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Asset Management Performance Benchmarks
St. Louis CDC’s who are acting as asset managers can use these formulas to get a full picture of the health of their investment.
What Information Do You Need?
The Benchmarks
The nine primary performance benchmarks used to determine how a rental property is functioning are -
· Collection Rate
· Percentage Arrears Collected
· Occupancy Rate
· Economic Occupancy Rate
· Turnover Rate
· Make Ready Time
· Turnaround Time
· Change Over Time
· Work Order Percent Completed
The Basic Documents
In order to determine these benchmarks, the following documents are needed.
· Income Statement
· Balance Sheet
· Budget Comparison MTD and YTD
· Cash Flow Report
· Delinquency Reports for- *30 days *60 days *90 days
· Monthly Net Rental Income
· Total Monthly Operating Expenses (including monthly funded reserve accounts before debt service)
Collection Rate
Fundamental to the overall financial health of a project, the amount of rent collected each month is a critical performance indicator, and directly relates to the effectiveness of management’s collection efforts and policies.
· Information you will need to know:
o Actual Rent $s Taken in During the Month (of current receivables)
o Gross Potential Rent (GPR) for the Month
o Dollars Lost due to Vacancies for the Month
o Amount Collected on Past Due Amounts for the Month (arrears)
· Formula:
Total Actual Rent Dollars Collected – Amount Collected on Arrears
GPR – Vacancy Loss (net billed)
· Example: University Lofts has 300 units and a monthly GPR of $123,000. The Property Manager collected $115,000 during the month of August. Amount collected on arrears totaled $2,000. Another 15 units were vacant during the period for a total vacancy loss of $5,000.
Ø What is the collection rate?
Percentage Arrears Collected
Along with the Collection Rate calculation, it is good to know how much you have collected against arrearages or past due balances.
· Information you will need to know:
o Total Amount Past Due for the Month
o Amount Collected on Past Due Amounts (collected against arrears)
· Formula:
Amount Collected on Past Due Amounts
Total Amount Past Due for the Month
· Example: At the end of August the Controller reported that $84,000 had been collected at University Lofts. Of the $84,000, $2,500 was against the arrearages of $5,000.
Ø What percentage of arrears were collected?
Occupancy Rate
The monitoring of occupancy levels from month to month is a critical asset management activity. Changes in occupancy may reflect, among other things, the effectiveness of outreach efforts, wait list management, the timely turnaround of vacant units or the level of resident satisfaction. Any of these issues will ultimately affect the financial bottom line.
· Information you will need to know:
o # of Days in the Month
o # of Units
o Total Vacant Days for all Units
· Formula:
o First Calculate:
# of Days in the Month times the # of Units = Total # of Possible Days
Total # of Possible Days – Total Vacant Days (all units)
Total # of Possible Days
· Example: University Lofts has 40 units. Three units were vacant during September. 1B was vacant 20 days, 4C was vacant 15 days and 3A was vacant 13 days.
Ø What is the Occupancy Rate?
Economic Occupancy Rate
Economic Occupancy is a better means of assessing an apartment complex’s success than physical occupancy is. This is because an apartment complex can be completely full in terms of physical occupancy, yet still be losing revenue because tenants are not paying their rent. Ideally, the Economic Occupancy percentage should be close to or match the physical occupancy percentage.
· Information you will need to know:
o Amount of money each month collected from tenants
o Amount of money each month that actually could be collected
· Formula:
Rent Collected From Tenants
Amount of Rent Scheduled For Collection
· Example: University Lofts has 10 tenants who each are supposed to pay $800 per month, but only 8 of the tenants pay their rent.
Ø What is the Economic Occupancy?
Turnover Rate
The turnover rate measures how many tenants are moving in and out during the course of a month, and equally as important, per year. Generally, the higher the turnover, the more costs you have in cleaning and preparing the units and typically, the higher the vacancy losses.
· Information you will need to know:
o # of Move Outs Which Took Place During the Month
o # of Units
· Formula:
# of Move Outs Which Took Place During the Month
# of Units
· Example: University Lofts has 30 units. During the month, 5 tenants moved out and were replaced by 5 others.
Ø What is the Turnover Rate?
Make Ready Time
Make Ready Time is the amount of time it takes from the day a tenant vacates his unit until the day the unit is “ready” for a new tenant. The make ready time does not include lease up time after the unit is in move-in condition.
· Information you will need to know:
o Total Vacant Days From Vacancy to Move In Condition for Each Unit Finished
o # of Units Finished During the period
· Formula:
Total # of Days: Vacancy to Ready for all Finished Units
# of Units Finished During the Month
· Example: University Lofts has 32 units. Four of them were vacant during March and two were re-rented. The two rented were #1a and #6b. It took the maintenance crew 10 days to paint and repair #1a. It took 20 days on #6b. 4cwas a quick one, with only touch-up so they finished it in 6 days, but it did not get re-rented. The last, 5c, was still being repaired at the end of the month.
Ø What is the Make-Ready Time?
Turnaround Time
Vacant unit turnaround is the amount of time it takes from the day a tenant vacates his unit until the day a new tenant moves in. The turnaround time includes both Make Ready Time and the lease-up time.
· Information you will need to know:
o Total Vacant Days for All Units Re-rented
o # of Units Re-rented During the Month
· Formula:
Total # of Days all Re-rented Units Were Vacant
# of Units Re-rented During the Month
· Example: University Lofts has 45 units. Three of them were vacant during January and two were re-rented. The two rented were #4 and #18. #4 had been vacant 16 days, #18 had been vacant 28 days. The third unit had been vacant 5 days but was not re-rented by the end of the month.
Ø What is the Turn-Around Time?
Change Over Time
This is a calculation that can be used for almost any of the ratios an Asset Manager reviews. It helps sum up the difference between one period and another. It can be done utilizing totals or on a per unit basis.
· Information you will need to know:
o Amount This Month
o Amount Last Month
· Formula:
Amount This Month – Amount Last Month
Amount Last Month
Work Order Percent Completed
Effective maintenance monitoring includes a regular evaluation of work order completion times. Work Order Percent Completed is a way of analyzing work orders (non-emergency) completed over a predetermined set of time frames. Work Order Completion Times will be as follows: under 5 days, 5-10 days, 10-15 days and over 15 days.
· Information you will need to know:
o Number of Work Orders Completed in a Given Time Frame
o Total Number of Work Orders in the Same Given Time Frame
· Formula:
Number of Work Orders Completed
Total Number of Work Orders
· Example: The Asset and Property Manager for University Lofts met to evaluate the responsiveness and effectiveness of their maintenance program. Based upon an evaluation of the Work Order Log, they determined that 17 tenant requested (non-emergency) work orders were completed in under 5 days, 28 in 5-10 days, 40 in10-15 days, and 15 took longer than 15 days.
Ø What is the Percent of Work Orders Completed?