Multi family development model
Hey guys, I'm trying to build a detailed multi family development model for a project. I've looked through several models online for guidance (CRE adventures, REFM) but I've found nothing in line with what I'm doing. I've attached the crappy draft of what I've done so far.
I've built out my unit matrix and lease up assumptions, and now starting to build out my cash flow. I created a market rent line item which is in-place rent grown at whatever growth rate necessary. I'm now trying to fill in the loss/gain to lease and abs/turnover vacancy line items to account for my second/third/fourth lease assumptions. I can easily do this for the first generation units, but I don't know how to proceed with the second, third, fourth generation units without making things overly complicated. Already tried offsetting, but it gets way to messy.
There must be a better way to do this. At a road block at the moment. Any help is appreciated.
i kinda get what you are doing, ive done value add where i have to take into account MCI(Major Capital Improvements) to improve the rent, however the increases in rent are based on % of total unit rehab etc. I also had to do a many statemented ifs because if enough rehab then the unit would go to market rent. Then the unit would have to be subject to the growth rate in the proforma.
A choose function could help, I would have to go back and find the model. You could use a choose which rent or growth rate to use based on which generation? Is there a simpler way to explain what you are doing?
Haha, well the most basic way I can explain it is how do I build out a multi family cash flow..on the rent side?
I'm literally projecting how units will lease up, expire, and release over my entire hold period, so that I can fill in my gain/loss to lease (the few times when market rent > contract rent) and turnover vacancy. It's all based on an assumption of how many units will lease per month, their term, and downtime.
The problem I'm experiencing is not being able to do this without modeling out each floor plan leasing up, each floor plan expiring, each floorplan releasing, each floorplan expiring again....etc. And I'll have to do the same for concessions. It just becomes way too messy (my calc page that I attached is only one generation of leasing). So, idk...maybe this is the right way to do it, or maybe there is a better way to accomplish this. I've never done multi fam before so this is a new one for me.
O.K. I get it.
Is it a ground up or value add play? My only question regarding when will resi leases expire is are the going off the market for a reason? Resi leases are not like commercial leases there is not market leasing assumptions. You wouldn't do this floor by floor like in Argus. After your projected initial lease up phase where you determine your velocity then subsequent years cash flows are just % Vacancy of Gross Revenue. You get PGI by Gross Revenue minus a % of vacancy and then if you have line items of other income(which YOU do) then add parking income etc. Boom, PGI.
Honestly I've seen the underwriting for MF vacancy from a brokerage perspective, everyone uses 3%-5% in my major market. Working for an operator I've seen higher vacancies because a unit or two will be vacant and it takes a month to lease. The higher you are pushing your rents the higher the vacancy will be.
But because I have modeled out rent regulated properties I know you can do something like you stated above. Let me know if this makes sense and I can send you something that could be helpful.
I was thinking of doing something like that...just modeling to 95% or 100%, and then applying a vacancy percentage for the rest of the hold period. Just thought it was wrong way to approach it.
I'm working off market rent is because I guess in my mind that would be the starting point for rent. From there, just net off vacancy (due to rollover and initial absorption) and gain/loss to lease (the instances when your units are locked in at rents below market). not sure if i'm making sense...
This is a ground up play on what is now a parking lot in a shopping center. No one at my firm knows multi fam so any help I can get would be extremely helpful.
Using the set %Vacancy is the right way and industry standard to do it so don't worry.
I don't think you need to model off any rollover. I 100% understand what you are saying, and it does happen in office but that is just because you are seeing multi-year leases. If you really want to then have the rent roll and projection proforma have row headers to include a:date, b:period(e.g. 1-120 for a 10-year proforma) and years. You then also include a grouped row before the rent at what the market rent is, so this would be on top of the rent roll. When you have vacancy cause of a lease rollover then have a max function for the 1st row with the market rate and the forward rate that includes your growth assumption.
But I honestly think this is extraneous work and haven't seen a REPE OM with this type of granularity. I'll send you a 1-unit proforma that I made for when I wanted to model different rates based on different criteria, hopefully it is somewhat helpful?
Honestly I think you're getting too detailed. You have your rents, you assume 94%-95% occupancy, you assume a X% renewal rate, and you assume Y% rent growth. You can model higher lease up during the summer as opposed to the winter too, for a little more month by month accuracy, and probably pro-rate a month free rent for your first round of leases, but you're still only taking down Z units a month from delivery and then only keeping that X% when the leases roll.
Ok. I think I get what you're saying. Thanks for the comment.
Does anyone have a multifamily financial model with a developer/management fee? (Originally Posted: 02/07/2018)
Hi guys, was wondering if anyone had a multifamily financial model with a developer/management fee that they could share with me? Would appreciate it. Thanks
dev fees and AM fees are usually structured pretty dynamically so I doubt you'd be able to create a set model that can capture all types of structures. Pm me if you have a specific fee structure you need help on.
You might be overthinking this. Both are just line items.
The development fee is just a line item in the capital budget, like "FF&E" would be, and the management fee is just a line item in the OpEx budget, like "Cable and Internet" would be.
Dev fees are usually a % of the development budget or a flat rate and Management fees are either on a per unit, per bed, or flat rate basis, but whatever it is it won't really fluctuate unless you're building a new phase every year.
This. It's 3% of EGI... sometimes lower if it's a huge property
So I'm doing a part time internship with a real estate development company that is going to start charging a development/management fee which I thought was usually around 2-3%? I'll have to look. But they have been giving their investors a full pay out at the end of the first year. They would like to change that so investors instead get a percentage return back over time.
so dev fees are to be paid out pro rated to % completion? If so, then calc would go as such:
3% * dev cost incurred to date * percentage completion of construction to date.
Also, are you referring to PM fees or AM Fees?
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