How do you analyze a multifamily rent roll for a loan?
Start at the unit level. A multifamily rent roll lists each unit with its type, square footage, lease dates, contract rent, market rent, concessions and balance owed. Summed, it gives gross potential rent, physical occupancy, loss to lease and the lease expiration schedule. Those totals only mean something once they tie to the trailing twelve month operating statement.
The tie-out is where problems surface. Gross potential rent on the rent roll should reconcile to T12 rental revenue after vacancy, concessions, bad debt and loss to lease. A gap usually means one of three things: the rent roll shows rents that are not being collected, concessions are being booked outside rental revenue, or the two documents cover different periods.
The OCC's Commercial Real Estate Lending handbook makes the same point about apartments: "Even though a review of the rent roll might indicate a high rate of occupancy, actual collections should be examined to determine the true economic occupancy and evaluate the competency of property management and the effectiveness of its collection efforts." Physical occupancy is a count of leased units. Economic occupancy is what the property actually collects.
What makes multifamily bridge loan underwriting different?
A bridge loan is sized on a business plan, not on the property as it stands. The sponsor proposes a capex budget per unit, a renovation premium per unit and a lease-up schedule, and the loan often carries an interest reserve to cover debt service until the renovated units stabilize. The pre-screen question is whether the in-place numbers support the starting point and whether the plan is plausible enough to underwrite.
The handbook defines the metrics. "The DSCR, calculated by dividing the NOI by the annual debt service requirements, measures the borrower's ability to service its debt." And "Debt yield is the ratio of NOI to debt," a measure "independent of the interest rate, amortization period, and capitalization rate." It also warns that "Use of interest reserves to fund interest payments for loans that should be generating cash flow such as those financing stabilized properties or speculative purchases of raw land is generally not appropriate."
Leverage has a ceiling in the interagency real estate lending guidelines, which say internal loan-to-value limits "should not exceed the following supervisory limits" and set 85 percent for improved property. Many bridge credit policies set tighter limits than that, and the exit matters as much as the entry: the loan has to refinance at stabilized NOI and a market rate, and the refinance DSCR at that exit rate is a test a pre-screen can run on day one.
How does DealScreen Multifamily screen a bridge request?
DealScreen Multifamily runs on the MightyBot platform with your multifamily credit box written as plain-English policies. It reads the rent roll unit by unit, rebuilds gross potential rent, occupancy, loss to lease and concessions, and ties them to the T12. In-place NOI and the sponsor's pro forma NOI are shown side by side, with every assumption that separates them listed.
The value-add plan is tested against itself. Capex per unit is compared with the renovation premium the plan needs, renovated units already on the rent roll are compared with the premium claimed, and the interest reserve is checked against the lease-up schedule. DSCR, debt yield and LTV are computed on in-place and stabilized NOI, and the refinance DSCR is computed at your exit rate.
Stress cases come from your policy. The handbook says "capitalization rates, interest rates, and DSCRs should be stress-tested to determine whether a property will likely remain viable during a period of economic stress." The screening memo shows each stress result next to the base case, and every figure opens the rent roll row or T12 line it came from.