Calculating a market rental rate growth.
So I've got 5 apartment complexes I'm using for comps. If I wanted to calculate a market rental rate growth using just those five comps how would I go about that. Would I take the weighted average of all the comps by bed. I'm pretty confuse so on how I could use these comps and their over year rental rates an drew set up a table and formulas in excel to calculate that growth rate. I'd appreciate any feedback in the topic. I'm using axiometrics so if there's anything I can do with that then let me know.
run a property level report on each using axiometrics. It will give you rent growth for each and dollar amounts over at least trailing 3 years maybe. You could also run a non-subject CPS report and then within the report menu you should be able to see an aggregate rent growth per year.
Thanks I'll give it a shot
This is a super unhelpful comment, but at some point the old axiom "past performance is not an indicator of future results" holds true.
Take a step back and look at the macro situation of the market. Did it just undergo explosive growth? Has it recently been rezoned? Is it in a long term period of economic/demographic stagnancy or decline? Sounds self-evident to bake that into your 3 yrs trailing rent growth, but someone investing in real estate in Williamsburg, Brooklyn in 2015 would have seen rent growth off the charts, and would have gotten killed if their new development had come online in 2017, assuming 2013-15 levels of rent growth.
market rents are a phantom number. Net effective rents are important
Use to be 3% annually, but I am seeing more and more sponsors these days using 5% Year 1, 4% Year 2, 3% thereafter......Yikes.
but to answer your question, if you just want to use those comps I would take a weighted average by floor plan for each (1x1, 2x1, 2x2, 3x2), calculate their historic annual growth (simple division and percentages), then get an aggregated weighted average for all comps.
So I just sort of winged it and let me know if this makes sense.
For each property I went into axios and took the time series reports effective rent numbers for September 2017, 16,15,14, and 2013. I set up a table and then ran a five year CAGR on those numbers to come up with a rental growth rate. I did that for all five of my properties and then took the average of each of the CAGRs. However, not all of my comparable properties go back five years, so would this still make sense to do when you're using developments that have just delivered and have no operating history.
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