Calculations Cheat Sheet

Purpose (Why we do this):

At Horizon we are committed to being market leaders and fiscally responsible. This commitment requires a solid understanding of the value of your property and how the decisions you make will impact the value. 

Policy (What you're supposed to do):

Horizon managers should be proficient in the calculations below to maximize their level of fiscal responsibility

Procedure (HRA Way!):

NET OPERATING INCOME (NOI)

Total Revenue = Net Apartment Rent + Other Income

Net Operating Income (NOI) = Total Revenue - Total Operating Expenses

EXAMPLE

Assume Net Apartment Rent is $90,000 and Other Income is $5,000. Expenses total $70,000.

Calculate the Net Operating Income as follows:

$95,000 - $70,000 = $25,000 Net Operating Income

OCCUPANCY PERCENTAGE (ECONOMIC)

HRA WAY: Rental Income (actual) ÷ GPR (actual) = Economic Occupancy Percentage

EXAMPLE

Assume your GPR is $251,135 and your Rental Income is $240,777.

Calculate the economic occupancy percentage as follows:

$240,777 ÷ $251,135 = .9587 x 100 = 95.87%

OCCUPANCY PERCENTAGE (PHYSICAL)

Total number of (physically) occupied Beds ÷ total number of beds

= physical occupancy percentage

NOTE!  Vacancy Percentage + Occupancy Percentage must = 100%

EXAMPLE

Assume you have a total of 438 Beds and 420 Beds are occupied.

Calculate the occupancy percentage as follows:

420 ÷ 438 = 96% physical occupancy

OPERATING EXPENSES PER BED (ANNUAL)

Total operating expenses ÷ total number of Beds 

= operating expenses per Bed

EXAMPLE

Assume on a 438-Bed property, the annual operating expenses total $540,000.

Calculate the operating expenses per Bed as follows:

$540,000 ÷ 438 = $1,233 operating expenses/bed

CAPITALIZATION/VALUATION FORMULAS

Annual net operating income (NOI) ÷ capitalization rate 

= approximate sales value

I ÷ R = V

OR

Capitalization Rate x Value = Annual Net Operating Income (NOI)

R x V = I

NOTE! Capitalization rates generally range from 5.5-9.0% and are determined by the market and quality of the property.

EXAMPLE

Assume the annual Net Operating Income is $500,000 and the market capitalization rate is 8%.

Calculate the value of the property as follows:

$500,000 ÷ .08 = $6,250,000

ANNUAL TURNOVER PERCENTAGE

Total number of annual physical move outs ÷ total number of beds

 = Annual Turnover Percentage

EXAMPLE

Assume you have a total of 400 Beds and a total of 300 physical move-outs for the year.

Calculate the annual turnover as follows:

300 ÷ 400 = 75% turnover

NOTE!  Several different residents may occupy the same Bed in one year, thus, increasing the annual turnover percentage

ANNUALIZING A NUMBER

(Number ÷ current time period in months) x 12 = Annualized Number

EXAMPLE

Assume you have 41 work orders recorded in January and 27 in February.

Calculate an annualized number of work orders for the year as follows:

41 + 27 = 68

(68 ÷ 2) x 12 = 408 annualized work orders

VARIANCE PERCENTAGE

(Actual number - budgeted number) ÷ budgeted number

 = variance percentage

The variance percentage is the calculation of how much you are actually over or under your budgeted figures.

If an expense category is over budget, it is a negative variance.

If an expense category is under budget, it is a positive variance.

If an income category is over budget, it is a positive variance.

If an income category is under budget, it is a negative variance.

EXAMPLE

Assume you collect income of $2,400,000 versus a budgeted income of $3,000,000.

Calculate the variance percentage as follows:

($2,400,000 - $3,000,000) ÷ $3,000,000 = -0.2 = -20%

This -20% represents an unfavorable variance as it reflects an income category.

AVERAGE INCREASE ON NEW LEASES OR RENEWALS

Average Effective/Leased Rent for new leases or renewals - Average Effective/Leased Rent for the same Beds paid by the previous resident

EXAMPLE

Assume you have 8 new leases for the month.  The effective rate paid by the previous residents averaged $550 while the effective rate paid by the new residents is $575.

