# Multifamily Benchmarks & Market Standards

A comprehensive reference for underwriting, evaluating, and benchmarking multifamily investment opportunities. These benchmarks reflect institutional-quality standards and should be adjusted for local market conditions, property vintage, and current economic cycle positioning.

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## Operating Expense Benchmarks

Operating expenses are the single largest controllable factor in multifamily NOI. Understanding per-unit benchmarks by property class, region, and size allows underwriters to quickly identify properties that are over- or under-managed.

### By Property Class

| Expense Category | Class A ($/unit/yr) | Class B ($/unit/yr) | Class C ($/unit/yr) |
|---|---|---|---|
| Insurance | $600 - $800 | $500 - $700 | $400 - $600 |
| Property Taxes | Market Dependent | Market Dependent | Market Dependent |
| Maintenance & Repairs | $800 - $1,000 | $900 - $1,200 | $1,000 - $1,400 |
| Management Fee | $80 - $100/unit/mo | $60 - $85/unit/mo | $50 - $75/unit/mo |
| Turnover Cost | $2,000 - $3,000 | $1,500 - $2,500 | $1,200 - $2,000 |
| CapEx Reserves | $350 - $500 | $300 - $450 | $250 - $400 |
| Utilities (owner-paid) | $1,200 - $2,000 | $1,000 - $1,800 | $800 - $1,500 |
| Payroll / On-site Staff | $1,200 - $2,000 | $800 - $1,500 | $500 - $1,000 |
| Marketing / Advertising | $200 - $400 | $150 - $350 | $100 - $250 |
| Administrative / G&A | $300 - $500 | $250 - $400 | $200 - $350 |
| Landscaping / Grounds | $200 - $400 | $150 - $350 | $100 - $250 |
| Contract Services | $300 - $600 | $250 - $500 | $200 - $400 |
| **Total OpEx** | **$7,500 - $11,000** | **$6,000 - $9,500** | **$5,000 - $8,000** |

### By Region

| Region | Avg OpEx ($/unit/yr) | Key Cost Drivers |
|---|---|---|
| Sun Belt (TX, FL, AZ, GA, NC) | $5,500 - $7,500 | Lower labor costs, higher insurance (hurricane/flood), moderate taxes (except TX) |
| Northeast (NY, NJ, CT, MA, PA) | $8,000 - $12,000 | High taxes, high labor, heating costs, regulatory compliance |
| Midwest (OH, IN, MI, IL, MN) | $5,000 - $7,000 | Moderate taxes, heating costs, lower labor, aging building stock |
| West Coast (CA, WA, OR) | $7,500 - $10,500 | High labor, high insurance (earthquake/fire), regulatory burden, water costs |
| Mountain West (CO, UT, NV, ID) | $5,500 - $7,500 | Growing markets, moderate costs, increasing insurance |

### Property Taxes by State (Top 10 Highest Effective Rates for Multifamily)

| Rank | State | Effective Tax Rate (% of value) | Approx. $/unit/yr (on $150K/unit) | Notes |
|---|---|---|---|---|
| 1 | New Jersey | 2.2% - 2.8% | $3,300 - $4,200 | Highest in nation, limited appeal success |
| 2 | Illinois | 2.0% - 2.5% | $3,000 - $3,750 | Cook County especially high, frequent reassessments |
| 3 | Texas | 1.8% - 2.3% | $2,700 - $3,450 | No income tax offset, aggressive appraisal districts |
| 4 | Connecticut | 1.7% - 2.2% | $2,550 - $3,300 | High mill rates, declining population pressure |
| 5 | New York | 1.5% - 2.0% | $2,250 - $3,000 | NYC has separate system, upstate varies widely |
| 6 | Wisconsin | 1.5% - 1.9% | $2,250 - $2,850 | Stable assessments |
| 7 | Nebraska | 1.5% - 1.8% | $2,250 - $2,700 | Often overlooked market |
| 8 | Ohio | 1.4% - 1.8% | $2,100 - $2,700 | County-dependent, appeal-friendly |
| 9 | Pennsylvania | 1.3% - 1.7% | $1,950 - $2,550 | Philadelphia highest, rural areas lower |
| 10 | Michigan | 1.3% - 1.7% | $1,950 - $2,550 | Prop A caps annual increases |

**Low-tax states for multifamily**: Florida (0.8-1.2%), Colorado (0.5-0.8%), Arizona (0.6-0.9%), Georgia (0.8-1.1%), North Carolina (0.7-1.0%).

### By Unit Count (Economies of Scale)

| Property Size | Mgmt Fee (% of EGI) | Mgmt Fee ($/unit/mo) | Staffing Model | Total OpEx Impact |
|---|---|---|---|---|
| 10 - 50 units | 8% - 10% | $80 - $120 | Off-site manager, part-time maintenance | Higher per-unit costs, limited negotiating power |
| 50 - 100 units | 6% - 8% | $65 - $95 | Part-time on-site manager, full-time maintenance | Moderate economies, some bulk purchasing |
| 100 - 200 units | 5% - 7% | $55 - $80 | Full-time manager, 1-2 maintenance staff | Good economies, dedicated leasing staff |
| 200 - 400 units | 4% - 6% | $45 - $70 | Full management team, maintenance crew | Strong economies, specialized roles |
| 400+ units | 3% - 5% | $35 - $60 | Full on-site team, assistant managers | Maximum economies, potential for ancillary revenue |

### Insurance Deep Dive

Insurance costs have escalated dramatically since 2020 and deserve special attention in underwriting.

- **Base property insurance**: $400 - $600/unit/year (non-coastal, no catastrophic exposure)
- **Coastal / hurricane zones**: $800 - $1,500/unit/year (FL, Gulf Coast, Carolinas)
- **Earthquake zones**: Add $100 - $300/unit/year (CA, Pacific Northwest)
- **Flood zones (FEMA)**: Add $200 - $800/unit/year depending on zone classification
- **Liability / umbrella**: $50 - $150/unit/year
- **Trend**: Insurance costs increasing 10-25% annually in many markets since 2020
- **Underwriting best practice**: Budget 5-10% annual insurance escalation minimum

### Management Fee Structures

- **Percentage of EGI**: Most common structure. Ranges from 3% (institutional, 500+ units) to 10% (small properties, intensive management). Standard is 5-8% for 100-300 unit properties.
- **Per-unit fee**: Alternative structure. $50 - $100/unit/month. Provides more predictability.
- **Hybrid**: Base percentage + incentive fees for occupancy or NOI targets.
- **Self-management**: Viable at 50+ units for experienced operators. Savings of 2-4% of EGI but requires infrastructure.
- **Additional fees to watch**: Lease-up fees (typically one month's management fee per unit leased), construction management fees (5-10% of project cost), acquisition/disposition fees (0.5-1% of price).

---

## Rent Benchmarks

### Average Monthly Rents by Unit Type and Class

| Unit Type | Class A | Class B | Class C |
|---|---|---|---|
| Studio (350-500 SF) | $1,400 - $2,200 | $1,000 - $1,500 | $700 - $1,100 |
| 1BR/1BA (600-800 SF) | $1,600 - $2,800 | $1,100 - $1,800 | $800 - $1,300 |
| 2BR/2BA (900-1,200 SF) | $2,000 - $3,500 | $1,300 - $2,200 | $1,000 - $1,600 |
| 3BR/2BA (1,100-1,400 SF) | $2,400 - $4,200 | $1,500 - $2,600 | $1,200 - $1,900 |

**Note**: These are national averages. Gateway markets (NYC, SF, LA, Boston, DC) can be 50-150% higher. Tertiary markets can be 20-40% lower.

