MIM Vol 1 Q1 2019 VERSION 00 FEB 8 FINAL

In every issue of Multifamily Insight, it is our goal to deliver new knowledge followed by confirming best practices in property acquisitions and operations and deliver at least one topic that makes you think outside of the box.

In every issue of Multifamily Insight, it is our goal to deliver new knowledge followed by confirming best practices in property acquisitions and operations and deliver at least one topic that makes you think outside of the box.


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VOL <strong>Vol</strong> 11 <strong>Q1</strong> <strong>2019</strong><br />

Multifamily MULTIFAMILY Insight IN- Magazine<br />

5 Multifamily Rental Revenue<br />

Growth Strategies<br />

Multifamily Finance:<br />

Is it Still a Great Time to<br />

Be a Borrower?<br />

Smart<br />

Property<br />

Management<br />

in 1<strong>00</strong> Words<br />

<strong>Vol</strong> 1 <strong>Q1</strong> <strong>2019</strong><br />


FREE<br />

eBook: 25 Biggest<br />

Mistakes Real<br />

Estate Buyers Make<br />

AI Driven Real Estate<br />

Underwriting:<br />

An Interview with<br />

Marc Ruzten of Enodo Inc.<br />

5 Multifamily Rental Revenue<br />

Growth Strategies<br />

Multifamily Finance: Is it still a<br />

Great Time to be a Borrower?<br />

Editorial: I am Jamal<br />

Khashoggi<br />

Editorial: I am Jamal Khashoggi<br />


Multifamily insight Magazine<br />

From the Editor<br />

In this edition of Multifamily Insight Magazine...<br />

John Wilhoit<br />

In this, edition of Multifamily<br />

Insight Magazine,<br />

we present an extended<br />

conversation with Marc<br />

Ruzten of Enodo Inc.<br />

Marc has worked tirelessly<br />

towards finding<br />

solutions and “cracking<br />

the code” within multifamily<br />

valuation and investing.<br />

David Garfinkel of Northmarq<br />

writes about the<br />

current state of commercial<br />

mortgage financing.<br />

In every issue it is our<br />

objective to deliver new<br />

knowledge, followed by<br />

confirming best practices<br />

and deliver at least<br />

one topic that makes<br />

you think.<br />

If you have a<br />

product or service<br />

related to the multifamily<br />

industry you<br />

believe is of interest<br />

to our readers please<br />

reach out.<br />

jwilhoit@win-rei.com<br />




What’s Inside<br />

4<br />

10<br />

AI Driven Real Estate Underwriting.<br />

An Interview with Marc Ruzten<br />

How do you compete for deals against big companies?<br />

By leveling the playing field with technology.<br />

5 Multifamily Rental Revenue<br />

Growth Strategies<br />

Year-over-year rent growth is the most important<br />

driver of revenue growth. How do you get it?<br />

Multifamily Financing: Is it Still a Great<br />

Time to be a Borrower?<br />

All of our capital sources are lending, and that is<br />

a good thing.<br />

12<br />

Editorial: I am Jamal Khashoggi<br />

Mr. Khashoggi and I have much in common...<br />

15<br />


4 AI Driven Real Estate Undewriting 14<br />

An Interview with Marc Rutzen<br />

10 5 Multifamily Rental Revenue<br />

15<br />

Growth Stratetgies<br />

12 Multifamily Financing: Is it Still a Great 17<br />

Time to be a Borrower<br />

Smart Property Mgt in 1<strong>00</strong> Words<br />

In this issue: Programmable Thermostats.<br />

Editorial: I am Jamal Khashoggi<br />

Book Deal with Free Shipping<br />

Get two books, Multifamily Insight <strong>Vol</strong> I & II<br />


AI Driven Real Estate Underwriting<br />

Artificial Intelligence (AI) Driven Real Estate Underwriting with Marc Rutzen<br />

