Critique my APOD

3 Replies

So I'm building a pro-forma APOD on an 18-unit apartment building.

How does this look? Other Income includes a service charge of 50/unit as well as pet fees and late fees for part of the units, but I'm really trying to get the Expenses down to a T.

Maybe I'm missing it in there, but where is general maintenance like painting, carpet, plumbing etc? My building is older and hadn't been maintained well but I'm spending 10-20% of gross rents on that depending on how many units turn-over.

@Thierry Van Roy

In addition to @Jeff Kehl 's comment about maintenance, here are a couple more that might apply:

What about other utility costs such as cable TV & internet?

Are any utilities paid by the owner and reimbursed by the tenants? If so I would add a separate income line for that.

It looks like Property Management is entered at about 7% and change, we typically find that with an outside property management company, when all their ancillary charges are included the cost runs between 9 to 10%.

On maintenance costs we like to separate the unit turn costs from regular maintenance to track both. Unit turn costs typically include the unit interior cleaning, painting and carpet cleaning/replacement.

Regarding the vacancy rate at 8%, have you checked the rent rolls and leases to see how many units actually turnover each year? And how long each turn takes on average? From a physical vacancy standpoint, an 8.333% vacancy rate implies that all units turn over every year, if the complete turn (old tenant move out to new tenant move in, including cleaning/repair/marketing time) takes 1 month. At a flat 8%

the average turnover would be just over 17 units per year. If the turn time was two months at 8% vacancy that would imply 8-9 units turned over on average every year. We built the above calculator to test vacancy rates provided against actual unit turns for use in our due diligence. With it we can use the upper section to calculate what a given vacancy rate means in terms of turnover and the lower section to build a vacancy rate bottom up by starting with the number of turns and the turn time. If you want a copy (in .xls) message me with Dealizer Vacancy Calculator in the subject line.

One final comment on the APOD itself (and maybe it already shows on your worksheet but not on the display), we like to have our assumption for each number displayed right with the calculated number. For instance display the 8% used for vacancy and the number used to generate property management costs, etc.

Good hunting-

It's a new building that I first need to get finished, so that'll mean a lot less maintenance for the first couple of years. Though you are right, I should include at least some percentage outside of CapEx.

This also means I don't have any history to go over, by the way. Though as for turnover, it's in a triple-A location at market prices, so the things will rent easily.

Propert Management I checked with the company, there's a discount involved because of the size (and because of me).

As for the television & phone utility cost, that's entirely for the telecom company and the tenants can choose their own service provider.

Though thank you both for the input, and for the link to the very interesting Ashworth & Partners site!

PS
I use Real Data Software to analyze my deals, so I indeed have a breakdown per unit.

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