Calculate the average increase as follows:

$575 - $550 = $25 increase or a 4.5% increase ($25 ÷ $550 = 4.5%)

AVERAGE LEASED RENT

First determine the total rental revenue for each Bed type or lease amount.

Calculate the total number of Beds rented at a particular amount subtracting any concession amounts.  Calculate this for each Bed type or lease rate.

Then, add the total rental amounts and divide by the total number of Beds.

(Potential Rent – Concession/Rental Inducement) ÷ Total Beds Occupied 

= Average Leased Rent

EXAMPLE

Assume the community currently has 70 Beds leased at $354, 92 Beds leased at $381, 110 Beds leased at $457 and 47 Beds leased at $715 offering $100 off each month.

Calculate average leased rent as follows:

70 Beds leased @ $354= $24,780

92 Beds leased @ $381= $35,052

110 Beds leased @ $457= $50,270

47 Beds leased @ $615= $28,905

319 total Beds occupied= $139,007

$139,007 ÷ 319 total Beds = $435.75 = $436 average leased rent

AVERAGE RENT COLLECTED

First determine the Number of Beds Collected.

(Staff Beds + Vacancy) ÷ Potential Rent = Percentage Loss

Percentage Loss x Total # Beds = Beds Not Collected

Total Beds - Beds Not Collected = Beds Collected

Then, calculate the Average Rent Collected.

(Current Month Rent + Previous Paid Rent) = Total Rent Collected for Month

Total Rent Collected for month ÷ Beds Collected = Average Rent Collected

AVERAGE SQUARE FEET/BED

Square footage of all specific Bed types ÷ Total number of Beds

= Average square feet/Bed

EXAMPLE

Assume you have 15 two-bedroom Beds with 1086 square feet and 104 two-bedroom Beds with 1087 square feet.

Calculate the average square feet as follows:

15 Beds @ 1,086 square feet =16,290

104 Beds @ 1,087 square feet =113,048

119129,338

129,338 ÷ 119 = 1,087 average square feet per Bed for two-bedrooms

CLOSING PERCENTAGE/RATIO

Total number of leases for the week ÷ total number of traffic 

= closing percentage/ratio

EXAMPLE

Assume you have 20 visitors (traffic) to the property for the week resulting in 6 leases.  Assume one person was previously shown a bedroom or suite.

Calculate the closing percentage/ratio as follows:

6 ÷ 19 = 32% closing percentage/ratio

CONVERSION PERCENTAGE/RATIO

Total number of phone calls for the week 

÷ Total number of phone call traffic = Conversion Percentage/Ratio

EXAMPLE

Assume you have 20 phone calls and 5 visit the property.

Calculate the conversion percentage/ratio as follows:

5 ÷ 20 = 25% conversion percentage/ratio

COST OF ADVERTISING PER LEASE

Total cost of ad ÷ number of leases generated from ad = cost per lease

EXAMPLE

Assume an ad in the newspaper cost $4,200 and generates 20 new leases.

Calculate the cost per lease as follows:

$4,200 ÷ 20 = $210 per lease

COST OF ADVERTISING PER PIECE OF TRAFFIC

Total cost of ad ÷ total number of traffic generated from ad

 = cost per piece of traffic

EXAMPLE

Assume an ad in the newspaper cost $4,200 and generates 80 prospective residents.

Calculate the cost per piece of traffic as follows:

$4,200 ÷ 80 = $52.50 per piece of traffic

EFFECTIVE RENT

[(Market rent x number of months in lease term) - total concession awarded]

÷ Number of months in lease term = Effective Rent

EXAMPLE

Assume a new lease was signed with the Market Rent at $500 per month and a concession of one month’s free rent was granted as an incentive.

Calculate the effective rent as follows:

($500 x 12 = $6,000) - $500 (concession) = $5,500

$5,500 ÷ 12 = $458 effective rent

OPERATING MARGIN

Total operating expenses ÷ total revenue = operating margin

EXAMPLE

Assume on a property the annual operating expenses total $540,000.  The total revenue is $1,045,000.

Calculate the operating margin as follows:

$540,000 ÷ $1,045,000 = 52% operating margin

The lower the operating margin, the better.

PRICE PER SQUARE FOOT

Monthly rent ÷ total square footage = price (rent) per square foot

EXAMPLE

Assume the monthly rent on a bed is $530 and has 698 square feet.

