Multifamily development pro forma

The example, per unit

Developers and lenders read a multifamily deal per unit, so here is the example's $14,848,230 broken down across its 48 units.

From the rent roll to NOI

48 units at $2,350 a month is $1,353,600 of gross potential rent a year. 5% vacancy and credit loss takes off $67,680, and $75 a unit a month of parking, storage and pet income adds $43,200. Operating expenses of $7,200 a unit a year, for taxes, insurance, payroll, repairs and management, come to $345,600, 26.0% of effective gross income. That leaves $983,520 of stabilized NOI.

What moves a multifamily deal

Each row changes one input and leaves the rest as modelled.

Rent and vacancy hit NOI almost dollar for dollar: 5% less rent takes $64,296 off NOI, and 5 more points of vacancy takes $67,680. A 10% rise in operating expenses takes $34,560. At a 5.5% exit cap every dollar of NOI is worth $18 of value, which is why small rent assumptions move profit so much. A longer lease-up leaves NOI alone but adds interest and pushes the sale out, so it shows up mostly in total cost and the IRR.

What it leaves out for apartments

It uses one average rent, so a unit mix has to be averaged first. (New to the terms? Start with what a development pro forma is.) There are no concessions, no rent growth during lease-up and no property tax reassessment at completion; put realistic stabilized numbers in instead. Affordable housing with tax credits and condo projects sold unit by unit need a different model. The full list of what the pro forma models, and what it does not, is on the real estate development pro forma template page, and a walk-through of this same building, month by month, is in the pro forma example.