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APOD - How to Construct an Annual Property Operating Data Statement

The APOD (an acronym for "Annual Property Operating Data") is one of the most popular reports in real estate investing because it gives the real estate analyst a quick evaluation of property performance for the first year of ownership. In fact, it would be surprising not to encounter an APOD in the pursuit of real estate investment property because of its popularity.

In daily life, the Annual Property Operating Data essentially serves as the real estate equivalent of an annual income and expense statement, but more in the capacity of a "snapshot" of a property's income and expenses.

Characteristics

Projects property performance for the first year of ownership only

Ignores tax shelter consideration

The bottom line is cash flow before tax (CFBT), not cash flow after tax (CFAT)

Reveals income, operating expenses, net operating income, debt service, and cash flow concisely and therefore serves investors well as a good "first-glimpse" of the investment opportunity

A well-constructed APOD is best for comprehension, obviously, and the clearer annual property operating data is presented the easier the determination of property performance. In truth, however, the emphasis is on correct numbers, not style. Here's the procedure.

Show the Gross Scheduled Income (GSI) This is the income derived from rents and should represent the annual sum of all rents as if the units were 100% occupied. Include an annual rent even for vacant units; you can use any rent you like (perhaps market rent) just as long as it is realistic.

Show an amount for vacancy and credit loss Deduct this amount from GSI to compute the Effective Gross Income (or EGI).

Show the income generated from other sources (if any) Include things such as laundry income, rents from storage units or garages (if any) and add the total to EGI to compute Gross Operating Income (GOI).

Show the individual operating expenses and total Include expenses required to run the property such as property taxes, property insurance, utilities, trash, repairs and maintenance, property management, advertising, landscaping, and so on. Do not include debt service. Compute a total and label it Annual Operating Expenses.

Deduct the annual debt service (mortgage payment) from NOI This computes the investment property's bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).

Deduct the annual debt service (mortgage payment) from NOI This computes the investment property's bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).

Format of the Annual Property Operating Data statement

Okay, let's consider the entire list from top to bottom so you can see a typical format used in an annual property operating data:

  Gross Scheduled Income (GSI)

  - Vacancy Allowance

  = Effective Gross Income (EGI)

  + Other Income

  = Gross Operating Income (GOI)

  - Operating Expenses

  = Net Operating Income (NOI)

  - Debt Service

  = Cash Flow Before Tax (CFBT)

Special Features

As stated earlier, an APOD is more about substance (accurate financial data) than it is about style and panache. Nonetheless, annual property operating data that also includes computations for cap rate, gross rent multiplier, price per square foot, and cash on cash return are help. Yes, you can exclude the extra effort to include these computations, but it does create annual property operating data that will make you proud to present to customers and lenders.

Please feel free to preview a sample APOD on our website.

Recommended Resources:
ProAPOD Real Estate Investment Software: www.proapod.com

About the author: James R Kobzeff

James developed ProAPOD Real Estate Investment Software to make rental property cash flow, rates of return, and profitability analysis presentations possible in minutes. Discover all the benefits and reports at www.proapod.com

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Thursday, December 3, 2009