How To Read Financial Reports Like A Boss
Updated: Apr 16, 2022

In the world of finance, there are tons of reports for measuring the performance of an asset. For us in the Multifamily Syndication world, we are not any different. True Real Estate Investments, like what we provide, are to be treated seriously and with transparency. As your Asset Manager, it is my duty to provide you with financial analysis. The question is, how do you know what you're looking at?
Ten15 Capital provides quarterly reports on all our assets to our investors. We design the releases to follow the calendar, so everyone knows when to expect these reports. However, what you receive is actually a condensed version of all of the data that we are constantly mining. Monitoring the Business Plan and overall performance of the asset requires faithful dedication of the metrics.
Ever received financial reporting that look like Wall Street analysis? You can't even make heads or tails of the data. This is bad. When presenting financial statements to our investors, there are structures in place that we always follow. For example:
The format should be consistent. We use the same formats for all properties and from one period to another.
The format should be the most informative to the investor. It should be easy to read and zero in on important information, yet perform detailed analysis.
Doesn't include unnecessary data. Our finished statement package provides the investor the correct data points to make good judgments on their investment.
The format should be efficient and readily labeled so the investor could quickly find the metric they are looking for.
Let's boss-up! What are financial reports?
Financial statements reveal the status, progress and control of a business. To understand what financial reports are, first we need a brief overview of accounting. As Asset Managers, we're scientists and mathematicians before we are landlords. To be effective at what we do, we need to have a thorough understanding of basic accounting and bookkeeping principles. Let's take-on the two foundations: the first is the Double-Entry Bookkeeping and the second is the General Ledger.
The most common method of accounting is what's called Double-Entry Bookkeeping. In the double-entry system, each accounting transaction has two sides where transactions are recorded in terms of debits and credits. Since a debit in one account offsets a credit in another, the sum of all debits must equal the sum of all credits. Visualize a table with two columns. A debit is an entry made to the left side of an account, and a credit is an entry made to the right side.
The record that summarizes all business operations is the General Ledger. Every entry is logged in this ledger. Often times, businesses like ours create sub-categories such as "Rental Income," "Marketing," "Repairs," etc. From the ledger, all reports are ultimately made. The General Ledger contains every transaction made, and the financial statements are reports that express information summarized from the General Ledger.
Below is a list of reports that your Asset Managers create from the General Ledger and mine through to assess the performance. Keep in mind that although there are repeated information, every report serves it's own utility for assessing the property. Sometimes we're looking for ratios, trends or anomalies, and it has to be scoured against different metrics in order to find these.
Each of the statements has a distinct function, and ultimately, all of these functions are interrelated.
Below is a list of the typical reports we as Asset Managers are constantly reviewing:
Weekly Property Management Reports
Monthly Property Management Reports (end-of-month)
Status Summary
Income Statements/Profit & Loss (T-12, T-6, T3, etc.)
Balance Sheet
Accounts Payable Aging Analysis
Accounts Receivable Aging Analysis
Box Score
Trial Balance
General Ledger
Rent Roll
1. Weekly Property Management Reports
The first report we'll tackle is the weekly PM report. In this weekly snapshot from the Property Manger, they are highlighting a couple of key metrics that we are specifically targeting and is typically condensed to a few pages. This is typically the conversation-starter for our weekly calls and we then deep-dive into any section that may need attention. Let's look at each segment at a time.

Occupancy Projections. This section details out the current occupancy percentage for the property and projects out what the occupancy will be in 30-days and what it will be in 60-days. This is useful to track occupancy rates, especially during renovations. Monthly Leasing Results. Here we are tracking how many people inquired about availability, as well as how many actually applied and how many were approved. Vacancy. This is the section where we track the vacancies and non-performing units. Current Delinquency. The total amount outstanding for collections for the month. Income. Here we are tracking the expected income versus the actual collected. Notes and Comments. This is the section where our Property Manager would give some brief commentary around needs and activity. Manager Follow-Up Needs. Here is where we track specific tasks that we asked the Property Manager to perform.
2. Monthly Property Management Reports (End of the Month - EOM Report)
The second report we'll tackle is the End of the Month report. This is monthly snapshot from the Property Manager giving us the final look at the month's performance and would typically be performed by a Senior Property Manager after they've analyzed the month's financials. It is often accompanied by the Income Statement for the month and a Status Summary. This report is really important because this is also where the final Net Operating Income (NOI) for the month is determined, so you really have to be paying attention. Let's look at each segment at a time.

