👋Organic Rent Growth is Dangerous

[Justin Goodin]

This is the manual input in your underwriting model that reflects the percentage increase your rents will grow each year.

Unusually high organic rent growth inputs can be dangerous because it has a compounding effect.

Organic rent growth has a compounding effect in your underwriting model. Meaning, every year builds off of the previous year.

A reasonable organic rent growth input can be from 2% to 4% every year, but this depends on your business plan and market.

Sponsors can use organic rent growth to inflate investor returns in the underwriting model. 

What are you using for organic rent growth assumptions moving forward?

[Jay Hinrichs]

Quote from @Justin Goodin:

Quote from @Melanie P.:

I laughed at your casual use of the word, "sponsors," as though it is typical for investors to send their money off to heavily marketed investment schemes. Real estate isn't that complicated. Cut the sponsors out of your investments and you'll do better.

Yep it’s pretty common for investors to invest in syndications. Thanks for the insightful comment like always. 

LOL someone hates syndicators :)