### Rent per Square Foot Benchmarks

| Market Tier | Class A ($/SF/mo) | Class B ($/SF/mo) | Class C ($/SF/mo) |
|---|---|---|---|
| Gateway | $3.50 - $6.00+ | $2.50 - $4.00 | $1.75 - $3.00 |
| Primary | $2.00 - $3.50 | $1.50 - $2.50 | $1.00 - $1.75 |
| Secondary | $1.50 - $2.50 | $1.10 - $1.80 | $0.80 - $1.30 |
| Tertiary | $1.00 - $1.75 | $0.80 - $1.30 | $0.60 - $1.00 |

### Rent Growth Rates by Market Tier

| Market Tier | Annual Growth (Stabilized) | Peak Cycle Growth | Downturn Expectation | Recovery Speed |
|---|---|---|---|---|
| Primary (Top 25 MSAs) | 3% - 5% | 8% - 15%+ | -2% to +1% | 12-18 months |
| Secondary (Top 50 MSAs) | 4% - 7% | 10% - 20%+ | -1% to +2% | 6-12 months |
| Tertiary (Smaller markets) | 2% - 4% | 5% - 10% | 0% to +2% | Slower but less volatile |

**Key growth drivers**: Job growth, population migration, supply pipeline, affordability relative to homeownership, local economic diversification.

**Underwriting best practices**:
- Year 1: Use actual lease trade-out data, not market projections
- Years 2-3: 2-4% annual growth (conservative)
- Years 4-5+: 2-3% (revert to long-term average)
- Never underwrite >5% annual growth unless specific lease-up or renovation program justifies it

### Rent-to-Income Ratios

- **Target**: 30% of median household income (widely accepted standard)
- **Affordable threshold**: 25-30% (strong demand, low default risk)
- **Moderate**: 30-35% (acceptable, standard in most markets)
- **Stretched**: 35-40% (higher turnover risk, collection challenges)
- **Distressed**: 40%+ (significant demand risk, regulatory attention)

**How to use**: Compare your asking rents to the median household income in the census tract / zip code. If rents require income that exceeds the area median, demand risk increases.

### Loss-to-Lease Analysis

Loss-to-lease measures the difference between current in-place rents and achievable market rents.

| Loss-to-Lease Range | Interpretation | Action |
|---|---|---|
| 0% - 2% | Tight to market | Rents are at or near market. Limited organic upside. |
| 2% - 5% | Modest upside | Normal leasing friction. Capture through renewals and new leases. |
| 5% - 10% | Moderate value-add | Significant upside via lease rollovers. 12-24 month capture period. |
| 10% - 15% | Strong value-add opportunity | Major upside. May indicate deferred management or renovation potential. |
| 15%+ | Substantial repositioning | Large spread suggests major operational or physical improvements needed. Verify comps are truly comparable. |

**Calculation**: Loss-to-Lease % = (Market Rent - In-Place Rent) / Market Rent x 100

**Caution**: Verify market rent comps are truly comparable (same class, condition, amenities). Inflated market rents create false value-add narratives.

### Ancillary Income Benchmarks

| Revenue Source | Typical $/unit/mo | Implementation Notes |
|---|---|---|
| Pet rent | $25 - $75 | Plus $200-500 pet deposit. 40-60% of tenants have pets. |
| Parking (covered/garage) | $50 - $200 | Market dependent. Higher in urban/dense suburban. |
| Storage units | $50 - $150 | If space available. High-margin revenue. |
| Laundry (owner-operated) | $20 - $40 | Revenue share with vendor is lower ($10-20). |
| RUBS (utility billback) | $50 - $150 | Ratio utility billing. Water/sewer most common. |
| Trash valet | $20 - $40 | Contracted service, pass through to tenant. |
| Cable/internet bulk | $10 - $30 | Bulk contract with provider, mark up to tenant. |
| Application fees | $5 - $15 (amortized) | $50-100 per application, allocated across units. |
| Late fees | $10 - $25 (amortized) | 3-5% of tenants pay late each month. |
| **Total ancillary** | **$150 - $400** | **Strong ancillary income = 8-15% of total revenue** |

---

## Occupancy Standards

### Physical Occupancy Benchmarks

| Occupancy Level | Rating | Interpretation | Action |
|---|---|---|---|
| 97%+ | Exceptional | Rents may be below market. Test rent increases. | Push rents, reduce concessions |
| 95% - 97% | Excellent | Healthy, stabilized property. Target range. | Maintain current strategy |
| 93% - 95% | Good | Slight softness. Normal seasonal variation. | Monitor trends, adjust marketing |
| 90% - 93% | Below market | Underperforming. Investigate causes. | Lease audit, competitive analysis, consider concessions |
| 85% - 90% | Weak | Significant issues (management, condition, market). | Operational overhaul, renovation assessment |
| 80% - 85% | Distressed | Major intervention needed. | Bridge loan territory, deep value-add |
| Below 80% | Severely distressed | Potential regulatory/structural issues. | Full repositioning or redevelopment consideration |

### Economic Occupancy vs Physical Occupancy

Economic occupancy is the more meaningful metric because it captures actual revenue collection.

**Economic Occupancy** = Actual Collected Revenue / Gross Potential Revenue x 100

| Scenario | Physical Occupancy | Economic Occupancy | Gap Cause |
|---|---|---|---|
| Healthy | 95% | 93-94% | Normal 1-2% gap from concessions, bad debt |
| Concession-heavy | 95% | 88-91% | Heavy concessions masking weakness |
| Collection issues | 95% | 85-90% | Non-paying tenants, bad debt |
| Strong | 96% | 95%+ | Minimal concessions, strong collections |

**Rule of thumb**: Economic occupancy should be within 2-3% of physical occupancy. A gap >5% is a red flag requiring investigation.

### Seasonal Occupancy Patterns

| Season | Typical Impact | Notes |
|---|---|---|
| Spring (Mar-May) | +1-3% occupancy | Peak leasing season. Highest demand, best rent growth. |
| Summer (Jun-Aug) | Peak occupancy | Highest occupancy. Turnover concentrated here (move season). |
| Fall (Sep-Nov) | -0.5-1.5% from peak | Gradual decline. Student markets spike in Aug/Sep. |
| Winter (Dec-Feb) | -1-3% from peak | Lowest demand. Avoid lease expirations here if possible. |

**Lease expiration management**: Stagger lease expirations to avoid >10% of leases expiring in any single month. Target heavier expiration in spring/summer months (Apr-Sep). Offer 14-month or 16-month leases to shift winter expirations to favorable months.

