Commercial Real Estate: Analysis – Estimating Tenant Turnover

100% occupancy.....think again

Greetings from the metropolis of Cedar Crest, NM !

Back from my trip to Texas and trying to close on some deals.  Dealing with lenders has always been difficult…..but I think lenders are looking for ways to make it even more difficult…but I digress.

Anyway….

Today’s post comes from the help of my friend and commercial mortgage broker Terry Painter from The Apartment Loan Store.

In my analysis of an apartment deal in Texas, I asked Terry about estimating tenant turnover from a lender’s perspective.  I got a great reply from Terry and I wanted to share it.  Terry’s response is below…..

Rob, there are 5 main factors that our HUD appraisers use to estimate tenant turn over:

1. Quality of tenants (mesured by how long each tenant has occupied) (will
need monthly rent rolls for the past 3 – 6 months to determine this)
2. Historical occupancy (based on monthly rent rolls for the past year)or
market data for the submarket
3. Type of tenants (Students occupy an average of 9 – 10 months, Military
about a year, Seniors 4 years and longer,General public about 8 months)
4. Demand for the property in relationship with other properties in
the market
5. Time to make-ready the unoccupied units (critical on properties that stay
full)

So it is different for every property.  Even newer in-demand properties with
a waiting list average 2 – 3% turn over rate and result in 97% annual
occupancy.

Hope this is helpful…

Terry Painter, President
Business Loan Store
104 Monterey Drive
Medford, OR  97504
Mortgage Banker

Office  541-326-0570
Fax     888-404-7089
Cell     541-840-3078

Thanks Terry!

Until next time……rob

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