Reforecasting multifamily NOI when the rent roll runs ahead of collections

The initial model carries $7.92 million of gross potential rent and $410,000 of loss to lease. Eight vacant units produce $222,000 of vacancy loss. Concessions and bad debt remain at the $90,000 and $45,000 recorded in the T-12. Annualized utility billings contribute $620,000, and the expense base remains at $3.333 million. The result is $4.770 million of day-one NOI.

The updated operating files do not change physical occupancy. They change the cash behind it. Two model units are coded as occupied but produce no rent. Nineteen current leases carry concessions whose remaining forward cost is $188,000. Eleven resident accounts are more than 30 days delinquent. Utility billings are running at $620,000 on an annualized basis, but the trailing six-month collection rate is 85.6%.

For this comparison, economic occupancy is net residential rent divided by the $7.51 million of annualized in-place rent after loss to lease. The definition stays fixed between cases; only the vacancy, nonrevenue, concession and collection inputs change.

The current payroll roster, turn invoices, service renewals and insurance term also support $218,000 more expense than the T-12. Replacing only the lines for which a current run rate exists reduces NOI to $4.202 million. The property did not lose occupancy between the two cases. The first case simply gave current rent the benefit of stale leakage and stale costs.

The rent roll's occupied flag is retained as a property-management fact, not used as a proxy for collected rent. The two model units remain occupied in the operating record but move into the nonrevenue line. The two employee units remain in loss to lease at their actual discounted rents. This preserves the leasing record without pretending that every occupied unit contributes the same economics.

Concessions are rebuilt from the leases rather than annualized from the latest T-12 line. Of the 19 concession-bearing leases, seven received free rent upfront, eight receive a monthly credit and four carry a later free month. The forward case includes only the remaining benefit under each executed lease. It does not repeat an upfront credit already recognized, and it does not drop a later free month because no cash concession happened in May.

The expiration schedule is kept separate from the in-place concession calculation. Thirty-one leases expire in the next 90 days, including 12 of the concession-bearing leases. Whether those residents renew, receive another concession or vacate belongs in the rollover cases. It is not resolved by quietly assuming every current lease rolls to market on its expiration date.

The May rent roll contains $7.51 million of annualized in-place rent after loss to lease. The initial case deducts the eight physical vacancies and then treats the remaining occupied rent as substantially collectible. The collection ledger gives a different answer. Eleven accounts are more than 30 days past due; five have payment plans, three are in legal and three have made no payment since April.

The revised case does not write off the entire delinquent balance and does not assume full recovery. It uses the property's six-month roll-forward by aging bucket: current balances collect at the observed current rate, payment plans at their scheduled amounts, and legal accounts at the property's realized recovery rate. That produces $132,000 of annual collection loss, $87,000 more than the T-12 bad-debt line.

Concessions require the same distinction between accounting history and remaining cash. The T-12 records $90,000 because several May leases did not exist during most of the trailing period. The executed obligations still outstanding at May 31 total $188,000 over the next 12 months. Together with the model units, the revised concession and collection treatment reduces net residential rent by $249,000.

The utility billing file shows $51,700 billed to residents in May, which supports the $620,000 annualized recovery in the initial model. The cash ledger shows why billing cannot be used on its own. Over the last six months the property collected 85.6% of water, sewer and trash charges after move-out balances, billing disputes and the property's vacant-unit share. The revised recovery is $531,000.

That collection factor is not applied to rent or to every other-income line. Parking and storage are rebuilt from the assigned spaces and cages in the ancillary ledger. Application, late and pet fees remain tied to their trailing incidence. This reduces other income by another $12,000 without inventing a single blended haircut across revenue categories that behave differently.

The expense update follows the same rule: current evidence replaces a trailing line; the rest of the T-12 remains intact. The property added a maintenance technician and a leasing associate during the trailing year, so the current roster adds $51,000. Recent make-ready invoices and the next 90 days of expirations add $72,000 to the annual turn and maintenance run rate. Renewed trash, landscaping and pest-control contracts add $43,000, and the current insurance term adds $52,000.

The $218,000 adjustment is not a blanket inflation factor. It is the difference between the expense periods represented inside the T-12 and the costs already in force at closing. Combined with the $350,000 revenue adjustment, it brings day-one NOI from $4.770 million to $4.202 million.

At the $84 million purchase price, the initial NOI produces a 5.68% going-in cap rate. The $50.40 million loan is constrained by 60% LTV and opens at a 9.46% debt yield. On interest-only debt service of $2.898 million, day-one DSCR is 1.65×.

The revised NOI produces a 5.00% going-in cap rate. If loan proceeds remain at $50.40 million, debt yield falls to 8.34%, below the 8.50% minimum. Debt yield now sizes the loan at $49.44 million. The $960,000 reduction in proceeds moves directly into the acquisition equity requirement before any change to fees, reserves or planned capital expenditure.

The difference is not a debate over whether 97.2% is a strong occupancy figure. It is a question of what the occupied rent supports after the obligations and collection history already present in the deal files are carried through the underwrite. At this leverage, every $85,000 of day-one NOI supports $1 million of debt. A relatively small treatment difference in concessions or bad debt can therefore change which loan test governs the transaction.

The revised case is not the only defensible forward view. The 19 current concessions can burn off without replacement. Delinquency can normalize toward the property's longer-term collection history. The 31 near-term expirations can also produce more downtime and free rent than the base case carries. Those are distinct cases applied to the same reconciled starting point, not reasons to leave the starting point unreconciled.

Cap Orbit can work across the current rent roll, unit-status ledger, executed leases, concession schedule, collection and delinquency files, utility billings, cash receipts, T-12 and T-3 operating statements, payroll roster, service contracts, insurance term, debt quote and existing acquisition workbook in the same deal. The first pass establishes the cutoff and accounting basis of each source, then ties the resident-level records to the revenue lines already in the model.

From there, you can have Cap Orbit rebuild in-place rent by unit, carry each remaining concession through its actual lease term, apply the property's collection behavior by delinquency bucket, reconcile utility billings to cash receipts and replace trailing expense lines where current contracts or payroll support a different run rate. The result can be written into the existing acquisition model rather than a parallel summary that leaves the underwriting unchanged.

The same reconciled record supports the cases that matter to this deal: current concessions burning off or being renewed, delinquent balances curing at different rates, the near-term expiration cluster producing different downtime, and utility recoveries converging toward billed amounts. Each case returns the same connected outputs—effective rent, Year 1 NOI, debt yield, loan proceeds, DSCR and required equity—with every source treatment visible.

That is the standard for AI on this asset class. The useful result is not a summary of the rent roll or T-12. It is an acquisition case in which physical occupancy, effective rent, collections and current operating costs resolve into the same NOI and the same capital structure.