because they are not comfortable with the terms used on the reports. A brief refresher may do the trick!\"working-on-financial-real-estate-reports\"<\/p>\n

Below is a quick cheat sheet of nine common ratios that you will encounter and how to interpret them.<\/p>\n

    \n
  1. Capitalization Rate (Cap Rate)<\/strong> When you are just getting started with a property, cap rate comes in handy. The cap rate tells you the actual value of an investment beyond its appraisal value. To find the cap rate:<\/li>\n<\/ol>\n

    Cap rate\u00a0= sales price of a comparable income property\u00a0\u00f7 net operating income of comparable income property<\/p>\n

      \n
    1. Net Operating Income (NOI) <\/strong>NOI is also used to determine the value of a property. It uses data from the previous year to account for the loss of rental revenue due to vacancies, maintenance and other factors. To find the NOI:<\/li>\n<\/ol>\n

      Net operating income\u00a0= gross operating income \u2013 (operating expenses\u00a0\u00f7 gross income)<\/p>\n

        \n
      1. Market Value <\/strong>Your cap rate and net operating income can then help you to understand your market value. This will change over time based on several factors. To find market value:<\/li>\n<\/ol>\n

        Market value = net operating income \u00f7 capitalization rate<\/p>\n

          \n
        1. Vacancy Rate <\/strong>This is undoubtedly a figure that you will refer to often. The vacancy rate is the number of unoccupied units compared to the number of units available for rent. A lower number is better than a higher number. To find the vacancy rate:<\/li>\n<\/ol>\n

          Vacancy rate\u00a0= number of unoccupied units \u00f7\u00a0total number of units<\/p>\n

            \n
          1. Occupancy Rate <\/strong>Another common ratio used to understand the quantity of available units is occupancy rate. To find the occupancy rate:<\/li>\n<\/ol>\n

            Occupancy Rate <\/strong>= 100% \u2013 vacancy rate<\/p>\n

              \n
            1. Cash on Cash Return (CoC) <\/strong>While depreciation is most common, CoC may help you get a better idea of the lost value of a property. To find CoC:<\/li>\n<\/ol>\n

              Cash on cash return = (NOI – Debt – Income Tax Expense) \u00f7 Cash Invested<\/p>\n

                \n
              1. Depreciation<\/strong> Classic reporting will often include depreciation instead of CoC. Depreciation gives you an idea of the lost value of your property due to natural wear and tear. Depreciation is not often calculated annually. Instead, it is projected over a 27.5-year lifespan of the building.<\/li>\n<\/ol>\n

                Depreciation = (purchase price \u2013 land value) \u00f7 27.5<\/p>\n

                  \n
                1. Net Income Multiplier<\/strong> This ratio depicts the amount you paid for every dollar of net operating income generated by a property in a single year. Net income multiplier gives sellers and buyers an idea of what to expect from a transaction. To find net income multiplier:<\/li>\n<\/ol>\n

                  Net income multiplier = market value \u00f7 net operating income<\/p>\n

                    \n
                  1. Debt Coverage Ratio <\/strong>The debt coverage ratio gives you a better idea of how much income your property generates by removing the money needed to cover debt. You ultimately want a ratio greater than 1.0. To find debt coverage ratio:<\/li>\n<\/ol>\n

                    Debt coverage ratio = net operating income \u00f7 debt service<\/p>\n

                    Fortunately, you and your team don\u2019t have to crunch numbers on your own. Let your property management software do the heavy lifting for you. Explore property management solutions for small portfolios<\/a> as well as asset intelligence<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

                    As an owner, you wear many hats and have many strengths. If interpreting reports is not among your talents, you\u2019re not alone. Many leaders aren\u2019t getting the most out of team updates because they are not comfortable with the terms used on the reports. A brief refresher may do the trick! Below is a quick […]<\/p>\n","protected":false},"author":440,"featured_media":21643,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_s2mail":"yes","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[4],"tags":[2550,2634,2636,2635],"class_list":["post-21642","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-asset-intelligence","tag-cap-rate","tag-property-management-accounting","tag-reporting"],"acf":[],"yoast_head":"\nYardi Blog<\/title>\n<meta name=\"description\" content=\"As an owner, you wear many hats and have many strengths. If interpreting reports is not among your talents, you\u2019re not alone. 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