Are you an expert at Excel?

Many of the best investors and asset managers can sort columns in their sleep, know every shortcut, and can use pivot tables with ease. However, the reason they’re so skilled is because they spend hours each day using Excel.

In multifamily real estate, Excel is used in many ways it was never intended to be used. Across owners and operators, many roles within multifamily organizations rely on Excel to manage data. Whether it’s portfolio-wide financial performance or granular operational data, many multifamily leaders lean on Excel to analyze vital portfolio information.

However, Excel simply wasn’t built for this. While it can be used effectively to analyze data, Excel has a number of weaknesses that can cost your organization time and money. In Excel, it takes hours to manually update data, it’s all too easy to insert errors, or get confused between multiple versions. Portfolios have literally millions of data points, and charts and rows are not built for that volume of data.

While you may admire Excel for its adaptability and usability across the business world, it isn’t the best tool for multifamily portfolio management. You should be aware of the drawbacks of Excel before you build your entire real estate business on it.

Slow Speed

Excel may be easy to use, but it’s certainly not the fastest way to analyze data. Pulling reports in Excel can take days or even weeks to complete accurately. One common use for Excel in multifamily real estate is monthly financial review. If you have a large portfolio, you have to analyze income from hundreds of properties across multiple states. In order to analyze performance accurately with Excel, asset managers must pull all of the data into a single spreadsheet, unify it, and consolidate it into the correct reports.

This entire process can take a team of skilled analysts 6 to 8 weeks to complete using Excel. By the time you have access to your financial performance data, the information is already old news. Even if you’re just looking for a single data point within your portfolio, a simple request can take days, according to Eddie Reiner, Director of Asset Management at Pensam Capital.

“I tell my data analyst that I want to look at effective rents in South Texas. Compiling the data from the management software and putting it into a spreadsheet was always a two to three day process,” Reiner explained.

Because of this delay, Reiner no longer uses Excel to manage his firm’s KPIs. It’s simply not an efficient way to analyze multifamily real estate data.


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Error-Prone

As many as 88% of spreadsheets include errors and the majority are caused by human error, according to research from the University of Hawaii. Because Excel is a manual tool, it’s incredibly easy for one person to input a small mistake into a spreadsheet. Even the very best property managers in the business have made a typo now and again.

When you’re talking about massive spreadsheets shared across a large multifamily organization, there could be hundreds of typos and other mistakes hidden in your data. It’s very hard to catch those errors and fix them using Excel. This means you could be using false data to make important business decisions, according to Chris Rodriguez, the Director of IT at PASSCO.

“We’re all looking to get consistency of data and get away from the spreadsheet mentality,” he said. “It’s so time-consuming and there’s always room for error or confusion.”

Excel is simply too easy for the average user to input mistakes into the data, leading to low data quality. If you can’t trust the data itself, you definitely can’t trust the analysis you do with Excel.

Communication Struggles

If you use Excel to manage data shared between owners and operators and across portfolio assets, you’ve probably experienced difficulties with version control. Investors will receive one spreadsheet from one property management company, and a different spreadsheet from another in an entirely different format, with different data, different charts of accounts, and different operational definitions. These spreadsheets are then passed around the company and changed slightly by everyone. This can easily lead to inaccurate versions of a spreadsheet floating around.

If your entire team isn’t working off of the same information, there’s no way that you’re able to be fully transparent and consistently communicate. Especially for a decentralized portfolio, this is incredibly important, said Dean Holmes, Chief Operating Officer for Madison Apartment Group.

“We all need to be using the same data and communicating from the same data,” Holmes noted.

Without a central and consistent source of truth for data within your portfolio, there will never be any agreement on what steps to take next. Excel could cause your leadership to be using the wrong set of data, and make a misguided decision for your portfolio.

Excel has its place, and it can be a huge asset to any business organization. But when it comes to managing the massive amounts of data collected by property management systems, it’s simply not the right tool for the job.