Acceptable Accounts Ratio
Positive trade lines divided by (positive trade lines + negative trade lines) = acceptable accounts ratio; acceptable accounts ration is a % of positive trade lines to all trade lines and is set as a threshold by a company. Positive trade lines are accounts that don't have negative information (such as late payments)
| Term | Definition |
|---|---|
Acceptable Accounts Ratio | Positive trade lines divided by (positive trade lines + negative trade lines) = acceptable accounts ratio; acceptable accounts ration is a % of positive trade lines to all trade lines and is set as a threshold by a company. Positive trade lines are accounts that don't have negative information (such as late payments) |
Accrual Accounting | Records all income and expenses in the period they were earned or incurred, regardless of when the income was received or expenses were paid |
Amount of Rent Increase | New renewal rent - previous lease rent = amount of rental increase |
Annualization | YTD total expenses or income divided by number of months reported multiplied by 12. The process of converting YTD actual expense or income to an annual estimate |
Average Effective Rent | TRR divided by units occupied; calculates the property average rent per presently occupied units at lease rates |
Bad Debt | Uncollected rental income due to non-payment of rent |
Bonus Value Conversion to Hourly Rate | Total bonus for the period divided by hours in the period = bonus value per hour; converts nondiscretionary bonus or commission values to an hourly rate for adding to the regular rate for overtime |
Breakeven Occupancy Ratio | (OE + DS + RR) divided by EGI; calculates the occupancy needed to pay all operating expenses, debt service, and any replacement reserves |
Breakeven Rent Per SQFT | (OE + DS + RR) divided by total property sqft; calculates the cost per sqft to pay all operating expenses, debt service, and any replacement reserves |
Capital Expense (CE) | Costs for large improvements like appliances, HVAC equipment, roofing, etc. |
Capitalization Rate (CAP RATE) | NOI divided by purchase price or value; a rate of return that reflects the investor's desired ROI. The cap rate may be determined in three ways - NOI/CAP RATE=VALUE, NOI/VALUE=CAP RATE, VALUE*CAP RATE=NOI |
Cash Accounting | Records all income and expenses when they are actually received or paid |
Cash Flow (CF) | GMR - LtL=GPR - (Vacancy + Bad Debt + Concessions + Non-Revenue Units) = TRR + OI= EGI; EGI - OE = NOI - DS - CE - RR = CF; the amount remaining after all sources of income are collected and all property operating expenses, including capital expenditures and/or replacement reserves and debt service are paid |
Cash on Cash Return | Cash flow divided by down payment (or initial equity); measures the amount of cash earned aginast the original cash invested |
Cost of Lead | Market source spend per period divided by leads per period; cost per lead is typically the average cost of each lead generated and is calculated by taking marketing spend and dividing it by the number of leads generated |
Cost of Lease to Traffic | Market source spend per period divided by leases per period; cost per lease is typically the average cost of each lease signed and is calculated by taking marketing spend and dividing it by the number of leases signed |
Debt to Income Ratio | Total amount of all debts divided by annual income; this measure the entire amount of debt already outstanding against the annual income to meet a property standard for approval when completing a lease application |
Debt Service (DS) | The loan or mortgage payment; covers the interest on and retirement of an outstanding principal on a mortgage loan |
Economic Occupancy (TRR/GPR) | Indicates what percentage of the rental revenue that a property could be taking in is actually being realized |
Effective Gross Income (EGI) | GMR - LtL = GPR - (Vacancy + bad debt + concessions + non-revenue units) = TRR divided by OI = EGI; total revenue for the property |
Effective Market Rent | (monthly market rent x number of months in lease - total concessions) divided by number of months in lease; identifies the average rent per unit less any concession value |
Extrapolation | Use of projections into the future that presume a continuation of known data to plan future response |
Gross Potential Rent (GPR) | Occupied units x average leased rent divided by vacant units x average market rent |
Gross Market Rent (GMR) | Total units x market rent |
Housing Value Conversion to Hourly Rate | Total free of discounted housing value for the period divided by the hours in the period; converts eligible discounted or free staff housing value to an hourly rate for adding to the regular rate for overtime |
Leased Percentage | Total units leased divided by total units; the portion or ration of total units that are covered by a lease |
Leased Units | Total units - vacant units - units on NTV divided by vacant units preleased divided by units on NTV preleased; identifies the total number of units covered by active leases as well as future leases; reflects occupancy trend |
Net Effective Rent | (Market rent x number of months in lease) - total concessions divided by number of months in lease; the amount of rent actually collected per the lease |
Net Operating Income (NOI) | EGI - OE = NOI; the total revenue that remains after all operating expenses but before mortgage debt service and capital expenditures or replace reserve payments are deducted |
Operating Expense (OE) | The total expenses, fixed and variable, to operate the property; does not include capital items, reserves, or debt service |
Operating Expense Ratio (OER) | OE divided by EGI; the percentage of all revenue used to pay operating expenses |
Percent Renewal Increase | Amount of increase divided by previous leased rent; measures the amount of the increase as a portion of the old or previous rent |
Property Valuation | The process of determining the value of a property. The three most often used formulas as Cost Approach, Market Comparison, and Income Approach |
Rent to Income Ratio | Monthly income divided by monthly rent; rent to income ratio is calculated by dividing monthly rent by monthly income and must meet a property standard such as income needing to be 3 times the rent |
Replacement Reserve (RR) | May be included in capital expenditures; the account used to set aside money for anticipated future expenses or large projects |
Return on Investment (ROI) | Return divided by investment; the benefit to the investor resulting from their investment |
Total Rent Revenue (TRR) | GMR - LtL = GPR - (Vacancy + bad debt + concessions + non-revenue units) = TRR; total rent and only rent collected, also known as net rental income |
Turnover Ratio | Total number of move outs divided by total number of units |