CAM Financial Terms and Formulas Quick Guide
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| Term | Acronym | Formula/Definition |
|---|---|---|
| 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 | Average Effective Rent for Renewal – Average Effective Rent on Previous Lease | |
| Annualization | Average of actual months of expenses (or income) ÷ number of months reported x 12 | |
| Average Effective Rent | TRR ÷ Units Occupied
Calculates the property average rent per presently occupied units at lease rates |
|
| Bad Debt | Uncollected rental income due to non-payment | |
| Breakeven Occupancy Ratio | (OE + DS +RR) ÷ EGI
Calculates the occupancy needed to pay all operating expenses, debt service and any replacement reserves |
|
| Breakeven Rent Per Square Foot | (OE + DS + RR) ÷ Total Property Square Feet
Calculates the cost per square foot 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 ÷ Purchase Price = Cap Rate
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 | 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 ÷ Down Payment (or Initial Equity) = Cash on Cash Return Measures the amount of cash earned against the original cash invested
|
|
| Debt Service | DS | The loan or mortgage payment. It covers the interest on and retirement of an outstanding principal on a mortgage loan |
| Effective Gross Income | EGI | GPR – VAC = TRR + OI = EGI
Total revenue for the property |
| Effective Market Rent | (Monthly Market Rent x # of months in lease - total concessions) ÷ # 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 Income | GPI | Occupied Units x Average Leased Rent + Vacant Units x Average Market Rent = GPI |
| Gross Potential Rent | GPR | Total # of Units x Average Market Rent = GPR |
| Leased Percentage | Leased Units ÷ Total Units
The portion or ratio of total units that are covered by a lease |
|
| Leased Units | Total Units – Vacant Units – Notices to Vacate + Vacant Units Leased + Notices to Vacate Preleased
Identifies the total number of units covered by active leases as well as future leases. Reflects an occupancy trend |
|
| 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 | (given on Operating Statement)
The total expenses, fixed and variable, to operate the property. Does not include capital items |
| Operating Expense Ratio | OER | OE ÷ EGI = OER
The percentage of revenue used to pay operating expenses. |
| Percent Renewal Increase | Amount of Increase ÷ Previous Lease 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. Note the Income Approach is shown | |
| 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/Investment=Return on Investment. The benefit to the investor resulting from an investment |
| Total Rent Revenue | TRR | GPR – VAC = TRR
Total rent and only rent collected, also known as net rental income |
| Turnover Ratio | Total Number of Move-Outs ÷ Total Number of Units
The total number of move-outs for a given period divided by the total apartment units |
|
| Vacancy/Collection Loss | VAC | Vacancy, Collection Loss, Non-Revenue Units, Concessions |