Buying, selling and operating apartments in Portland

Apartment Operations Metrics | 17 April 2010

First-level financial performance metrics

Debt Coverage Ratio (DCR) = Annual NOI/Annual Debt Service. This is annual net income (NOI) divided by your annual debt payment. Your bank uses this to determine whether to finance and how well your property can pay its debt. Today a minimum of 1.25 is required. Higher is better.

Pre-tax Cash flow = What goes to you after you take expenses and debt service from your income. A higher number implies your property is generating more income after debt.

Expenses = This section breaks down the major categories where you are spending money. Tracking these categories on a periodic basis allows you to see trends developing rather than being surprised by large bills. Expenses are normally in the range of 45% of gross income. More than this is a problem. Less than 45% means either high rents, self-management, neglected maintenance or a very good property manager.

Income = This will show you where income is coming from including rent and other sources (laundry, parking, fees, bill-backs among others.)