Why Does AdvancedREI Use Floor Plans?
Robert here, and I'm taking a break from my usual spot on the Development blog to talk about one of the concepts I argued for while we were designing AdvancedREI: Floor Plans. Every commercial property has 'em, but until now, they haven't really been a part of calculating a property's financials. But it turns out, the are absolutely essential to accurately running those numbers in the most efficient way possible. So I thought I'd take a few minutes to talk about how they came to be in the app, and why they are so important.
Discovering the Hidden Dilemma
During the process of determining how we'd store the data in the database, we also simulated how a user would enter a property into the system. It began to become apparent that certain pieces of data were very repetitive, such as Market Rents, and the various unit costs. Once I saw the repetition, I knew we weren't done optimizing.
So I thought about the 100+ unit apartment complexes I used to live in back in Phoenix, where I grew up. Those complexes had several types of layouts to choose from, and some of those layouts had a couple variants that were similar in size, but might have an extra closet or a bigger back porch. Those layouts were called Floor Plans, and they usually had some kind of name associated with them, like Sedona or Desert Vista. So I called some of these complexes up, and the vast majority charged the same rent for the same floor plan. Given that, by and large, units in the same floor plan the same fixtures and building materials, it stands to reason that units within a floor plan would also have the same turnover and renovation costs as well.
Finding a Solution
If we changed our model to group Units by Floor Plan, and then attach the Market Rents and associated costs to the Floor Plan instead of the Unit, we discovered we could save quite a bit of time during the data entry process. On smaller buildings, that doesn't matter much... but in a 300-unit apartment complex, you could easily shave off over an hour from the process.
Putting the Solution to Work
For AdvancedREI, we grouped all of the Floor Plan-related items into a section called "Leasing Expenses", which is the 4th section in the Financials tab. You can see an example of this in the image below, taken from our sample Disneyland property.
These fields are applied to every Unit in a given Floor Plan. If you mark the "Renovate" column on a unit, then the Floor Plan's Renovation Cost is applied to the first month of the next calculated vacancy in the unit's term. If "Months Vacant" is greater than zero, the Market Rent is applied to the Rental Income and the Vacancy Loss for the term of the Vacancy, and the Turnover Cost is applied to the first month of the Vacancy. I would go into the calculations more, but that is another blog post for another day.
So there you have it: just one more way we think about commercial real estate differently, to make your life easier. Questions or Suggestions? Please let us know in the comments. :)