Multi-Family Acquisition: Income Growth Assumptions

Purpose

The purpose of this post is to outline the key functions of the Income Growth Assumptions in CREModels multifamily acquisition models. These features should be universal across all acquisition models unless noted otherwise.

Organic Rate Growth

The Organic Rate Growth inputs allow the user the enter the expected Gross Rental Income growth for each year of the analysis. Gross Rental Income in the Year 1 Pro Forma section (when no value is entered for Organic Rate Growth – Analysis Year 1) is based on either the Current Unit Mix (default) or the T-12 historical data, which the user may change by using the Revenue Type dropdown in the Year 1 Pro Forma section of the INPUTS tab:

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If a value is entered for Organic Rate Growth in Analysis Year 1, the Gross Rental Income displayed in the Year 1 Pro Forma section will be calculated as the Rent/Year (from the Existing Rent Roll section of the Unit Mix) grown by the Year 1 Organic Rate Growth.


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If the user selects “Annualized Period” in the dropdown as the Revenue Type, the model will use the T-12 total Gross Rental Income as the Gross Rental Income for Analysis Year 1 of the pro forma statement. If Current Unit Mix is selected as the Revenue Type, the model will calculate the Gross Rental Income achievable based on the Current Unit Mix information entered in the Unit Mix section.

Physical Vacancy %

The Physical Vacancy % inputs allow the user to enter the expected Physical Vacancy (%) for each year of the analysis. During each year of the analysis, pro forma Physical Vacancy loss will be calculated as the product of the entered values for Physical Vacancy % and the pro forma Gross Rental Income.


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Bad Debt % of GPR

The Bad Debt % of GPR inputs allow the user to enter the expected Bad Debt (%) for each year of the analysis. During each year of the analysis, pro forma Bad Debt will be calculated as the product of the entered values for Bad Debt % of GPR and the pro forma Gross Rental Income.


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Average Occupancy

Average Occupancy (based on down units) is provided to show the effect of future renovations on vacancy within the property. Average Occupancy (based on down units) only accounts for vacancy from down units due to renovations (does not include physical/economic vacancy). Note: Average Occupancy will only calculate vacancy from renovation units for which an Avg Reno Downtime value is entered in the Unit Mix. If values are entered for # Units Reno’d but there are no values are entered for Avg Reno Downtime, these units will not be included in the calculation of Average Occupancy (based on down units).



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