Multifamily Properties Value driver / potentials and risk

• Proximity to employment

  • downtown area of major cities

• unit interior finishes & amenities

  • new construction

  • views

  • renovated interiors

  • renovated common areas

• experiential component

  • gyms

  • playgrounds

  • dog parks

  • dog washing stations

  • entertainment centers

• Renovation timing

  • 12 - 36 month or more to get through all units at large properties

• rent control

  • government regulations may dictate rent increases

• quick drops in rent with short lease terms

  • multifamily properties subject to quick variations in market rental rates

• falling home values

  • lower home values results in lower monthly payments

  • rent vs buy analysis

• mark to market lease up opportunities

• affordable housing

• forced appreciation and quick value creation

• rising area employment

• rising home values

• Total potential base rental revenue

  • asssumes 100% occupancy at 100% market rates

• Base Rent / Unit / Month

• Physical vacancy

• Economic Vacancy

  • model units

  • Loss to lease

  • concessions

  • bad debt

• Difference between current market rates and in place rents

—> Example:

• Market rent 2.500 $ unit / month

• in place lease rent 2.300 $ unit / month

• Loss to lease 200$ (8%)

• X month free

• use to incentivize tenants to sign long term ( often 12+ month) leases

• net effective rent

  • Total base rent to be collected / Number of lease month

  • 2000$ / month with 2 month freee for 14 month = 24.000 / 14

• Contractual rent owed but not able to be collected

• often inversly correlated ith rental reates

  • High base rent

    • low credit loss

  • low base rent

    • high credit loss