### Lease Renewal Metrics

| Metric | Strong | Average | Weak |
|---|---|---|---|
| Renewal rate | 65% - 75% | 55% - 65% | Below 55% |
| Average lease term | 13-14 months | 12 months | Month-to-month heavy |
| Renewal rent increase | 3% - 6% | 2% - 4% | 0% - 2% |
| Days to re-lease (if vacated) | 15-25 days | 25-40 days | 40+ days |
| Move-out notice compliance | 85%+ | 70-85% | Below 70% |

**Turnover cost impact**: Every turnover costs $1,500 - $3,000 (painting, cleaning, repairs, vacancy loss, marketing, leasing commission). A 10% improvement in renewal rate on a 200-unit property saves $30,000 - $60,000 annually.

---

## Cap Rate Ranges

### By Market Tier

| Market Tier | Class A | Class B | Class C | Value-Add |
|---|---|---|---|---|
| Gateway (NYC, SF, LA, Boston, DC, Chicago) | 4.0% - 4.75% | 4.5% - 5.25% | 5.0% - 5.75% | 5.0% - 6.0% |
| Primary (Top 25 MSAs) | 4.5% - 5.25% | 5.0% - 5.75% | 5.5% - 6.5% | 5.5% - 6.5% |
| Secondary (Top 50 MSAs) | 5.0% - 5.75% | 5.5% - 6.5% | 6.0% - 7.0% | 6.0% - 7.5% |
| Tertiary (Smaller markets) | 5.5% - 6.5% | 6.0% - 7.5% | 7.0% - 8.5% | 7.0% - 9.0% |

### By Property Vintage / Strategy

| Strategy | Typical Cap Rate Spread | Description |
|---|---|---|
| Core (new construction, stabilized) | Lowest cap rate (benchmark) | Institutional quality, minimal risk, strong location |
| Core-Plus (stabilized, minor upside) | +25-75 bps vs Core | Stable with modest rent growth or expense reduction potential |
| Value-Add (renovation, repositioning) | +100-200 bps vs Core | Requires capital investment, management improvement. Buy on current NOI. |
| Opportunistic (distressed, turnaround) | +200-400 bps vs Core | Significant risk, heavy capital needs, lease-up required |
| Development (ground-up) | Yield on cost target: 150+ bps above stabilized cap rate | New construction risk premium |

### Cap Rate Spread Over Treasuries

The spread between multifamily cap rates and the 10-year US Treasury yield provides a measure of relative value.

| Spread Level | Interpretation |
|---|---|
| 200+ bps | Historically wide. Attractive entry point for buyers. |
| 150-200 bps | Normal / fair value range. |
| 100-150 bps | Tight. Market may be overheated or treasuries elevated. |
| Below 100 bps | Very tight. Exercise caution. Limited margin of safety. |

**Historical average spread**: ~150-180 bps for institutional multifamily.

### Cap Rate Compression/Expansion Factors

| Factor | Effect on Cap Rates |
|---|---|
| Interest rate decreases | Compression (lower cap rates, higher values) |
| Strong rent growth expectations | Compression |
| Capital inflows to multifamily | Compression |
| Interest rate increases | Expansion (higher cap rates, lower values) |
| Recession / job losses | Expansion |
| Oversupply (new construction) | Expansion |
| Institutional demand | Compression |
| Regulatory risk (rent control) | Expansion |

---

## Per-Unit Valuation

### Price Per Unit by Market Tier

| Market Tier | Class A ($/unit) | Class B ($/unit) | Class C ($/unit) |
|---|---|---|---|
| Gateway | $300,000 - $500,000+ | $200,000 - $400,000 | $150,000 - $250,000 |
| Primary | $200,000 - $350,000 | $150,000 - $250,000 | $100,000 - $175,000 |
| Secondary | $120,000 - $200,000 | $80,000 - $150,000 | $60,000 - $120,000 |
| Tertiary | $80,000 - $150,000 | $50,000 - $100,000 | $40,000 - $80,000 |

### Replacement Cost Analysis

Replacement cost provides a floor for property valuation in strong markets.

| Component | Cost Range ($/unit) | Notes |
|---|---|---|
| Land | $15,000 - $100,000+ | Highly market dependent. Can be 10-40% of total. |
| Hard construction costs | $100,000 - $250,000 | Wood frame: $100-150K. Concrete/steel: $175-250K. |
| Soft costs (permits, design, fees) | $15,000 - $40,000 | Typically 12-18% of hard costs |
| Developer profit/overhead | $10,000 - $30,000 | 8-15% of total project cost |
| Financing costs during construction | $8,000 - $20,000 | 12-24 month construction period |
| **Total replacement cost** | **$150,000 - $400,000+** | **Varies enormously by market and product type** |

**Buying below replacement cost** is a strong value indicator -- it means the property cannot be replicated for the acquisition price. This creates a natural barrier to competitive new supply.

### Price Per Square Foot

| Market Tier | Class A ($/SF) | Class B ($/SF) | Class C ($/SF) |
|---|---|---|---|
| Gateway | $400 - $700+ | $250 - $450 | $175 - $300 |
| Primary | $250 - $400 | $150 - $275 | $100 - $200 |
| Secondary | $150 - $250 | $100 - $175 | $70 - $130 |
| Tertiary | $80 - $150 | $60 - $120 | $45 - $90 |

---

## Financing Standards

### Typical Loan Parameters by Source

| Parameter | Agency (Fannie/Freddie) | CMBS | Bank | Bridge | Life Co |
|---|---|---|---|---|---|
| LTV | 65% - 70% effective sizing; stated max can reach 80% | 65% - 75% | 65% - 70% | 70% - 80% | 55% - 65% |
| DSCR Minimum | 1.25x | 1.25x - 1.35x | 1.20x - 1.30x | 1.0x (I/O) | 1.40x+ |
| Debt Yield Min | 8% - 9% | 9.5% - 11% | N/A (DSCR focused) | N/A | 9% - 10% |
| Rate Type | Fixed | Fixed | Fixed or Floating | Floating | Fixed |
| Term | 5, 7, 10, 12 years | 5, 7, 10 years | 3 - 7 years | 1 - 3 years | 10 - 30 years |
| Amortization | 30 years | 30 years | 25 years | Interest Only | 25 - 30 years |
| Recourse | Non-recourse (carve-outs) | Non-recourse (carve-outs) | Full recourse (typically) | Recourse or non-recourse | Non-recourse |
| Loan Size | $1M - $100M+ | $2M+ | $500K - $25M | $1M - $50M+ | $5M+ |
| Timeline | 45 - 60 days | 60 - 90 days | 30 - 45 days | 14 - 30 days | 60 - 90 days |
| Prepayment | Yield maintenance or defeasance | Defeasance | Minimal (0-1%) | None or 1% | Yield maintenance |

### DSCR Calculation

**DSCR** = Net Operating Income / Annual Debt Service

| DSCR Level | Interpretation | Lender Comfort |
|---|---|---|
| 1.50x+ | Very strong coverage | Exceeds all requirements, premium terms |
| 1.35x - 1.50x | Strong | Comfortable for all lender types |
| 1.25x - 1.35x | Adequate | Meets Agency and CMBS minimums |
| 1.15x - 1.25x | Thin | Bank loans only, may require additional collateral |
| 1.00x - 1.15x | Marginal | Bridge/transitional only |
| Below 1.00x | Negative leverage | Cash flow does not cover debt service |

