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APOD - Annual Property Operating Data
An APOD (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. It would be surprising, in fact, not to encounter an APOD in the pursuit of real estate investment property because of its popularity.
APOD, an acronym for "Annual Property Operating Data", basically is a report that serves as the real estate equivalent of an annual income and expense statement; yet is more of a "snapshot" of a property’s annual property operating data. Bear in mind that an APOD only projects property performance during the first year of ownership.
Moreover, an APOD ignores tax shelter consideration. The bottom line on annual property operating data is cash flow before tax (CFBT), not cash flow after tax (CFAT). Nonetheless, because it does reveal income, operating expenses, net operating income, debt service, and cash flow concisely, an APOD does serve investors well as a good "first-glimpse" of the investment opportunity.
A well-constructed APOD is best for comprehension. Obviously, 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. Though it may tarnish your image, you can in fact construct an APOD on a napkin as long as the numbers are meaningful.
Here is the procedure to construct an APOD; remember to include annual property operating data, not monthly amounts.
1. Show the income derived from rents. This is known as Gross Scheduled Income (or GSI), and should represent the sum of all annual rents as if the units were 100% occupied. In other words, include an annual rent even for vacant units. In this case, you can use any rent you like (perhaps a market rent) just as long as it is realistic.
2. Show an amount for vacancy and credit loss and deduct it from the gross scheduled income to compute Effective Gross Income (or EGI).
3. Show the income generated from other sources (if any) such as laundry income and add it to EGI to compute Gross Operating Income (or GOI).
4. Show the operating expenses such as property taxes, property insurance, utilities, trash, repairs and maintenance, property management, advertising, landscaping, and so on. Do not include debt service. Compute and label the total Annual Operating Expenses.
5. Deduct Annual Operating Expenses from GOI to compute Net Operating Income (NOI).
6. Deduct the annual debt service (mortgage payment) from NOI to compute Cash Flow Before Taxes (CFBT).
For good measure, you might want to add a computation for cap rate, gross rent multiplier, and cash on cash return. This is not necessary, but it does create an APOD that will make you proud to present to customers and lenders.
ProAPOD® Real Estate Investment Software creates the annual property operating data automatically as you enter the property data for any rental income property, of any size. The APOD is recalculated automatically and in real time whenever data is changed so the APOD always includes the most current data and returns.
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