Variances can be shown in the monthly cash flow budget; however, a variance report is a narrative report that describes assumptions, amount, and plans for managing variances. It communicates to the owner that the real estate manager is aware of the variances and will take action a needed.
What is the reason for variance?
Were the forecasting techniques reliable?
Is the action necessary to correct the situation?
What actions can be taken?
The cash flow statement is a year-end report that recaps the actual inflow and outflow of cash and its related sources and uses. Only items that involve a cash transaction appear on cash flow statement.
The year-end income statement encapsulates the financial transactions for the fiscal period.
An income statement (sometimes called a profit and loss statement) gives a summary of the organization’s economic activity over a period of time, typically a year. It lists income, expenses, and net income (loss). The income statement is prepared after all journal entries have been posted to the general ledger.
Physical assets used for business, such as building and equipment, age and consequently lose value over time. Depreciation is the expense of using up an asset.
Interest is included in the income statement for external us. The figure for interest expense represents the amount the property paid in interest on its loans.
Income capitalization is the market valuation of a property based upon a one year projection of income. In other words, it relies on a single year’s stabilized NOI to estimate the value of property.
Put simply, the capitalization rate is the NOI divided by the sales price and value of a property expressed as percentage.
The lower the capitalization rate, the higher the value of the property, and vice versa.