The occupancy section gives a summary of where we stand on total rented units, status of move-ins or move-outs, total renewals completed for the month and how many units are down for repairs.
The EOM Operating Snapshot (End of Month) is extremely important. In this summary, you are able to view the total income for the month, the total expenses and the net income. As Asset Managers, we scrutinize each of these sections against our budgeted metrics to determine if the income and expenses are what we expected them to be. No one likes surprises!
The same section shows any additional non-operating expenses or reserves that either we choose to deduct or must be deducted, such as "Debt Service" and the "Capital Expenditures" reserves. The final is the disbursable cash flow for the month. This is the final profits after all operating expenses and non-operating expenses have been paid.
Cash In Bank (Cash On Hand) statement is a summary of money in the bank accounts. Notice there are three separate accounts: Operating Account, Security Deposit Account and the Capital Expenditures (Capex) Account.
Accounts Payable balance allows us to understand outstanding debts owed to vendors and subcontractors for the month.
The final line, Minimum Operating Cash Balance, is optional. In this case, the Asset Management team elected to have a minimum balance in the Operating Account as a safety net.
The Highlights/Issues section is the "Notes" section for the Property Manager, giving a brief highlight of pluses or deltas on the property.
3. Status Summary
The Status Summary is usually part of our End of the Month Report. This is brief and only depicts Occupancy and Beginning and Ending Balances. In the Balances section, note where the balances were when the month started and where they are at the end.

4. Income Statements (T-12, T-6, T3, etc.) (P&L Statement)
How to read a T-12. My favorite statement is the Income Statement, also known as the P&L Statement (Profit and Loss Statement). This is a nice, summarized report of the General Ledger detailing out the Revenue (Income) sources and the Operating Expenses. This allows me to seek out an anomaly and them deep-dive into it to investigate why it exists.
The example below is for one month, which could be called a T-1, or Trailing One Month. For analysis, you could look at the last quarter, which is three months, or a T-3. You could also look for patterns developing by reviewing a T-6 or a T-12 (trailing 12-months).
The Manager will choose between Accrual Method or Cash Method (or basis) for the statement reporting. This is important to distinguish since if you are not trained at what you're looking at, you could be misinterpreting the data. The main difference between accrual and cash basis accounting is the timing of when the revenue and expenses are recognized. The cash method is a more immediate recognition of revenue and expenses, while the accrual method focuses on anticipated revenue and expenses. We use the cash basis, since it is easier to understand and relates to what has actually been received or spent to date.
Note the details from the General Ledger. For example, the main ledger is broken down into Revenue and Operating Expenses. Revenue is further categorized into Rental Income and Additional Income. Each of those two is further broken down, for example, Rental Income is broken further down into Rental Income, HUD Income, Loss to Lease, Vacancy and Concessions.
A very good use of the Income Statement is forensics. Take these two real-world examples:
1. An example could be, the Gross Operating Income looks normal, however, upon inspection you find that your actual Rents collected dipped but you made it up with late fees. With this information, we are able to then drill down into why are collections low and if we need to replace the tenants.
2. Another example we have found, is the Operating Expenses have been creeping up for the last few months. After drilling down, we found that the water and sewer had been steady increasing. This could mean a possible water leak, which could end up being costly! If your Asset Manager is not vigilant, it could actually be costing you REAL MONEY!!

5. Balance Sheet
Robert Kyosaki made knowing the differences between Assets and Liabilities cool. Kiyosaki defines an asset as anything that puts money in your pocket. A liability is anything that takes money out of your pocket. However, in business, both are needed to run the operation and to determine what the Owner's Net Worth is. This is another one of our fundamental accounting principles and is depicted in the Balance Sheet.
Total Assets = Total Liabilities + Net Worth

Here is a sample of the Balance Sheet for your review. Let's drill down a little bit. What are Assets? What are Liabilities? The Balance Sheet is one of the main financial statements that we review because it is a listing of the properties (assets), debts (liabilities) and ownership value (net worth).
What are Assets? Simply put, things owned by the business. In the case of multifamily apartment complexes, assets are cash in the bank and capital expenditures invested into the property. Other assets include maintenance supplies, furniture and equipment.
What are Liabilities? Simply put, claims by others against the business. For multifamily real estate, these are items that are not ours, like prepaid rents, someone owns that. Security deposits, etc. Loans and Accounts Payables are also forms of liabilities.

6. Accounts Payable Aging Analysis
The Accounts Payable Aging Analysis is a cool tool. With this tool, you are being graded by the vendors. Yes, YOU! As Asset Managers and Owner-Operators, we want our vendors to know that we pay our bills and we pay them on time. This allows them to extend credit to us in the form of net-30 payments. This report shows our outstanding debts and obligations to our vendors.
Think about it, if you were a landscaper, you perform all your work for the month and submit an invoice, with the hope that the client will pay you on time so you are not out of pocket too long for your expenses and payroll. We must be mindful of this. As such, your reputation is at stake through this. Vendors talk, and if you are a slow or non-payer, no one will want to work with you.
In this example, you see the vendor names followed by journal entries. Journal entries are General Ledger entries, and every one of the GL entries must be identified with a unique identifier. This is the blockchain! Except not digital, not automatic and not transparent. So not like the blockchain, the blockchain is a General Ledger. Rabbit hole.
How to read this. The "Post Month" is the column showing to what month was the entry made to the journal. Followed by the "Invoice Date" and "Due Date" columns. The rest are critical. Open Balance and Current show the outstanding, followed by four columns. These show how much balance is owed within 1-30 days, 31-60 days (you're late), 61-90 days (you're super late) and 91+ days (you don't pay your vendors). Try to never be in the last 3 columns.