### Debt Yield Calculation

**Debt Yield** = Net Operating Income / Loan Amount x 100

| Debt Yield | Interpretation |
|---|---|
| 10%+ | Strong. Conservative leverage. |
| 9.5% - 11% | Current general CMBS screen in 2026; multifamily can price tighter with live quote support. |
| 8% - 9% | Agency range where debt yield is often the binding constraint. |
| Below 8% | Aggressive leverage. Limited lender options without mission-driven or unusually strong DSCR support. |

### Rate Benchmarks (Typical Spreads)

| Loan Type | Benchmark | Typical Spread | All-In Rate Range |
|---|---|---|---|
| Agency (Fannie/Freddie) | 10yr Treasury | +170 - 220 bps | 5.5% - 7.0% |
| CMBS | 10yr Treasury / Swaps | +200 - 280 bps | 6.0% - 7.5% |
| Bank (fixed) | 5yr Treasury / Swaps | +200 - 300 bps | 6.0% - 7.5% |
| Bank (floating) | SOFR | +200 - 350 bps | 7.0% - 8.5% |
| Bridge | SOFR | +300 - 600 bps | 8.0% - 11.0% |
| Life Company | 10yr Treasury | +150 - 200 bps | 5.5% - 6.5% |
| Mezzanine/Pref Equity | N/A | N/A | 10% - 15%+ |

**Note**: Rates are highly market-dependent and change frequently. These represent general ranges and should be verified with current market quotes.

### 2026 Benchmark Source Notes

- Agency leverage: Fannie Mae reported a 63% weighted-average original LTV and 1.9 weighted-average DSCR for its multifamily guaranty book as of March 31, 2026: https://multifamily.fanniemae.com/doing-business-us/1q-2026-multifamily-earnings-highlights (accessed 2026-05-19).
- Stated agency maximums: Freddie Mac Conventional Small term-sheet examples show up to 80% LTV for amortizing/partial-IO executions and lower full-term-IO limits: https://www.greystone.com/wp-content/uploads/2026/04/Freddie-Mac-Conventional-Small-Term-Sheet.pdf (accessed 2026-05-19).
- Agency escrows/reserves: Fannie Mae DUS term-sheet guidance says replacement reserve, tax, and insurance escrows are typically required, while the live Multifamily Guide still states a $250/unit/year published floor. This framework uses $300-$350/unit/year as a conservative 2026 underwriting target, not an official DUS minimum unless a primary source later confirms a changed floor: https://multifamily.fanniemae.com/financing-options/dus-mortgage-loans-term-sheet and https://mfguide.fanniemae.com/node/3406 (accessed 2026-05-19).
- CMBS debt yield: Commercial Observer's April 2026 CRED iQ summary reported recently originated CMBS debt yields averaging 10.3% across property types and 8.87% for multifamily, so use 9.5%-11.0% as the general screen and allow tighter multifamily only with live quote evidence: https://commercialobserver.com/2026/04/debt-yields-cmbs-cred-iq/ (accessed 2026-05-19).

---

## Performance KPIs

### Income Statement KPIs

| KPI | Strong | Average | Weak | Formula |
|---|---|---|---|---|
| NOI Margin | 60% - 65%+ | 55% - 60% | Below 55% | NOI / EGI |
| Operating Expense Ratio | 35% - 40% | 40% - 45% | 45%+ | Total OpEx / EGI |
| Revenue per Available Unit (RevPAU) | Top quartile for market | Median for market | Bottom quartile | Total Revenue / Total Units |
| Net Effective Rent Growth | 3% - 5% | 1% - 3% | Negative | Year-over-year change in net effective rents |
| Bad Debt Ratio | Below 1% | 1% - 3% | Above 3% | Uncollected Rent / Gross Potential Rent |
| Concession Rate | Below 2% | 2% - 5% | Above 5% | Concessions / Gross Potential Rent |
| Ancillary Income Ratio | 10% - 15%+ | 5% - 10% | Below 5% | Ancillary Income / Total Revenue |

### Capital Efficiency KPIs

| KPI | Target | Formula |
|---|---|---|
| CapEx as % of Revenue | 5% - 10% | Annual CapEx / Effective Gross Income |
| CapEx as % of NOI | 8% - 15% | Annual CapEx / Net Operating Income |
| Renovation ROI | 15% - 25%+ annual return on cost | Rent Premium Gained x 12 / Renovation Cost Per Unit |
| Payback Period (renovations) | 18 - 36 months | Renovation Cost / Monthly Rent Increase x 12 |

### Operational Efficiency KPIs

| KPI | Best Practice | Average | Needs Improvement |
|---|---|---|---|
| Turnover rate | Below 40% | 40% - 55% | Above 55% |
| Average days vacant | Below 20 | 20 - 35 | Above 35 |
| Maintenance work orders/unit/year | 3 - 5 | 5 - 8 | 8+ |
| Work order completion time | Under 24 hours (routine) | 24 - 48 hours | Over 48 hours |
| Online review rating | 4.0+ stars | 3.5 - 4.0 | Below 3.5 |
| Leases signed online (%) | 50%+ | 25% - 50% | Below 25% |

### Return Metrics for Investors

| Metric | Core | Core-Plus | Value-Add | Opportunistic |
|---|---|---|---|---|
| Cash-on-Cash (Year 1) | 4% - 6% | 5% - 8% | 2% - 6% (lower during renovation) | 0% - 3% (lease-up period) |
| Average Annual Cash-on-Cash | 5% - 7% | 6% - 9% | 8% - 12% | 10% - 15%+ |
| IRR (5-year hold) | 8% - 12% | 10% - 15% | 15% - 20%+ | 18% - 25%+ |
| Equity Multiple (5-year) | 1.5x - 1.8x | 1.7x - 2.0x | 2.0x - 2.5x | 2.0x - 3.0x+ |
| Cash Yield (stabilized) | 5% - 7% | 6% - 8% | 8% - 11% | 10% - 14% |

---

## Quick Reference: Red Flags in Underwriting

| Red Flag | What It May Indicate |
|---|---|
| Occupancy below 88% for 6+ months | Structural demand issue, not just seasonal |
| Economic occupancy >5% below physical | Collection problems or excessive concessions |
| OpEx below $4,500/unit/year | Deferred maintenance, underreporting expenses |
| OpEx above $10,000/unit/year (non-Gateway) | Management inefficiency or aged property |
| Insurance increasing >15%/year | May indicate claims history or regional risk escalation |
| Turnover rate >60% | Management, condition, or market issues |
| Loss-to-lease >15% with high occupancy | Verify comp quality, may be inflated market rents |
| Cap rate >150 bps below market average | Overpaying relative to comparable sales |
| CapEx reserves below $250/unit/year | Insufficient for long-term property preservation |
| Rent-to-income ratio >40% | Affordability ceiling risk |

---

## Submarket Adjustment Protocol

The benchmarks throughout this document represent national averages and broad regional ranges. Every specific acquisition requires adjustment to the target submarket. This protocol provides systematic adjustment factors for cost of living, catastrophe exposure, property tax variation, and building age so that agents produce submarket-accurate underwriting rather than generic national estimates.

