APOD is an acronym for “Annual Property Operating Data” and is one of the most popular reports used in real estate investing, mostly because it gives the real estate investors a quick evaluation of investment real estate for the first year of ownership.
Characteristics
- Projects annual performance for the first year of ownership only
- Acts as a “snapshot” of the property’s income and expenses
- 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
Construction
A well-constructed APOD with clear and concise data is best for comprehension, so it felt needful to share the data you want to include in this order.
- 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.
- Vacancy and credit loss – Deduct this amount from GSI to compute the Effective Gross Income (or EGI).
- 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).
- 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 annual operating expenses from GOI – This computes the all-important Net Operating Income (NOI).
- Deduct the annual debt service (loan payment) from NOI – This computes the investment property’s bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).
Special Features
In addition to the data listed above, an APOD that also includes computations for cap rate, gross rent multiplier, price per square foot, and cash on cash return are helpful when evaluating a particular investment opportunity. Besides, it’s impressive to your customers, colleagues, and lenders.
You can preview a sample APOD on our website at http://www.proapod.com/PDF/apod.pdf