7. Accounts Receivable Aging Analysis
I have a lot of respect for Property Managers. One of the most tedious aspects of Property Management is controlling our residents credit accounts. From previous definitions, we extend credit to our customers, our residents, in the form living in the unit. The Property Manager's job is to collect rents and with this tool, their job is a little bit easier. This statement, the Accounts Receivables Aging Analysis, is a summary of our customer's account, which shows any balances due. As an extension of the General Ledger, this is a customer ledger card that determines which accounts are past due.

8. Box Score
The Box Score is a report we as Asset Managers use to view our rental trends. Part of our duties is to study and assess the market data points to ensure our rents are within the ranges. You definitely don't want to be the guy at the bottom of the list!
With the Box Score we are analyzing the Unit Mix and getting a bird's eye view on how they are performing by unit type. This gets us the quick look at occupancy rates by type, how they relate to our target market rents, leases coming due, lead activity and vacancy status.

9. Trial Balance
The Trial Balance is the bookkeeper's friend. This worksheet proves that the General Ledger is balance. From earlier explanations, the General Ledger is in balance when the total of all debits on one side must equal the total of credits on the other side. Hence, because every entry includes a positive (debit) and a negative (credit), a correctly-posted General Ledger will add up to a net of zero.
Note that the Trial Balance is not a detailed ledger, it is instead a summary of each section of the General Ledger. On this sample snapshot, this Trial Balance is the final page of the 3 page report. This ledger is in balance because the Debits match the Credits and equal to an Ending Balance of zero.

10. General Ledger
The General Ledger. The holy grail of your business operation. For larger properties they could typically average around 50-pages! Footnote: thank goodness for software.
The General Ledger is nothing more than a summary of your business activities for the property. Every income and expenses is listed here in detail. The purpose of the General Ledger is track every single transaction, plus or minus, ever made. It is not meant to be used for controls or to support the details of different financial statements. It is meant to produce our statements readily and easily while being easy to balance. This is also our audit trail, meaning that whoever reviews the GL should be able to trace all account entries back to the original document.
An example of an audit trail, on a property we own we typically average around $925 a month for trash pickup. One month, I noticed the GL code for trash was at $3,000. I was able to use the GL code to zero-in on the Expenses the Trash, and noticed more than one trash pickup was performed. I called the Property Manger and she explained that we had a unit that needed to have all carpet removed and ceiling drywall due to water damage. With this information, I can make an informed decision on how the data is managed.

11. Rent Roll
How to read a Rent Roll. For us, the Rent Roll tells a story. A rent roll shows the expected rental income from a real estate asset as well as current occupancy. It tells us how much the property is producing and if it is profitable. It tell us if the property is collecting rents. Although the exact information on a rent roll varies based on the property management structure, a good rent roll always includes the following information:
Property Information
Name of property owner or management company
Address of property
Unit Data
Unit number (such as #1, A, etc.)
Square footage
Number of bedrooms
Number of bathrooms
Additional features (2-car garage, back yard deck, freestanding storage shed, etc.)
Other amenities (common-area swimming pool, HOA, near greenbelt, etc.)
Tenant Information
Name of tenant
Monthly rent
Additional rent (pet fee, additional storage fee, parking fee, etc.)
Rent due date
Date rent paid
Past due rent
Prepaid rent
Security deposit held by landlord
Lease start date
Lease end date
Rent concessions given by landlord to tenant
Rental Income Summary
Rental Information
Total monthly rent collected (including extra rental income)
Total annual rent collected (including extra rental income and any annual fees charge to tenant such as carpet cleaning, pest control, or landscaping)
Total fees collected such as late fees and pet fees

Below are some of our favorite financial ratios that we create using all of the above data.
Pari-Passu = LP Split / GP Split
Net Operating Income (NOI) = Total Net Income - Total Expenses
Cash Flow = Total Net Income - Total Expenses - Debt Service
Pro-Rata = Your Investment Amount / Total Investment
Cash on Cash Ratio = Annual Pro Rata Return / Your Investment Amount
Debt Yield Ratio = NOI / Mortgage Principal
Debt Coverage Ratio = NOI / Annual Debt Service
Break-Even Vacancy = (Total Expenses + Debt Services) / Total Net Income
Equity Multiple = Total Return On Investment / Initial Investment
Gross Rent Multiplier = Purchase Price / Gross Scheduled Income
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We are Ten15 Capital, and we are innovating the world of real estate investing via apartment complexes. We create lucrative opportunities via syndication or joint venture projects.
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