12 underwriting pitfalls.
Where have you seen costly mistakes?
---- Background ----
We're working on a case study covering rent comps and market analysis. How do investors underwrite post-renovation multifamily rents? We drop our students into investors' shoes and want to include tips on common pitfalls...
---- 12 Rent Comp & Underwriting Pitfalls ----
1. Taking asking rents at face value
Quoted rents aren’t collected rents. Always adjust for concessions. A “free month” on a 12-month lease is an 8% haircut you can’t ignore.
2. Assuming "renovated" means the same everywhere
One property’s “renovated” might be new paint and lights; another’s could be a full-gut. You need to know what was actually done—or you’ll underbuild or overpay.
3. Ignoring finish level differences
Rent follows quality. If your comp has quartz counters and stainless appliances, and yours has carpet and laminate, you’re not playing in the same league.
4. Forgetting that location still matters—even within a submarket
School district lines, grocery access, street traffic, or just being on the wrong corner can mean a $150/month swing. Zip code comps don’t cut it.
5. Letting the highest rent set your target
The top end of the comp set is often aspirational. Don’t build your plan around the hero number. Underwrite to what you can actually achieve and lease.
6. Not watching occupancy and leasing velocity
A comp getting $1,750 isn’t helpful if it’s 89% occupied or took six months to lease up. Always ask: at what speed and with what kind of stickiness?
7. Ignoring rent per SF when it doesn’t fit the story
Rent per unit tells one story. Rent per square foot tells another. You need both to make sense of how comps stack up—and where your asset really fits.
8. Assuming concessions are temporary
Some discounts are structural. If everyone’s offering waived fees or free parking, chances are you will too. It may not go away after lease-up.
9. Trusting broker data without verifying
Broker OMs are a great place to start but they’re designed to sell. Call the comps. Walk the properties. Get the real story behind the numbers.
10. Forgetting property taxes go up with NOI
If your plan is to raise rents and push value, expect the assessor to notice. Don’t assume taxes stay flat after renovation. Budget for the reassessment.
11. Overlooking unit mix and size
A comp with smaller units will show higher rents per foot, but lower rents per door. Don’t benchmark blindly. Understand what you're adjusting to.
12. Treating rent potential like a formula
Rent isn’t just a math problem. Be honest about what your team can actually get done. Experience matters.
---- Advice or feedback? ----
What tips would you add, takeaway, or modify?
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