**When to apply**: Apply these adjustments to every benchmark used in underwriting. Start with the national/regional benchmark from the tables above, then layer in each applicable adjustment factor below. Document every adjustment applied so the underwriting model is fully transparent and auditable.

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### 1. Cost of Living (COL) Multipliers

Metro areas are classified into tiers based on their cost of living index relative to the national average. Apply the appropriate multiplier to adjust national benchmarks to local reality.

#### Metro Tier Classification

| Tier | Description | Example Markets | Overall COL Index |
|------|-------------|----------------|-------------------|
| **Tier 1** (Gateway) | Highest-cost metros, global gateway cities | NYC, San Francisco, Los Angeles, Boston, Washington DC, Seattle | 140-180+ (40-80% above national average) |
| **Tier 2** (High-Growth Primary) | Above-average cost, strong growth metros | Denver, Austin, Nashville, San Diego, Miami, Minneapolis, Raleigh, Charlotte | 110-135 (10-35% above national average) |
| **Tier 3** (Average) | Near national average cost | Atlanta, Dallas, Phoenix, Charlotte, Tampa, Salt Lake City, Columbus | 95-110 (within 10% of national average) |
| **Tier 4** (Below-Average) | Below national average cost, often Midwest and Southeast | Memphis, Oklahoma City, Toledo, Cleveland, Indianapolis, Birmingham, Little Rock | 80-95 (5-20% below national average) |

#### Rent Multipliers by Tier

Apply these multipliers to the national average rent benchmarks in the Rent Benchmarks section.

| Tier | Studio | 1BR | 2BR | 3BR |
|------|--------|-----|-----|-----|
| **Tier 1** | 1.50x - 2.00x | 1.50x - 2.00x | 1.50x - 1.90x | 1.50x - 1.85x |
| **Tier 2** | 1.10x - 1.35x | 1.10x - 1.30x | 1.10x - 1.25x | 1.05x - 1.20x |
| **Tier 3** | 0.95x - 1.10x | 0.95x - 1.10x | 0.95x - 1.10x | 0.95x - 1.10x |
| **Tier 4** | 0.70x - 0.90x | 0.70x - 0.90x | 0.75x - 0.95x | 0.75x - 0.95x |

#### Expense Multipliers by Tier (Overall)

Apply these multipliers to the national average OpEx benchmarks in the Operating Expense Benchmarks section.

| Tier | Overall Expense Multiplier | Rent-to-Expense Ratio Impact |
|------|---------------------------|------------------------------|
| **Tier 1** | 1.35x - 1.65x | Higher absolute expenses, but higher rents usually maintain margins |
| **Tier 2** | 1.10x - 1.25x | Moderate premium, margins generally intact |
| **Tier 3** | 0.95x - 1.05x | Baseline, no material adjustment needed |
| **Tier 4** | 0.80x - 0.95x | Lower expenses, but lower rents may compress margins |

#### Expense Category-Specific Multipliers

Not all expense categories scale uniformly with cost of living. Use these category-specific multipliers for precise underwriting.

| Expense Category | Tier 1 Multiplier | Tier 2 Multiplier | Tier 3 Multiplier | Tier 4 Multiplier | Notes |
|-----------------|-------------------|-------------------|-------------------|-------------------|-------|
| **Property Tax** | 1.20x - 2.00x | 1.00x - 1.30x | 0.90x - 1.10x | 0.70x - 0.95x | Driven by assessed values, not COL directly. NYC, NJ, IL highest. TX high rate but no income tax offset. |
| **Insurance** | 1.20x - 1.80x | 1.05x - 1.40x | 0.95x - 1.10x | 0.85x - 1.00x | Driven by replacement cost, not COL. Catastrophe zones override this (see next section). |
| **Utilities** | 1.15x - 1.50x | 1.05x - 1.20x | 0.95x - 1.05x | 0.85x - 0.95x | Varies by climate (heating vs cooling), utility rate structure, and deregulation. |
| **Labor / Payroll** | 1.40x - 1.80x | 1.10x - 1.30x | 0.95x - 1.05x | 0.75x - 0.90x | Most sensitive to COL. Includes maintenance staff, leasing, management on-site team. |
| **Management Fees** | 1.00x - 1.10x | 1.00x - 1.05x | 1.00x | 1.00x - 1.10x | % of EGI is market-standard; Tier 4 may have higher % due to smaller revenue base. |
| **Maintenance & Repairs** | 1.25x - 1.60x | 1.05x - 1.20x | 0.95x - 1.05x | 0.80x - 0.95x | Materials cost similar nationally; labor is the differentiator. |
| **Turnover Cost** | 1.30x - 1.70x | 1.10x - 1.25x | 0.95x - 1.05x | 0.80x - 0.95x | Higher finish standards in Tier 1 + higher labor = significantly higher turnover cost. |
| **Marketing** | 1.10x - 1.40x | 1.00x - 1.15x | 0.95x - 1.05x | 0.85x - 0.95x | Digital marketing costs are national; local print/signage varies. |

**Application example**: Underwriting a Class B property in San Francisco (Tier 1). National benchmark for maintenance & repairs (Class B): $900-$1,200/unit/year. Apply Tier 1 maintenance multiplier of 1.25x-1.60x. Adjusted range: $1,125-$1,920/unit/year. Use the midpoint of $1,500/unit/year as the underwriting assumption, then validate against local property management operating reports.

---

### 2. Catastrophe Zone Adjustments

Properties located in FEMA-designated flood zones, hurricane-prone coastal areas, earthquake zones, wildfire interface zones, or tornado-prone regions require specific insurance and expense adjustments that override the standard COL multipliers for insurance.

#### Flood Zone Adjustments (FEMA Designations)

| FEMA Zone | Description | Insurance Impact | Additional Costs | Underwriting Adjustment |
|-----------|-------------|-----------------|------------------|------------------------|
| **Zone X** | Minimal flood risk | No adjustment | None | Standard insurance benchmark applies |
| **Zone B / Zone C** | Moderate flood risk (shaded X) | +5-10% on property insurance | Optional flood policy recommended ($100-$300/unit/yr) | Add $150/unit/year to insurance budget |
| **Zone A** (AE, AH, AO) | High risk, 100-year floodplain | +15-25% on property insurance | Required flood insurance: $400-$800/unit/yr (NFIP or private) | Add $600/unit/year minimum to insurance budget. Factor flood insurance into DSCR. |
| **Zone V** (VE) | High risk, coastal with wave action | +25-30% on property insurance | Required flood insurance: $800-$1,500/unit/yr. Wind coverage may be separate. | Add $1,200/unit/year to insurance budget. Lender may require additional reserves. |
| **Floodway** | Regulatory floodway, highest risk | +30%+ on property insurance | May be uninsurable through NFIP at standard rates. Private flood market required. | Add $1,500+/unit/year. Verify insurability BEFORE entering PSA. |

**Key considerations**:
- NFIP (National Flood Insurance Program) coverage limits: $500K per building for commercial properties. Properties exceeding this need excess flood coverage from private market.
- Flood maps are updated periodically. Check for pending FEMA map revisions (LOMR, CLOMR) that could change the zone designation.
- Lenders require flood insurance for any property with a federally-backed mortgage in Zone A or V.
- Flood insurance costs have increased dramatically under FEMA's Risk Rating 2.0 methodology. Budget conservatively.

