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Financial Management

CAM Financial Management

CAM impact property financials PALEBV= Analyze income Minimize Financial Loss Manage Expenses Monitor Budgets Performance Measurement Property Valuation
Generate and control income Rent Parking Cable, Internet Clubhouse rental Fees, late, pet Laundry vending
Control Expenses Maintenance Advertising Taxes Utilities Insurance Salaries/ Personnel
GPR Gross Potential Rent- Rent collected at 100% occupied and market rent
GPI Gross Potential Income- occupied units at existing lease rate plus vacant at market
Income statement all revenue and expenses current to budget and identifies variances
Cash flow or operating statement amount of $ after income collected and expenses paid
VAC vacancy loss due to concession, collection loss, nonrevenue units, vacant units
NRI or Total Rent Revenue Net Rental Income GPR - VAC= TRR
OI Other Income laundry, vending, parking, late fees, pet fees,
EGI Effective Gross Income GPR - VAC + OI= EGI
OE Operating Expenses expenses, fixed and variable
NOI Net Operating Income GPR-VAC+OI=EGI- OE= NOI
OE ratio Operating Expenses Ratio OE/EGI(GPR-VAC+OI)= OE ratio
CE Capital Expenses non-recurring appliance replacement, reno, roof, add life to property
RR Replacement Reserve $ set aside each month future expenses and large projects
DS Debt Services mortgage/ loan (principal and interest) sometimes RR taxes insurance
Cash Flow money remaining after income and expenses GPR-VAC+OI=EGI EGI-OE=NOI NOI-RR-CE-DS=CF
Break Even Occupancy % needed to cover OE and DS
Break Even Rent per square foot rent per sq ft pay OE+DS (OE+DS+RR)/TOTAL SQ FT=BREAK EVEN SQ FT
General Ledger group of accounts offsetting debits and credits debits increase assets and decrease liabilities and equity
chart of accounts sub accounts GL codes
Income Statement (Profit and Loss) measures performance compares accounting to budget shows variances
Minimize financial loss VAC Non-revenue units- employee units or down units Concessions and Discounts Bad Debt
Manage expenses Fixed- non-controllable, taxes, depreciation, insurance Variable- vary w/ occupancy- electric Cap Ex Debt Service
Fixed rate loan 20- 30 yrs same pay amortization- % to Int. % to Princ
Variable rate loan ARM Adjustable Rate Mort. based on financial index- interest rate changes
Balloon fixed rate for _ years must be paid in full after that date
Bullet P & I paid in 1 lump sum at a specified time. New construction and rehab when no income.
value and cap rate ratio NOI / Cap= Value NOI / value= Cap CAp x Value = NOI
Economic Occupancy Formula TRR / GPR= %
Effective Market Rent market rent x # months in lease- concessions / # months in lease
Leasing exposures # vac + # of on notice - # preleased= total exposure in units total exposure in units / # of units= exposure %
Operating Expenses Ratio OE / EGI - OE ratio %
Projected traffic required to meet leasing goals total # of leases / avg. closing %= projected traffice required to meet leasing goals
Lease up budget w/ out history projections- less precise pay attention to: activities & costs to attract residents, sign leases, generate income. absorption and timing of move ins and timing of expenses adjust forecasts but not budget
Rehab/ reno budget larger CAp Ex and labor more flexible depending on subs and schedules and supplies may have 0 income month to years
operating budget varying expenses- month to month detailed goals based on owners investment goals deadlines dictated by property management agreement
Managing budgets 1. Analyze #'s 2. Analyze variances 3. Explain variances - % off and then affects on NOI 4. Recommend action
Annualization vs. extrapolation Annualization- numbers and averages extrapolation- use numbers to make educated predictions
ROI NOI / initial investment
cash on cash return cash flow / initial investment
Property valuation approaches cost approach- fuly replace sales comps- single fam income cap- NOI / cap rate= value
4 attributes affecting value supply and deman substitution- price to aquire similar highest and best use external influences- location
Created by: MelCrab