In commercial multifamily real estate, there’s a language that is spoken when you are connecting with brokers, property managers and other investors in the profession. To avoid sounding like a novice, an investor must be fluent with the real estate terminology to be taken seriously. Let’s take a minute to breakdown one of those terms.
The occupancy rate required to cover all the expenses of the apartment community.
- The threshold of tenant occupancy that covers all expenses of the complex.
- Important factor to know when purchasing value add properties. One should always know their break even point or risk having to come out of pocket for these expenses.
- Dividing the sum of the operating expenses and debt service by the gross potential income.
- Example: 200-unit apartment community with $1,000,000 in operating expenses, $500,000 in debt service and $2,000,000 in gross potential income has a break-even occupancy of 75%
By learning these concepts and terms, you’re separating yourself from the novice investor looking to be more active than passive. Here’s where you can learn more multifamily investing terms.