IREM Report Confirms Strong Metrics for Apartments

The recently released 2012 edition of "Income/Expense Analysis: Conventional Apartments," published by the Institute of Real Estate Management, confirms the conventional wisdom among the apartment industry. Namely, it's bonanza time for landlords.

Chicago—The recently released 2012 edition of “Income/Expense Analysis: Conventional Apartments,” published by the Institute of Real Estate Management, confirms the conventional wisdom among the apartment industry, and with a wealth of data to back up its conclusion. Namely, it’s bonanza time for landlords.

Some of the report’s key findings include that gross possible rents for three of the four conventional rental apartments examined (elevator; low-rise with 12 to 24 units; and garden) rose within a range of 0.2 percent to 8.3 percent in 2011 versus 2010. Rents for the fourth kind of apartment, low-rise buildings with 25-plus units, dipped only 1.5 percent year-over-year.

Net Operating Income for the three apartment types for which data was available rose between 2.9 percent and 7.5 percent from the prior year. That was roughly enough to match the total expenses for three of the building types.

Other findings by the report include the fact that uncollected income due to vacancy and other forms of rent loss decreased slightly for all four building types. At 6.7 percent, garden buildings have the highest vacancy and rent loss as a percentage of gross possible income, followed by low-rise building with 12 to 24 units at 5.8 percent; low-rise buildings with 25 or more units at 5.6 percent; and elevator buildings at 4.8 percent.

An analysis of resident turnover by the report indicates that elevator buildings experienced the lowest turnover ratio at 39.8 percent, up 5.4 percent from the prior year. Low-rise buildings with 25 or more units reported a turnover ratio of 45.9 percent, a year-to-year gain of 5.2 percent. Garden buildings experienced the highest turnover ratio at 51.9 percent, despite a 1.1 percent dip.

In terms of sample size, the report analyzes the previous year’s operating income and cost figures for 3,156 multifamily rental properties representing over 618,000 units across the United States and Canada. The results are drawn from a control sample of conventional apartments that have submitted data for the report consistently over the past four years. The report also contains data drawn from a larger sample of submissions gathered over the past five years, regardless of whether that data was submitted consecutively over the five-year period.