The APOD: What Makes It Such a Popular Real Estate Analysis Report?

jim kobzeff


March 22, 2017

The APOD is arguably one of the most popular real estate analysis reports investors, agents, brokers, and others engaged in real estate investing use during the investment decision process. At least this was my experience over the thirty years that I serviced rental income properties as a realtor.

Although the word APOD conjures up a wide-range of misleading images, the word itself is really just an acronym for Annual Property Operating Data. Namely, the report concerns the rental property's annual financial performance for the first year.

Popularity

Real estate analysts like the APOD primarily because it gives a one-page "snapshot" of the property's financial performance over the course of the first year. Many, in fact, regard the data as a mini income-and-expense-statement because it includes the projected annual income, operating expenses and cash flow.

Personally, I like the APOD. During my tenure as a realtor, it was the one report presented to real estate investors I was meeting to discuss a property for the first time, and in most cases it proved to provide enough data for the investor to decide whether or not there was enough profitability to pursue the investment further. So it "cut to the chase" and saved us both valuable time.

Structure

There are four sections of the investment's annual property operating data that essentially comprise an APOD. Rental income, operating expenses, debt service, and cash flow. It is structured as follows:

  • Gross Scheduled Income (GSI) - The sum of all annual rents as if the units were 100% occupied. Apply any rent you wish (perhaps a market rent) to units that are vacant. The idea is to show the potential when all units are rented and all rent collected.
  • Vacancy and Credit Loss - The potential rental income lost do to unoccupied units or nonpayment of rent by the tenants. I recommend nothing less than 5%.
  • Effective Gross Income (EGI) - This is gross scheduled income reduced by vacancy allowance and represents the amount of rental income you realistically expect the asset to generate.
  • Other Income - The amount of income (if any) you expect can be collected from other sources such as coin-operated washers and dryers, storage rooms, garages and so on.
  • Gross Operating Income (GOI) - The actual amount of income available for you to start paying the bills.
  • Operating Expenses - The expenses required to keep the rental property in service such as property taxes, property insurance, utilities, trash, repairs and maintenance, property management and so on.
  • Net Operating Income (NOI) - The amount of income remaining to service the debt once all the operating expenses are paid.
  • Debt Service - The annual sum total of all mortgage payments.
  • Cash Flow - The cash available after all cash inflows are reduced by all cash outflows. In this case it is cash flow before taxes (CFBT) which means it is money still subject to the owner's income tax liability.

Or,

  • Gross Scheduled Income
  • less Vacancy and Credit Loss
  • equals Effective Gross Income
  • plus Other Income
  • equals Gross Operating Income
  • less Operating Expenses
  • equals Net Operating Income
  • less Debt Service
  • equals Cash Flow

Screenshot

Preview sample...

Rule of Thumb

The APOD is not perfect because it only evaluates the first year of a rental property's annual property operating data and does not include consideration for tax shelter or time value of money. Nonetheless, when populated with accurate and realistic numbers it will provide real estate investors with a concise and easy-to-read report that will benefit initial real estate investment decisions.

So You Know

Both software solutions provided by ProAPOD—Agent 6 and Executive 10— create an APOD automatically based upon your data entries. Preview sample...

It should also be noted that both software solutions also create a one-page marketing package that includes the annual property operating data. Preview sample...

james kobzeff author

James Kobzeff
Jim is a former realtor with over thirty years real estate investment property experience. He is the developer of ProAPOD's real estate investment analysis software solutions.