Why Monthly Reporting Isn't Accurate to a Deal's Performance

I was happy to see on two of my limited partner multifamily deals that the NOI last month achieved 35% better and 10.5% better than business projections.

Although I love when these numbers are shown, I also know I have to take it with a grain of salt.

Here's why:

Business plans typically average the projected 12 months of expenses and divide by 12. This creates a baseline that they show in their monthly reports. However, the reality is that expenses are paid in lump sums. It's not nearly the same amount each month. Taxes and insurance are examples. Say the annual taxes and insurance were paid in 2 months out of the year. Those two months the expenses would be significantly above the averaged out baseline. The other 10 months would show expenses being significantly lower than the projected baseline.

What you'll want to focus on when looking at monthly reports that only show you the single month is the income. The income will be a much more consistent number than the expenses. If the income number exceeds the projected income baseline, you're likely in good shape.

Deal that had 35% higher NOI than projected.

Deal that had 10.5% higher NOI than projected. Both deals from the same lead general partner.