Calculate the rent per square foot as follows:

$530 ÷ 698 = $.76 per square foot

RENEWAL PERCENTAGE

Total number of renewal leases ÷ total number of expiring leases 

= renewal percentage

EXAMPLE

Assume you have 780 leases expiring and of those 253 decide to renew.

Calculate the renewal percentage as follows:

253 ÷ 780 = 33%

SALARY RATE CALCULATIONS

Hourly Rate Gross annual salary ÷ 2080 = hourly rate

Monthly Rate Gross annual salary ÷ 12 = monthly rate

Annual Rate Hourly rate x 2080 = annual salary (gross)

NOTE! There are 2080 hours in a normal work year.  This assumes 5 workdays per week, 8 hours per day for the entire year.

EXAMPLE

Assume an associate’s annual salary (gross) is $13,520.  Calculate the hourly rate as follows:

$13,520 ÷ 2080 = $6.50 hourly rate

Calculate the gross monthly salary as follows:

$13,520 ÷ 12 = $1,126.67 gross monthly salary

OR, assume an associate’s hourly rate is $6.50.  Calculate the gross annual salary as follows:

$6.50 x 2080 = $13,520.00 gross annual salary

TOTAL LEASED PERCENTAGE

(Total number of occupied Beds + total number of leased not occupied) 

÷ Total number of beds = total leased percentage

EXAMPLE

Out of a total of 438 Beds, assume you have 420 occupied Beds and 10 Beds leased, but not occupied.

Calculate the leased percentage as follows:

(420 + 10) ÷ 438 = 98% total leased percentage

TOTAL REVENUE PRODUCING BEDS

Total number of Beds - non-revenue Beds = total revenue producing Beds

NOTE! Non-revenue Beds include models, staff beds and “down” beds.

EXAMPLE

Assume you have a total of 438 Beds and 15 are non-revenue Beds.

Calculate the total revenue-producing Beds as follows:

438 – 15 = 423 total revenue producing Beds

BED TYPE/BED MIX PERCENTAGE

Total number of a specific Bed ÷ total number of Beds

 = Bed type/Bed mix percentage

EXAMPLE

Assume you have 438 Beds and 119 of them are two bedroom Beds.

Calculate the Bed type/Bed mix percentage as follows:

119 ÷ 438 = 27% two-bedroom Bed mix

VACANCY PERCENTAGE

Total number of vacant beds ÷ total number of beds = vacancy percentage

EXAMPLE

Assume you have 438 total Beds and there are 18 vacant Beds.

Calculate the vacancy percentage as follows:

18 ÷ 438 = 4% vacancy percentage

Refer back to Occupancy Percentage (Physical).  Physical Occupancy and Vacancy Percentage must total 100%.

WEIGHTED AVERAGE RENT – LEASED

Number of leased Beds x the average leased rent of each floor plan 

= total leased rent/Bed type

Add each total leased rent/Bed type together ÷ total number of leased Beds = weighted average rent

EXAMPLE: 

Assume the community has a total of 225 Beds and a Bed mix, Beds leased and pricing structure as follows:

Floor PlanBed MixBeds LeasedAverage Leased Rent

1X15049$450

2X27572$500

3X27573$600

4X42525$750

TOTAL225219

Calculate the weighted average rent as follows:

49 x $450 =$22,050

72 x $500 =$36,000

73 x $600 =$43,800

25 x $750 =$18,750

219$120,600

219 ÷ $120,600 = $551

WEIGHTED AVERAGE RENT - MARKET

Total number of Beds per floor plan x the market rent of each floor plan

= total market rent/Bed type

Add each total market rent/Bed type together ÷ total number of Beds 

= weighted market rent

EXAMPLE 

Assume the community has a total of 225 Beds and a Bed mix, Beds leased and pricing structure as follows:

Floor PlanBed MixBeds LeasedAverage Market Rent

A15049$475

A27572$550

B17573$650

C12525$800

TOTAL225219

Calculate the weighed market rent as follows:

50 x $475 =$23,750

75 x $550 =$41,250

75 x $650 =$48,750

25 x $800 =$20,000

225$133,750

225 ÷ $133,750 = $594