## Weighted Average Calculation Methodology

Introduction (Please Read):

This document will provide you with an explanation of how REALHOUND CRM conducts Weighted Average calculations. Every effort has been made to make our reports statistically accurate. Because of this, some of our averages may calculate out different than yours, as REALHOUND CRM uses a true weighted average to determine overall averages. The example below illustrates this.

Calculation Example:

Let’s say that we have five apartment buildings for which we want to determine the overall average rent. The complexes and rents are:

Name |
Type |
Square Feet |
Units |
Low Rent |
High Rent |
Total Low |
Total High |
Total SF |

Californian | 2/1 | 850 | 58 | $1,000 | $1,100 | $63,800 | 49,300 | |

Coral Reef | 1/1 | 650 | 56 | $1,870 | $2,015 | $104,720 | $112,840 | 36,400 |

Tanoan | 1/1 | 725 | 28 | $745 | $795 | $20,860 | $22,260 | 20,300 |

Tanoan | 2/1 | 875 | 25 | $950 | $950 | $23,750 | $23,750 | 21,875 |

Surfside | 1/1 | 675 | 11 | $725 | $725 | $7,975 | $7,975 | 7,425 |

Surfside | 2/1 | 825 | 39 | $850 | $850 | $33,150 | $33,150 | 32,175 |

Tropic Sands | 0/1 | 550 | 4 | $735 | $735 | $2,940 | $2,940 | 2,200 |

Tropic Sands | 1/1 | 750 | 53 | $740 | $875 | $39,220 | $46,375 | 39,750 |

Totals |
274 |
$290,615 |
$313,090 |
209,425 |

First, you have to review all of the different unit types of all of the properties you want to average. Then, on a unit type by unit type basis, calculate the total low rent and total high rent by multiplying the respective rents by the number of units for that type. Calculate the total square feet by multiplying the unit’s square feet by the number of units. Then, sum up the total rents and total square feet columns.

Now, to calculate the average square feet per unit, divide the total square feet by the number of units. This will weight the average by the number of units, thus, the larger complexes will have more “weight” then the smaller ones.

To calculate the overall average rent, you first need to determine the average of the low and high rents. Because there are typically more low rent units than high rent ones, REALHOUND IP has an option on the Report Options screen to use a 2/3 weighting on this calculation. The calculation is ((low rent x 2) + High Rent)/3. If there is no high rent, then the low rent is substituted for it. After you have calculated the 2/3 weighted average of the total low and total high, divide this number by the total number of units. Here is the answer:

Average Rent = $1,088

Average SF = 764