Underwritten NCF
Requirements
You must use the following table to calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. for Student HousingStudent HousingA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and Dedicated Student HousingDedicated Student HousingMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
For Dedicated Student HousingDedicated Student HousingMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , Fannie Mae will permit “by-the-bed” income and valuation for units occupied by students if the
- PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has at least 2 years of operating statements using that method, and
- rental rates are comparable to similar Student HousingStudent HousingA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
REQUIRED UNDERWRITTEN NCF |
||
---|---|---|
Item |
Function |
Description |
CALCULATION OF NET RENTAL INCOME | ||
1 |
GROSS RENTAL INCOME (GRI) – market rents for vacant units based on a current rent roll (multiplied by 12), plus:
|
|
2 |
PLUS |
To the extent deducted as an operating expense, rents for other non-revenue units (e.g., model units deducted in the “model apartment” operating expense in the “general and administrative” category, or actual rent from employee units deducted in the “employee” operating expense in the “payroll and benefits” category). |
EQUALS |
GROSS POTENTIAL RENT (GPR) |
|
3 |
MINUS |
Premiums (e.g., identifiable additional income from furnished units or short term leases) and/or corporate premiums (e.g., identifiable additional income from corporate units, housekeeping services, etc.). |
4 |
MINUS |
Physical vacancy – market rents for vacant units based on a current rent roll (multiplied by 12).1 |
5 |
MINUS |
Concessions - the aggregate amount of forgone residential rental income resulting from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.1 |
6 |
MINUS |
Bad debt - the aggregate amount of unpaid rental income determined to be uncollectable: include any adjustments to other income for bad debt.1 |
EQUALS |
NET RENTAL INCOME (NRI) |
|
1 The total of Items 4, 5, and 6 must equal or exceed the greater of
If trailing 12-month NRI is not available, use a minimum 10% of GPR. |
||
CALCULATION OF OTHER INCOME |
||
7 |
PLUS |
Actual other income (except premiums and corporate premiums) generated through ongoing operations. The income must:
You must assess the individual monthly other income within the prior full year operating statement or, at a minimum, an operating statement covering at least the trailing 6 months (annualized).
If there are fluctuations, you may use other income that exceeds the trailing 3-month other income (annualized), as long as it does not exceed the highest 1-month other income used in the trailing 3-month other income calculation. |
CALCULATION OF COMMERCIAL INCOME |
||
8 |
PLUS |
Actual income from occupied commercial space (and parking revenue for commercial spaces, if applicable). |
9 |
MINUS |
10% of the actual commercial income.2 |
2 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI. |
||
10 |
PLUS |
Premiums3, provided that the income must:
|
11 |
PLUS |
Corporate premiums3, provided that this income must:
|
12 |
PLUS |
Laundry and vending, parking, and all other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
EQUALS |
EFFECTIVE GROSS INCOME (EGI) |
|
3 Premium or corporate premium income cannot exceed 3% of GRI. |
||
CALCULATION OF OPERATING EXPENSES |
||
13 |
MINUS |
Line-by-line stabilized operating expenses. Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operations, not affected by a lease-up, rehabilitation, or other short-term positive or negative factors. Non-recurring, extraordinary operating expenses must not be included.
You must assess:
You must analyze historical operations at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and apply an appropriate increase over the prior year’s operations in determining an estimate. |
14 |
MINUS |
PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management fee equal to the greatest of:
|
15 |
MINUS |
Real estate taxes based on the greatest of:
You must consider any automatic tax reassessment upon acquisition in the next 12-month period. |
16 |
MINUS |
Insurance equal to:
|
17 |
MINUS |
Utilities, water and sewer, repairs and maintenance, payroll and benefits, advertising and marketing, professional fees, general and administrative, ground rent, and all other expenses per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
EQUALS |
UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI) |
|
18 |
MINUS |
Replacement ReserveReplacement ReserveCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. expense per Part III, Chapter 1: Student Housing Properties, Section 105: Replacement Reserve. |
EQUALS |
UNDERWRITTEN NCF |