Some Multifamily Traders Are Underwriting four% Hire Decreases

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Some Multifamily Investors Are Underwriting 4% Rent Decreases

Trion properties stays busy during the pandemic. The company is reporting strong rental income, new leasing activity, and has remained an active buyer through the pandemic. Six or seven more properties are expected to be purchased this year, adding more than 600 units to the portfolio.

“We are very active and net buyers. We have already closed one property and are closing two more in the next few weeks. In 2020 we expect to buy six to seven properties, maybe more. We buy with COVID discounts of 4% to 10%. " Max Sharkansky, Co-founder of Trion Properties, tells GlobeSt.com.

The discount makes sense as Trion expects rents to fall next year. The company recorded negative rental growth of 4% in the first year and positive rental growth in the following years. “We are assuming negative rental growth in the first year and positive rental growth in years two, three, four and five with a term of five years. If you combine the first and second years, we are down to zero in the first two years. So we assume that rents will be where they are today in two years, ”says Sharkansky. "We think this is a pretty conservative way of underwriting."

As for the company's current portfolio, rental income and occupancy have remained healthy, with nominal declines due to the pandemic. “In our portfolio, market rents have remained pretty strong,” says Sharkansky. “We usually shop in the suburbs of the first ring. These bags have persisted across the country. I think that's one reason we are fine. "

New leases were a similar story. "New moves have held their own," says Sharkansky. “Our utilization is 93% to 94%, instead of 95% before COVID. In July we burned all of our concessions. We're re-introducing some in some properties that needed a little boost, but we're almost franchise-free across the portfolio. "

Rental income in August followed a trend similar to that of the previous months, despite the expiry of unemployment benefits through the CARES law. Sharkansky is also optimistic about September. “The break in unemployment benefits for a few weeks did not have a major impact on our portfolio. Some properties fell behind, but there wasn't a large impact portfolio, ”he says. “With unemployment benefits resuming, I would expect the rental collections to be in September where they were in May, June and July. On the operational side, we've left some people with credit, which helps, and we can sublet these units to people who pay market rents. "

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