P&L Report Including Vacancy and Loss to Lease?

Question

I wanted to see if anyone's property management software provides the option to run a Profit & Loss/Income Statement that shows the breakout from Potential Gross Income to Effective Gross Income, including vacancy, loss to lease, etc...the type of report you typically see on offering memorandums. We are currently using Buildium, and it doesn't appear to have the functionality. I can only run the report based on the cash method or accrual method for what was charged. So no "top line" potential gross income, just effective gross income. We are considering converting to AppFolio or other more robust software that are more tailored to larger portfolios, but haven't been able to find if/which software companies provide this. I'd love to hear from users of other software to see if they provide this, or other advantages they've seen with their software over Buildium. Thanks for the help!

Mike Dymski · Answer

I invoice (not to the resident) based on gross potential rent and have an invoice credit for loss to lease (puts it on the P&L). Collected rent gets applied to the invoice...and any remaining invoice balance during resident transitions goes to vacancy loss (apply a manual credit to the invoice...puts it on the P&L).

This is done in Xero, which will not be a property management tool, but maybe the process can be replicated in Buildium.

Ryan Swan · Answer

@Coleman Nelson I've always wondered why Buildium doesn't have a simple stat or report that shows you a breakdown of vacancy numbers by property or portfolio. It would be so simple to calculate 1) the # days vacant  2) show this as a percentage and 3) calculate the lost potential income as a dollar figure based on actual rents. It boggles the mind that they don't have any feature like this. I often wonder if the guys behind Buildium have ever used it themselves....

Mike Dymski · Answer

Hey Coleman.  I ran into the same problem as you.  I want vacancy and loss to lease on my P&L because they are my largest costs and it helps me manage my 3rd party manager.  It's also very helpful for lender reporting when re-positioning properties.

The bookkeeping posts on BP are one of the worst subject matters covered on this site. It's largely due to the fact that QB sucks for property management and Buildium and AppFolio suck at bookkeeping. In addition, QB does not allow an automated feed from the two management systems (which is why I use Xero); so, duplicate work would be required.

I believe a lot apartment investors and management companies use Yardi. It may have loss to lease and vacancy functionality built in (or handled as I have described above). I see loss to lease and vacancy on Yardi P&Ls all the time when looking at offering materials for apartment communities.

Coleman Nelson · Answer

@Mark Trebor in our portfolio, we have a mix of SFRs, small multi-families, and apartment communities, and our strategy is a little different because our objectives vary by asset class. In general, for the SFRs and small multi-families, we don't push rents as strongly as they are generally held for cash flow and we would like to have longer-term residents to reduce turnovers. For our larger properties, we are looking to reposition the property through renovations and rent increases, with a short-term goal of refinance and long-term goal of a sale. For these, we are willing to try to push rents more early on with the risk of longer turnovers, with the reward of increased NOI and property value as a result of the higher gross income once the property is stabilized and ready for the refinance. So we have to balance maintaining cash flow while increasing the overall property value.

Mark Trebor · Answer

Have you found people to be persuaded to be engaged with your company based on potential gross income numbers?  I feel like when I look at a property and somebody starts telling me about the "potential" this property has I get turned off and my B.S. meter kicks in.  Are you using this information for some other purpose?

Gita Faust · Answer

@Coleman Nelson Yes you can in QuickBooks - but before I say 100% can you send me your sample report, what you are looking for?

Gita Faust

Mark Trebor · Answer

@Coleman Nelson - OK that sounds good, having more information is always a good thing.  What vacancy level do you consider worthy of raising rents at?  I have a different yet good problem, in the past 11 years across 18 houses I have only had one house vacant for a 3 month period.  Otherwise I have been 100% full.  I always wonder how high I could raise rent but never really know for sure what metric to use.  Right now I rely on other landlords in the area and monitor their properties, we keep our houses nicer and rents about $50 less so that we don't have to deal with vacant houses.  Its a simple plan but maybe not the most financially responsible.  Its a college town so houses rent fast and we have a known reputation for keeping good houses and being decent and flexible with the tenants.

Coleman Nelson · Answer

Thanks @Mike Dymski. Yeah, I'm thinking I'll have to either do some extra accounting in the system, or manually track them and add it to our monthly reports in Excel.@Mark Trebor, for now, this is strictly for our internal reporting process to help us visually see each month how far off we are from our potential, and why we are off. So the Gross Potential Income would be the current market rate for each type of unit, then the effective income is what we are actually bringing in. We want to be able to track whether we need to push rents up to market faster because we have low vacancy and high loss to lease, or because we are pushing rents to market, it's creating more vacancy. Just trying to have as much information as possible to make better business decisions.

P&L Report Including Vacancy and Loss to Lease?

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