Best analytical based methods for Forecasting Gross potential rent (GPR)for stabilized Multifamily property - GO!
Not looking for proprietary level methods.
[{"id": "i446ejh", "text": "This is applied economics.  You need to segment the households your property captures, analyze demand drivers...  This isn't a finance math game.  Obviously, forecasting the stage of the economic cycle is critical.  If you've never read any open markets committee reports by the board of governors of the fed, you're at a disadvantage.  Oxford Economics is probably the best shortcut.  Moody's reports have always been wrong in my experience.\n\nNote Costar uses metro division baseline forecasts by Oxford Economics.  Better than nothing, but really only applicable to Class A assets.", "replies": [], "depth": 1}, {"id": "i450mq5", "text": "On average, for a 250+ unit deal it takes anywhere from 12-15 months to cycle through your rent roll. In a high growth market and assuming your demographic supports it, look at the previous 4 months new leases rents (usually 15-20% of the rent roll) and project your top line to those numbers by end of year one. UW annual LTL to half of what your % growth assumption is. For year 1 it\u2019d be half of the % difference between your base case market rents vs. what\u2019s what\u2019s actually in place", "replies": [{"id": "i4aipuq", "text": "16-20 units per month is a pretty crazy clip during the labor shortage. Are you talking with uogrades or just a stabilized rollover plan with fluff and fold turns?\n\nI ask because I'm open to suggestions on how to increase turnover without sacrificing vacancy or putting too much product on the market and sacrificing rental income.", "replies": [{"id": "i4sno2p", "text": "I\u2019m talking straight organic rent growth in high growth markets in a mark to market trade. Depends on market, but in many sunbelt markets with serious shortages, you can accomplish at institutional grade deals with minimal disruption. UW in place LTL taking 24-36 months to burn off. If budgeting interior unit value add, then project no more than 3-4 units/month and reasonable down time which  will add 0.5%-1% incremental vacancy to your base case 5% factor. At the end of the day, your money on a value-add deal is the NOI you cap at exit and the spread of your unlevered ROC over that cap rate.  That said, your still sizing to a 10% return and 50% agency leverage with those super aggressive assumptions lol", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i45sdsu", "text": "I take a rolling average growth rate removing outliers like a bounceback from covid lows. Depending on the biz plan I'll also assume abnormally high vacancy and turnover as units are being renovated/rents brought to market.", "replies": [{"id": "i45ujxt", "text": "Trailing rent growth has a negative correlation with future rent growth. Historically periods with outsized rent growth are followed by periods of below average rent growth. .", "replies": [{"id": "i45uzrj", "text": "Perhaps. That's why I do not weigh huge growth from black swan events like covid.", "replies": [], "depth": 3}, {"id": "i4an3n6", "text": "Tell that to Phoenix.\n\nAt the risk of sounding perma-bullish, we are becoming more and more a renter nation. As one of the largest generations become more and more locked into the renter lifestyle, and the following generation looking to possibly be even bigger, we can't build enough apartments to keep up for various reasons.\n\nWe need about 300,000 new units built per year just to keep up with future demand..and that's only through 2030.\n\nQuestion is..Will they be built in a Chicago or in a Raleigh?\n\nThat said, I wouldn't underwrite and present more than 2-3% organic rents anywhere and would look to modeling forced appreciation though capital improvement plans..Higher organic rent growth figures strain credibility where most people are used to seeing conservative numbers.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i4ai2l4", "text": "Great thread.", "replies": [{"id": "i4b29ui", "text": "Indeed", "replies": [], "depth": 2}], "depth": 1}]