How To Analyze a Multifamily Rent Roll

Описание: Mike Taravella (@valueaddmike) discusses the 3 things that you need to understand when looking at a rent roll:

1) Total number of units - some operators may omit and hide units so always confirm

2) How many units are vacant - you need physical occupancy to be 90% for 90 days to qualify for agency loans

3) Delinquent Units - To make sure you understand and can project cash flow from properties

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(0:00) Introduction
(0:29) What is a Rent Roll?
(0:48) Total Units
(1:35) Total Vacant Units
(2:45) Delinquent Units
(3:26) Conclusion


Transcript
Hey everyone, value add Mike here today to discuss how to analyze a rent roll and multifamily. For those who don't know, my name is Mike Taravella. Value Add Mike. I've closed over $65 million in commercial real estate specifically in the multifamily sector with me and my partners. And today I wanted to good discuss how I analyzed one of the most important documents in commercial real estate, and that is the rent roll. So the rent roll is a document that lists all of the residents, their moving dates, their move out dates, when the leases expire, what the rent charges are, and the balance due. And the three things that I really analyze when looking at a rent roll is first, how many units are on the rent roll. There's a lot of times where you can look at the last number of the sequence and assume that's the rent how many units that are. But sometimes, there could be omitted units or you hear weird kooky things about unit, there's no unit 13. So when looking at a rent roll, I highlight all the rows that I have units and make sure I verify that the offering memorandum matches how many units are on the rent roll. Also, it's super important to understand how many units are down due to fires or other natural disasters or any other things that could happen in property management, which can be a handful. But first, it's important to know how many units that you have when analyzing a property. The second most important thing that I look at is how many of the total units that I have are vacant. So it's super important when looking at the understanding how many vacant there are because if you're qualifying for agency loans, you have to be at least physically 90% occupied for 90 days. So if you think about it, you're going into if you're looking at an investment that's 80% occupied, but the operator that you're looking at is qualifying for agency debt, there may be a discrepancy, and you have to confirm with your operator the assumptions, but also making sure that you hit hit that requirement for agency loans. Also, it's super important if the occupant if the vacancy is really high, you may be looking at bridge debt and community debt options because they're more forgiving on that 90 For 90 rule. So it's just important that you understand how heavy of a lift that you're investing in before you go through it. So the rent roll can kind of give peeks to that. And so just important that you understand how your team is going to operate the property, but also the marketing behind it as well. So you can reduce that vacancy and increase your occupancy. And the last thing that is super critical when looking at the rent roll is how many units are not paying. So I've seen a lot of many rent rolls that may have the balance due column omitted. But it's super important that if you don't have a balance due column in your rent roll that you follow up with your operator and see if they have a delinquency report. Because the last thing you want to do is take over a property that doesn't have strong collections and that you have to operate this property at a deficit when you first take on because there's a lot of work when taking over a property and the last thing you want to do is have most of your residents not paying even though it's physically filled. So those are the three things I look at is number of units. How many units are vacant and last but not least, how many residents are not paying. So if this video video gave you any added any value to your investing career, please like comment, subscribe, and any quick questions please put them in the comments and happy to help and your investing journey. Also make sure to follow click the link in the description to make sure that you sign up for our newsletter and investor updates. And until then we will see you next time