New home lot supply drops to cycle lows
When analyzing the opportunity for your next rental apartment community, if you are not doing a Stripped Rent Analysis, you could be leaving money on the table. In short, a Stripped Rent Analysis is one that begins with asking rents at each comparable development and then “strips” those rents of all upgrades, amenities, premiums and other factors to arrive at a true base rent for a given home size. These “deconstructed” rents allowing for an accurate “apples to apples” comparison (particularly for markets in which comparable product does not exist), that ultimately result in the ability to maximize revenue through highly granular research. As summarized by our Consultant Taylor Chapel, the steps involved in this type of analysis include:
This type of analysis proves critical when a certain product type does not exist in a particular market. For example, OneC1ty, a proposed high-rise within a mixed-use development, in Nashville used the Stripped Rent Analysis methodology to determine that their rents should have been 29% higher than existing product in the market which consisted primarily of a mix of wrap and podium construction with the exception an older high-rise built in 1998. When it comes to stripping your rents or stripping your profit margin, the former must be done to avoid doing the latter.
Contact us to learn more about how we can help maximize value and minimize risk in your next rental community.
Taylor Chapel, Consultant – Advisory Dallas
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