#### Hurricane Zone Adjustments (Coastal FL, TX Gulf, Carolinas, Mid-Atlantic)

| Exposure Level | Geography | Insurance Impact | Wind/Hail Deductible | Underwriting Adjustment |
|---------------|-----------|-----------------|----------------------|------------------------|
| **Extreme** | South Florida (Miami-Dade, Broward, Palm Beach), coastal TX (Galveston, Corpus Christi) | +30-40% on property insurance | 3-5% of insured value (Named Storm deductible) | Add $800-$1,500/unit/year. Budget Named Storm deductible in reserves. |
| **High** | Central/North FL coast, SC coast (Charleston), NC Outer Banks, TX coast | +20-30% on property insurance | 2-3% of insured value | Add $500-$1,000/unit/year. Named Storm deductible reserve. |
| **Moderate** | FL inland, GA coast, NC coast (Wilmington), VA coast | +10-20% on property insurance | 1-2% of insured value | Add $300-$600/unit/year. |
| **Low** | Inland Southeast, Mid-Atlantic inland | +0-5% on property insurance | Standard deductible ($5K-$25K) | Minimal adjustment beyond standard benchmark. |

**Named Storm deductible example**: 200-unit property insured for $30M. 3% Named Storm deductible = $900,000 out of pocket before insurance pays. This must be budgeted as a reserve or accepted as a risk. Some lenders require a deductible reserve account.

#### Earthquake Zone Adjustments

| Seismic Zone | Geography | Insurance Impact | Seismic Retrofit | Underwriting Adjustment |
|-------------|-----------|-----------------|------------------|------------------------|
| **Very High** | Coastal CA (SF, LA, San Diego), Pacific NW coast (Seattle) | +15-25% on property insurance (earthquake policy is separate and expensive) | Pre-1970 buildings: $5,000-$15,000/unit retrofit cost | Earthquake insurance: $300-$800/unit/year. Budget retrofit if pre-1970 soft-story. |
| **High** | Inland CA, Salt Lake City, Memphis (New Madrid zone), Charleston SC | +10-15% on property insurance | Pre-1970 buildings: $3,000-$10,000/unit | Earthquake insurance: $150-$400/unit/year. |
| **Moderate** | Pacific NW inland, parts of Mountain West, parts of Southeast | +5-10% on property insurance | Generally not required | Earthquake insurance: $100-$200/unit/year (optional but recommended). |
| **Low** | Most of the central and eastern US | No adjustment | Not applicable | Standard insurance benchmark applies. Earthquake insurance not typically purchased. |

**Soft-story retrofit**: Many California municipalities (LA, SF, Berkeley, Santa Monica) have mandatory soft-story retrofit ordinances for pre-1970 wood-frame multifamily buildings. Retrofit costs $3,000-$15,000/unit. Non-compliance creates code enforcement risk AND uninsurability. Always check local retrofit mandates.

#### Wildfire Zone Adjustments

| Exposure Level | Geography | Insurance Impact | Defensible Space | Underwriting Adjustment |
|---------------|-----------|-----------------|------------------|------------------------|
| **Very High** (WUI) | CA foothills, mountain communities (Lake Tahoe, Santa Rosa), CO Front Range, OR/WA forest interface | +25-35% on property insurance. Some carriers refuse to write. | $500-$2,000/unit for vegetation management, fire-resistant landscaping | Add $500-$1,000/unit/year insurance premium. Budget $1,000/unit initial defensible space. Verify insurability. |
| **High** | Suburban-wildland interfaces across Western states | +15-25% on property insurance | $200-$800/unit | Add $300-$600/unit/year. |
| **Moderate** | Nearby but not in direct interface | +5-15% on property insurance | Minimal | Add $100-$300/unit/year. |
| **Low** | Urban / non-forested | No adjustment | Not applicable | Standard benchmark applies. |

**Insurer availability warning**: In very high wildfire zones (especially Northern CA, parts of CO), major insurers have exited the market. Properties may need to use state FAIR Plan (insurer of last resort) at significantly higher premiums with limited coverage. Verify insurance availability and cost BEFORE entering PSA.

#### Tornado Alley Adjustments

| Exposure Level | Geography | Insurance Impact | Additional Costs | Underwriting Adjustment |
|---------------|-----------|-----------------|------------------|------------------------|
| **High** | Central OK, Central KS, North TX (Dallas/Fort Worth area), Central MS | +10-15% on property insurance | Hail damage deductibles: 1-2% of insured value. Storm shelter requirements in some jurisdictions. | Add $200-$400/unit/year. Budget hail deductible reserve. |
| **Moderate** | Broader Great Plains (NE, IA, MO, AR, AL, TN), Southeast | +5-10% on property insurance | Standard wind/hail deductible | Add $100-$200/unit/year. |
| **Low** | Outside tornado-prone regions | No adjustment | Standard deductible | Standard benchmark applies. |

---

### 3. Property Tax Variation

Property taxes are often the single largest operating expense line item for multifamily properties and vary enormously by jurisdiction. This section provides the framework for accurate tax underwriting.

#### Reassessment Rules by State Type

| Reassessment Type | How It Works | States (Examples) | Underwriting Approach |
|------------------|-------------|-------------------|----------------------|
| **Full reassessment on transfer** | Property is reassessed to market value (purchase price) upon sale | Most states: TX, FL, GA, NC, TN, OH, IN, NY (outside NYC), IL, NJ, SC | Model at: Purchase Price x Local Mill Rate. This is the most common and most predictable. |
| **Limited reassessment (Prop 13 style)** | Annual increase capped (typically 1-2%) regardless of market value changes. Reassessment on transfer to current market value. | CA (Prop 13 -- 2% annual cap), MI (Prop A -- CPI cap), OR (Measure 50 -- 3% cap) | Model at: Purchase Price x Local Rate for Year 1, then cap annual increases at statutory maximum. Prior owner may have artificially low basis. |
| **Classification systems** | Different property types taxed at different rates; multifamily may receive favorable or unfavorable classification | NY (NYC -- Class 2 multifamily), MN (4d affordable housing classification), SC (6% primary residence vs 4% commercial) | Verify the correct classification and applicable rate. NYC Class 2 has its own assessment methodology. |
| **No state income tax offset** | States without income tax often have higher property taxes to compensate | TX, FL, TN, NH, NV, WA | Higher property tax is the cost of no state income tax. Factor into NOI but recognize the full picture for investors domiciled in these states. |

#### Tax Abatement / PILOT Programs

| Program Type | How It Works | Expiration Risk | Underwriting Approach |
|-------------|-------------|-----------------|----------------------|
| **PILOT (Payment In Lieu Of Taxes)** | Negotiated fixed payment to municipality, typically below market tax rate | Payment steps up over time, eventually reaches full tax rate (10-25 year programs) | Model the step-up schedule exactly. Budget for full market taxes in year of PILOT expiration. |
| **Tax abatement (new construction)** | Full or partial tax exemption for new multifamily (e.g., NYC 421-a, TX Chapter 313) | Abatement expires per statutory schedule. Full reassessment follows. | Calculate the "tax cliff" -- the increase in taxes when abatement expires. This can be $1,000-$3,000+/unit/year. Model post-abatement taxes in hold period pro forma. |
| **Enterprise zone / Opportunity zone** | Tax incentives for investment in designated areas | Zone designations can change. Federal OZ program sunsets. | Model conservatively -- assume incentives expire at statutory sunset. Do not rely on renewal. |
| **Affordable housing tax incentive** | Reduced assessment or rate for affordable/workforce housing | Compliance requirements (income/rent restrictions). Non-compliance triggers recapture. | Budget for compliance monitoring. Model at incentive rate but stress-test at market rate. |

**Tax cliff example**: A 150-unit NYC property with a 421-a tax abatement. Current PILOT payment: $1,200/unit/year. Full market taxes upon abatement expiration (Year 8 of hold): $4,800/unit/year. Tax cliff: $3,600/unit/year x 150 units = $540,000 annual increase in operating expenses. This reduces NOI by $540K and can reduce property value by $7.2M-$10.8M at a 5.0-7.5% cap rate. Always model the tax cliff in the pro forma.

