For any multifamily underwriting analysis, choosing the best comparable properties (comps) is critical to get right.

Your projected rents and other underwriting assumptions can quite literally make or break your deal.

Here's a step-by-step guide on how to select the best comps:

1. Size: Look for comparable properties of similar size. Most investors would agree it’s not accurate to compare a 10-unit to a 100-unit complex.

2. Distance: Comps should be within a reasonable distance from the property you're analyzing. The closer they are, the more accurate the comparison. Within 1-3 miles is deal.

3. Age: The property vintage makes a huge difference. Generally, newer assets will be considered higher quality and could higher quality tenants.

4. Amenities: Consider amenities like parking, gyms, pool, and laundry services. Properties with similar amenities will provide more accurate comparisons.

5. Unit Size: Comparing similar unit sizes in critical. Not all 1 bedroom / 1 bath units are created the same. I would not recommend comparing rent from a 1/1 unit that is 650sqft to a 1/1 unit that is 970 sqft unit.

6. Unit Layout and Finish: Are you comparing a unit that has stainless steel appliances, a smart package, and 9 foot ceilings to a unit with white appliances

7. Specific Location: Are you comparing a property that is located next to a graveyard to a property that is directly next to a large shopping/retail center with Whole Foods and Starbucks?

8. Use Third Party Resources: Various real estate websites and platforms provide data on recent property sales and rental rates. Use Apartments.com, Apartmentlist.com, Costar, and feedback from property management companies to confirm your assumptions.

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• Apartment List National Rent Report

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📈 Chart of The Week

Apartment Demand Finally Matching Up with Job and Income Growth

New lease traffic has been strong, indicating renters are shopping around as record volumes of supply have expanded their options. Thus, rent growth is faltering as supply does what it’s supposed to do – slow down intense price increases.

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