The Definitive Guide to Underwriting Multifamily Acquisitions: Develop the skills to confidently analyze and invest in multifamily real estate by Robert Beardsley

Author:Robert Beardsley [Beardsley, Robert]
Language: eng
Format: mobi
Published: 2020-05-11T00:00:00+00:00

RENTAL & SALES COMPARABLES

Rental Comparables

Performing a rental comparables analysis, or rent comps, is the most time-consuming aspect of underwriting a multifamily investment. If a business plan leaves rents unchanged rent comps may be less important. However, the bulk of deals we look at have a value-add component where we renovate the property and improve management to capture higher market rents. When underwriting increased rents, rent comps are needed to justify the increases based on the market. Beyond rent increases, rent comps also support a lease-up business plan, or a situation where the subject property’s vacancy rate is higher than the market vacancy rate by showing that strong occupancy is possible at target rents – of course the lower the rents, relative to the market, the easier it will be to fill the property; the higher the rents, the tougher it will be.

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