The APOD is such a popular report associated with real estate analysis that it’s easy for real estate investment specialists to toss the term around as frequently as family members making toasts at a wedding.
If you’re a realtor who services rental income property, or are someone buying investment real estate, chances are good that you’re well-acquainted with the term and have already used the report during a property evaluation.
On the other hand, if you’re a residential real estate agent or novice investor with little real estate investing experience it’s probably also true that you have no idea what an APOD is or how it’s used.
Of course this is to be expected. After all, apart from real estate investing, who really cares what it is? If Suzie the residential agent makes her living selling houses and wants to think that an APOD is something to set a camera on, it doesn’t matter because the report doesn’t apply to her business activity.
However, when Suzie ventures into the world of investment property, then it does matter; and at that point Suzie better know about this popular report. Both, for her own business success, as well as to avoid being looked upon as less-than-professional by colleagues and real estate investors.
So for all the Suzie’s out there who want to work with residential income property, this one’s for you.
An APOD is an acronym for Annual Property Operating Data (i.e., A-P-O-D) and typically consists of a one-page document used by analysts to evaluate a rental property’s income and expenses projected for the first year of ownership.
The annual property operating data provided by the report is well-short of enough information required by an investor to make a prudent real estate investment decision. It concerns only the property’s first-year income and expenses, and does not include the elements for tax shelter. So the cash flows and rates of return revealed in the report are before taxes.
Nonetheless, the APOD does provide investors with a snapshot of a property’s first-year’s financial performance in a concise manner.
As such, it can be extremely beneficial during the early stages of a rental property evaluation. In fact, you might present the annual property operating data to an investor up front just to determine how much interest there is in the property before digging deeper.
The report is meant to serve as the real estate equivalent of an annual income and expense statement. Therefore, it’s structured to present the rental property’s cash inflows and outflows. Namely, rental income, vacancy allowance, operating expenses, and debt service (i.e., mortgage payment).
A well-structured report for this annual property operating data will also show rates of returns, measures and ratios such as cap rate, gross rent multiplier, cash on cash, debt coverage, loan-to-value and more.
Bear in mind that the intention is to create a “snapshot” of the investment property’s financial performance during the first year of ownership. So the more data you can present to an investor as a first-glance look at the property the better.
So You Know
All three of the real estate investment software solutions provided by ProAPOD automatically create an APOD. You just fill in the forms and print.