#### Effective Tax Rates by Major Metro (Multifamily)

| Metro | Effective Tax Rate (% of Market Value) | Approx. $/Unit/Year (at $150K/unit) | Reassessment Rule | Notes |
|-------|---------------------------------------|--------------------------------------|-------------------|-------|
| Newark/Jersey City, NJ | 2.2% - 2.8% | $3,300 - $4,200 | Full reassessment on transfer | Highest in nation. Limited appeal success. |
| Chicago, IL (Cook County) | 2.0% - 2.5% | $3,000 - $3,750 | Full reassessment (triennial cycle) | Cook County especially aggressive. Tax attorneys essential. |
| Dallas/Fort Worth, TX | 1.8% - 2.3% | $2,700 - $3,450 | Full reassessment (annual) | No income tax offset. Protest annually -- appraisal districts are aggressive. |
| Houston, TX | 1.8% - 2.2% | $2,700 - $3,300 | Full reassessment (annual) | Same as DFW. Budget for annual tax protest ($2-5K/year fee). |
| Hartford, CT | 1.7% - 2.2% | $2,550 - $3,300 | Full reassessment (periodic) | High mill rates. Population decline pressure. |
| New York City, NY | 1.0% - 1.8% | $1,500 - $2,700 | NYC Class 2 system (complex) | Separate assessment system. Transitional assessments phase in increases over 5 years. |
| Milwaukee, WI | 1.5% - 1.9% | $2,250 - $2,850 | Full reassessment (annual) | Stable and predictable. |
| Cleveland, OH | 1.4% - 1.8% | $2,100 - $2,700 | Full reassessment (triennial) | Appeal-friendly jurisdiction. |
| Philadelphia, PA | 1.3% - 1.7% | $1,950 - $2,550 | Full reassessment (periodic) | City + school district taxes. AVI reassessment created large increases. |
| Detroit, MI | 1.3% - 1.7% | $1,950 - $2,550 | Prop A (CPI cap until transfer) | Cap limits annual increases. Reassessment on transfer to 50% of market value x local millage. |
| Atlanta, GA | 0.9% - 1.2% | $1,350 - $1,800 | Full reassessment on transfer | Moderate and predictable. Fulton County slightly higher than surrounding counties. |
| Phoenix, AZ | 0.6% - 0.9% | $900 - $1,350 | Full reassessment (annual) | Low rate, but rapid value appreciation driving higher absolute taxes. |
| Denver, CO | 0.5% - 0.8% | $750 - $1,200 | Full reassessment (biennial) | Among the lowest effective rates for multifamily. Gallagher Amendment residential assessment rate. |
| Tampa/Orlando, FL | 0.8% - 1.2% | $1,200 - $1,800 | Full reassessment on transfer | Save Our Homes cap (3%) applies only to homestead, not commercial. Full reassessment for MF. |
| Nashville, TN | 0.8% - 1.1% | $1,200 - $1,650 | Full reassessment (periodic) | Moderate. Davidson County reappraisal every 4 years. |
| Austin, TX | 1.7% - 2.1% | $2,550 - $3,150 | Full reassessment (annual) | High rate partially offset by no income tax. Protest annually. |
| San Francisco, CA | 0.7% - 1.0% | $1,050 - $1,500 | Prop 13 (2% annual cap) | Low EFFECTIVE rate on long-held properties. New acquisition = reassessment to purchase price. |
| Los Angeles, CA | 0.7% - 1.0% | $1,050 - $1,500 | Prop 13 (2% annual cap) | Same as SF. Supplemental tax bill in year of acquisition. |

---

### 4. Vintage / Age Adjustment

Building age materially affects operating expenses, particularly maintenance, insurance, and capital expenditure reserves. Newer buildings have lower routine maintenance but higher finish-quality replacement costs. Older buildings have higher maintenance frequencies but often simpler (less expensive) finish packages.

#### OpEx Adjustment by Building Vintage

| Vintage | Built | Maintenance Multiplier | CapEx Reserve Multiplier | Insurance Multiplier | Key Cost Drivers |
|---------|-------|----------------------|------------------------|--------------------|--------------------|
| **Pre-1960** | Before 1960 | 1.30x - 1.50x | 1.40x - 1.60x | 1.15x - 1.25x | Lead paint, asbestos, knob-and-tube wiring risk, single-pane windows, no insulation, cast iron plumbing. Major systems at or past end of life. |
| **1960-1970** | 1960-1970 | 1.20x - 1.35x | 1.25x - 1.40x | 1.10x - 1.20x | Potential lead paint (pre-1978), galvanized plumbing, aluminum wiring in some, original boiler/HVAC systems likely replaced but second generation aging. |
| **1970-1990** | 1970-1990 | 1.10x - 1.20x | 1.15x - 1.25x | 1.05x - 1.15x | Polybutylene plumbing (1978-1995), FPE/Zinsco electrical panels, EIFS moisture issues, flat roof membranes aging. HVAC replacement cycle approaching or active. |
| **1990-2010** | 1990-2010 | 1.00x (baseline) | 1.00x (baseline) | 1.00x (baseline) | Baseline period. Standard construction methods. Systems in mid-life. Moderate deferred maintenance typical. |
| **2010-2020** | 2010-2020 | 0.90x - 0.95x | 0.85x - 0.95x | 0.95x - 1.00x | Lower maintenance frequency. Newer systems under warranty (first 5-7 years). However, higher finish quality (quartz counters, LVP flooring, smart home tech) means higher UNIT COST per repair/replacement. |
| **Post-2020** | After 2020 | 0.80x - 0.90x | 0.75x - 0.90x | 0.90x - 0.95x | Minimal maintenance in early years. Warranty coverage on major systems. Highest finish quality = highest per-incident replacement cost. Technology systems (smart locks, building automation) require specialized maintenance. |

