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Choosing the right comps is a critical step in the underwriting process. When projecting rent amounts in your model, you want to be sure your numbers are supported by the market.

To choose the most accurate comps, use this criteria in your selection:

1. Location

2. Number of units

3. Year of construction

4. Amenities

5. Size of units

6. Condition

First, let’s start where you can find rental comp information. Online sites like Apartments.com, Zillow, and Rent.com are commonly used to advertise rent information. Apartments.com is a great resource since it will list the year the property was built, number of units, asking rents, and amenities the property has.

Keep in mind, online websites list the asking rents of the property. The property may or may not be renting units at these rates, but they are advertising the units at these rates.

There are also paid databases like Costar, Yardi, etc.

It’s also important to note how additional charges like utilities and trash are charged. If you are comparing rents to a different property, be sure to find out if these ancillary charges are included in rent or not.

Location

Choose properties that are within a 1 - 5 mile radius of the subject property. Location is a huge factor for what properties can charge for rent. It’s important to consider that a property located next to a popular shopping center may be able to rent units higher than a property located next to a graveyard.

Number of units

Choose properties that have around the same number of the units as the subject property.

Year of construction

Properties built within 1 - 10 years of the subject property will be most accurate.

Amenities

The most accurate comps will have similar amenities as the subject property. A property that has a pool, fitness center, and car wash could probably demand higher rent than a property that lacks these amenities.

Size of units & condition

The size and condition of the unit will have a huge impact on the rent amount. A classic, outdated 1-bedroom unit that is 600 sqft will most likely rent much less than a newly renovated 1-bedroom unit that is 875 sqft.

When projecting rent amounts, I always like to be in the middle spectrum of the comps. I take into consideration the actual rent amount and the rent per square foot. If you are projecting rent amounts to be the highest in the market, you should have a really good reason to do so!

As an example, the below picture is how we are projecting rent amounts for our most recent deal.

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📈 Chart of The Week

Apartment Markets Where Occupancy Persisted in 2023

While most apartment markets saw occupancy decline in calendar 2023, a handful of metros held their ground, relatively speaking. In the U.S. overall, apartment occupancy dropped 80 basis points (bps) year-over-year, coming down from 2022 peaks and returning to its long-term normal range.

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