Apartment Building Profit and Loss Statement: A 50-Unit Example, Line by Line

What is an apartment building profit and loss statement?

An apartment building profit and loss statement is a monthly report. It starts with the rent the building would earn if full, then subtracts vacancy, running costs and the loan to show what is left.

A house's profit and loss statement, P&L for short, starts with rent collected and lists a handful of costs. A building's P&L starts higher, at the rent the building could earn, and ends lower, at the cash left after the loan. The P&L is the fourth report in the monthly report package for an apartment building.

Why does an apartment building P&L start with gross potential rent?

Because it shows what the building could earn. Starting there makes every dollar of lost rent visible as a line, instead of hiding it inside a smaller rent number.

Gross potential rent is the rent if every unit were full and paid. At Birch Way that is 50 units at $1,450: $72,500. The building earned $68,150. The $4,350 between the two is rent the empty units did not earn. Starting at the top line lets you see it.

How are vacancy and concessions shown on an apartment P&L?

Each is a subtraction under gross potential rent. Vacancy is the rent of empty units. Concessions are move-in specials and credits. What remains is rent the building actually earned.

Vacancy and concessions together are called economic vacancy. It is the rent the building gave up this month, whether to an empty unit or to a special.

What counts as other income on an apartment building P&L?

Money the building earns besides rent: laundry, parking, pet rent, late fees and utilities billed back to tenants. Each gets its own line.

• Laundry: coin or card machines in the building.
• Parking: assigned spaces, garages or carports.
• Pet rent: the monthly charge for a pet. The refundable pet deposit is not income.
• Late fees and other fees: charged when the lease allows them.
• Utility bill-backs: what tenants repay for water, gas and trash.

Each one is its own line, never mixed into rent, so rent on the P&L keeps matching the rent roll. Birch Way shows $0 here only so the totals match the site calculator.

Which operating expenses appear on an apartment building P&L?

7 groups, in the same order every month: on-site payroll, repairs and unit turns, utilities, property tax, insurance, management fee, and office costs.

The same 7 groups in the same order every month is what makes one month comparable with the next. What belongs in each cost group is in apartment building operating expenses. The loan payment comes lower, below net operating income.

Where is net operating income on an apartment building P&L?

Net operating income is income minus operating expenses. It sits below the cost lines and above the loan, so it shows what the building earns before financing.

Net operating income, NOI for short, is what the building earns before the loan. It is the number lenders and buyers ask for, because it does not depend on how the building is financed. What counts toward this number and what does not is in net operating income for an apartment building.

Where does the loan payment go on an apartment building P&L?

Below net operating income. Interest is a cost. Principal pays down the loan and is not a cost, but it still leaves the bank. Subtract both to see the cash left.

Profit and cash left are different numbers. Profit counts the $24,300 of interest as a cost and stops there. Cash left also takes out the $9,200 of principal, because that money left the bank too. That is why cash left after the loan, $7,650, is smaller than profit. How each loan payment is split in the books is in recording a multifamily loan payment.

Depreciation and other tax lines are not on this statement. Your CPA adds those for the tax return.

What should an apartment owner compare from month to month?

4 things: rent collected against rent if full, each cost group against last month, net operating income, and cash left after the loan.

• Rent against rent if full. At Birch Way, $68,150 of $72,500: 94% of the units rented. A falling share means empty units or growing specials.
• Each cost group against last month. A jump in one line shows you where to look.
• Net operating income. $41,150 this month. Over 12 months this is the number that says whether the building is getting better or worse.
• Cash left after the loan. $7,650 this month. Loan coverage, net operating income divided by the loan payment, is 1.23. The building breaks even at 84% rented.