#### Hazardous Material Cost by Vintage

| Material | Applicable Vintage | Testing Cost | Abatement/Management Cost | Regulatory Requirement |
|----------|-------------------|-------------|--------------------------|----------------------|
| **Lead-based paint** | Pre-1978 | $5-$15/surface (XRF testing) | $5-$25/SF for abatement; $500-$2,000/unit for encapsulation | Federal disclosure required. EPA RRP Rule for renovation. HUD requirements for federally-assisted housing. |
| **Asbestos** | Pre-1980 (most common) | $2,000-$5,000 per building survey | $5-$25/SF for abatement; $2,000-$8,000/unit if encapsulated | O&M plan required if present. Abatement for renovation that disturbs materials. NESHAP regulations. |
| **PCBs (caulking)** | Pre-1978 | $500-$2,000 per building | $10,000-$50,000+ per building for removal | EPA TSCA regulations. Required for renovation of affected buildings. |
| **Galvanized plumbing** | Pre-1970 (typically) | Visual inspection + water quality test | $3,000-$7,000/unit for full repipe | Not regulated but a known failure-prone material. Insurance may be affected. |
| **Polybutylene plumbing** | 1978-1995 | Visual inspection | $3,000-$5,000/unit for full repipe | Class action settlement expired. Known failure-prone. Some insurers exclude. |

#### System Replacement Cycle by Vintage

Use this table to estimate when major system replacements will be needed based on building age and system age.

| System | Useful Life | Pre-1970 Status | 1970-1990 Status | 1990-2010 Status | Post-2010 Status |
|--------|------------|----------------|-----------------|-----------------|-----------------|
| **Roof (flat/TPO/EPDM)** | 20-25 years | 2nd or 3rd replacement due | 2nd replacement likely due | 1st replacement approaching | Under warranty, no action |
| **Roof (pitched/shingle)** | 25-30 years | Multiple replacements completed | 1st or 2nd replacement due | 1st replacement approaching | Under warranty, no action |
| **HVAC (individual PTAC/split)** | 12-18 years | Multiple replacements completed | 2nd replacement due | 1st replacement due or approaching | Mid-life, monitor |
| **HVAC (central boiler/chiller)** | 25-35 years | 2nd system due | 1st replacement due | Mid-life, major overhaul possible | Under warranty, no action |
| **Water heater (tank)** | 10-15 years | Multiple replacements | Current generation aging | 1st replacement approaching | Under warranty |
| **Plumbing (supply lines)** | 40-70 years (material dependent) | End of life (galvanized) | End of life or approaching (copper OK, polybutylene replace) | Mid-life (copper/PEX) | New, no action |
| **Electrical panels** | 30-40 years | Upgraded or need upgrade | Approaching end of life | Mid-life | New, no action |
| **Elevators** | 25-30 years to modernization | 2nd modernization due | 1st modernization due | Approaching modernization | Under warranty |
| **Windows** | 20-30 years | 2nd replacement due (if ever done) | 1st replacement due | Mid-life | New, no action |
| **Parking lot (asphalt)** | 15-25 years (with sealcoating) | Multiple resurfacings | Resurfacing due | Sealcoat, possible resurface | Under warranty |

**Application example**: Evaluating a 1985-vintage 100-unit Class B property in Atlanta (Tier 3). Start with national benchmark for Class B total OpEx: $6,000-$9,500/unit/year. Apply Tier 3 COL multiplier (0.95x-1.05x): $5,700-$9,975/unit/year. Apply 1970-1990 vintage maintenance multiplier (1.10x-1.20x) to the maintenance & repairs line item: national benchmark $900-$1,200 becomes $990-$1,440. Apply the vintage CapEx reserve multiplier (1.15x-1.25x) to reserves: national benchmark $300-$450 becomes $345-$563. Check for hazardous materials: pre-1978 building so asbestos survey recommended; no lead paint concern (built 1985). Check system replacement cycle: roof likely on 2nd replacement (budget $2,000-$3,000/unit), HVAC likely needing 2nd replacement ($5,000-$7,000/unit), plumbing is copper (acceptable, mid-life). Total adjusted OpEx estimate: approximately $6,800-$8,500/unit/year with elevated CapEx reserves of $400-$550/unit/year.

---

## How Agents Use This Skill

### When to Read

- **Rent roll analyst** (validate rent levels): Read the Rent Benchmarks section to validate whether in-place rents and market rent assumptions are reasonable for the property's class, unit type, and market tier. Also read the Loss-to-Lease and Ancillary Income sections to assess value-add potential.
- **OpEx analyst** (validate expense ratios): Read the Operating Expense Benchmarks section -- by property class, by region, and by unit count -- to identify whether the property's expenses are within normal ranges. Flag any line item that falls significantly outside the benchmark range.
- **Market study agent** (compare to market): Read the Cap Rate Ranges, Per-Unit Valuation, Occupancy Standards, and Performance KPIs sections to compare the subject property against market standards. Use these benchmarks to assess relative value and competitive positioning.
- **Financial model builder** (sanity-check projections): After building the financial model, read the Investment Thresholds and Red Flags sections to sanity-check all projections. Any projected metric that falls outside benchmark ranges should be flagged for review.

### What to Cross-Reference

- **Benchmarks against property class, region, and unit count from `deal.json`**: Look up the correct benchmark range by matching the property's class (A/B/C), region (Sun Belt, Northeast, Midwest, West Coast, Mountain West), and unit count. Using national benchmarks for a local market produces misleading comparisons.
- **Actual rents against benchmark ranges**: Compare the property's in-place rents (by unit type) against the rent benchmarks for the appropriate class and market tier. Rents above the top of the range may indicate overpricing risk; rents well below may signal value-add opportunity or property condition issues.
- **Actual expenses against per-unit benchmarks**: Compare each expense line item (insurance, maintenance, management fee, payroll, turnover, utilities) against the per-unit benchmarks for the property's class. Use the regional adjustments to account for geographic cost differences.

### How to Apply

- **Look up the benchmark range**: Identify the property's class (A/B/C), region, and unit count from deal.json. Find the corresponding benchmark ranges in the appropriate tables. These ranges define the "normal" band for that property profile.
- **Compare actual metrics**: For each key metric (rent per unit, rent per SF, OpEx per unit, OpEx ratio, cap rate, occupancy, turnover rate), compare the property's actual figure against the benchmark range.
- **Flag outliers**: Any metric that falls outside the benchmark range is a data point for risk scoring. Metrics above the range may indicate inefficiency or overpricing. Metrics below the range may indicate underperformance or value-add opportunity. Document the deviation and include it in the agent's findings.

### Common Mistakes

- **Using national benchmarks for a local market**: National averages mask enormous regional variation. A $7,000/unit/year OpEx figure is excellent in the Northeast but high for the Sun Belt. Always use the regional and class-specific benchmarks, not the national aggregate.
- **Not adjusting for building age and vintage**: Older buildings (pre-1980) have structurally higher maintenance costs, insurance premiums, and capital reserve requirements. Comparing a 1960s Class C property against new-construction Class A benchmarks produces meaningless results. Consider the property's age when selecting the appropriate benchmark tier.
- **Comparing Class A benchmarks to a Class C property**: Each class has distinct operating characteristics. Class A properties have higher rents but also higher payroll, amenity maintenance, and marketing costs. Class C properties have lower rents but higher turnover costs, maintenance, and bad debt. Always match the benchmark class to the subject property's actual class.

---

*Rates and benchmarks as of 2026-05. Benchmarks should be validated against current local market data for each specific acquisition. Market conditions, interest rates, and regional dynamics can shift these ranges materially.*
