VARIANCE REPORT

• 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.