My guest is Marc<br />

Rutzen. Marc<br />

is the CEO and<br />

co-founder of Enodo<br />

Inc.<br />

Enodo is an automated<br />

analysis platform<br />

for multifamily real<br />

estate. Our discussion<br />

is on the use of<br />

artificial intelligence<br />

(AI) in real estate<br />

underwriting.<br />

How does an<br />

individual investor or<br />

mid-sized operator<br />

compete for deals<br />

against big companies?<br />

By levelling<br />

the playing field with<br />

the use of technology<br />

that allows real<br />

estate investors to<br />

see and use the best<br />

and most current<br />

data.<br />

Enodo Inc. offers one<br />

such solution that is<br />

cost effective and<br />

races past the fluffit<br />

delves directly into<br />

the core financial<br />

concepts an investor<br />

needs to have for<br />

making investment<br />

decisions in real<br />

time.<br />

Marc directs the<br />

development of the<br />

platform including<br />

user interface and<br />

research & development<br />

for new<br />

product features on<br />

the platform. Marc<br />

is a licensed broker.<br />

He has a Master of<br />

Science Degree in<br />

Real Estate Development<br />

from Columbia<br />

University. Welcome<br />

Marc.<br />


I think AI (Artificial Intelligence)<br />

is something that<br />

everyone is familiar with.<br />

What they are not familiar<br />

with is that AI is having an<br />

impact on real estate and<br />

particularly multifamily.<br />

What can you share with us<br />

about that?<br />

Marc Rutzen: To give some<br />

context, people tend to<br />

conflate real estate data<br />

and data analysis and AI and<br />

they’ll call it CRE tech. Over<br />

the past 20 years there has<br />

been a renaissance in real<br />

estate data; twenty years<br />

ago you didn’t have data.<br />

There was no transparency<br />

into transactions. You didn’t<br />

know who owners were<br />

easily. You didn’t know what<br />

property trading prices.<br />

There was no Costar,<br />

Axiometrics, Real Capital<br />

Analytics. These platforms<br />

have brought data to the<br />

fore and made it more<br />

transparent so we know<br />

what’s going on in the market.<br />

The problem today is that<br />

there is just so much to<br />

analyze that no one person<br />

can make sense of all the<br />

data. Analyst pay for data<br />

sources and then devote<br />

further resources to confirm<br />

the data is accurate, trying<br />

to analyze it, make sense<br />

of it and then fill a narrative<br />

for a particular asset.<br />

What I see AI doing and<br />

what Enodo is trying to do,<br />

our mission; is to quantify<br />

the drivers of real value.<br />

Not just provide more data<br />

to analyze but tell you what<br />

that means in terms of<br />

investment potential. I see<br />

a lot of disruptive potential<br />

not just from our company<br />

but a lot of companies in<br />

the space that are pushing<br />

for the adoption of AI and<br />

it’s getting some traction.<br />

What Enodo is trying to do,<br />

our mission; is to quantify<br />

the drivers of real value.<br />

John Wilhoit: What I like<br />

about Enodo as a user is<br />

that it’s built for real estate<br />

professionals and more<br />

specifically for multifamily<br />

which is my area of expertise.<br />

Marc, you say that<br />

Enodo automates the underwriting<br />

platform for the<br />

multifamily industry. Talk to<br />

us about that.<br />

Marc Rutzen: Think about<br />

what you go through on a<br />

typical deal analysis. If it’s a<br />

marketed deal you’re going<br />

to have a rent roll and T12<br />

to analyze. You’re going to<br />

look at the market for your<br />

comps (comparable assets)<br />

and you’re going to compare<br />

rents to your comps<br />

and see if what they’re<br />

achieving is reasonable.<br />

Enodo automates the underwriting<br />

platform for the<br />

multifamily industry<br />

You’re going to put<br />

everything into your underwriting<br />

template and put<br />

in your deal assumptions.<br />

Then export everything<br />

into a finalized product and<br />

then use this to indicate to<br />

an analyst or your superior<br />

to do the deal or not do<br />

the deal. In the case where<br />

you’re the owner underwriting<br />

the deal; you are pursuing<br />

the transaction to syndicate<br />

equity for the deal and<br />

get financing from a lender.<br />

What our platform enables<br />

you to do, I know this is important<br />

to you John, with<br />

your writings about rent roll<br />

analysis, we have a rent roll<br />

parser on our site that free<br />

right now. You can load any<br />

rent roll. This will work with<br />

most property management<br />

software. Export your rent<br />

roll from property management<br />

software and load a<br />

POD into Enodo. This will<br />

parse floor plans, percent of<br />

market rent achieved by inplace<br />

leases and lease turnover<br />

exposure (when leases<br />

will expire). It will take out<br />

cost-to-lease so you can<br />

see what the effective rent<br />

is. All of this happens in a<br />

few seconds. That is something<br />

that helps you to tee<br />

up the data and not waste<br />

time manually parsing the<br />

rent roll.<br />

John Wilhoit: What you’re<br />

saying is that utilizing the<br />

Enodo platform compresses<br />

the amount of time required<br />

to perform underwriting?<br />

Marc Rutzen: Yes. Absolutely.<br />

It’s a huge time-saver.<br />

Once you have uploaded<br />

the rent roll and T12 into<br />

the system you’re going<br />

to be able to seamlessly<br />

compare your rents with<br />

the market and see if they<br />

are reasonable and gain<br />

some insight into if a deal<br />

is performing as compared<br />

to similar assets in terms of<br />

year built, number of units<br />

and location and see if your<br />

operating expenses are in<br />

line with the market. That’s<br />

a quick way to use AI to<br />

underwrite deals and assess<br />

potential upside.<br />

John Wilhoit: Split off for us<br />

how to utilize Enodo from<br />

an operator’s perspective<br />

and then from a developer/<br />

builder perspective.<br />

Marc Rutzen: Say the<br />

scenario is this: you have a<br />

property built in the 1980s<br />

that has not been renovated<br />

and in need of some<br />

TLC. You think that there’s<br />

some potential upside if<br />

you were to invest some<br />

money in renovating units<br />

and bringing them up to<br />

market. What Enodo does<br />

is enables you to see which<br />

amenities (amenity by<br />

amenity) are going to add<br />

the biggest rent premium.<br />

This folds in dirctly with<br />

our mission: to quantify the<br />

drivers of real estate value.<br />

Part of that is delving into<br />

determining the rent delivery<br />

value of granite counter-tops<br />

versus hardwood<br />

floors. Asking the question:<br />

what’s going to bring the<br />

biggest impact on rents:<br />

stainless steel appliances<br />

versus a rooftop deck.<br />

Which one will bring the<br />

highest rent? Enodo does<br />

that with each individual<br />

amenity allowing you to<br />

build your amenity package<br />

in the platform and see how<br />

it will perform if you were to<br />

invest those dollars and do<br />

those renovations.<br />

John Wilhoit: That’s<br />

from an acquisitions<br />

perspective? If you’re looking<br />

at it a deal that’s on<br />

your plate for potential<br />

acquisition, utilizing the<br />

Enodo platform can help<br />

you not only analyze the<br />

deal but analyze where redevelopment<br />

dollars should<br />

go in the deal?<br />

Marc Rutzen: Yes. If you<br />

already own the property,<br />

you can see, am I charging<br />

the best possible rent,<br />

am I optimizing my rent<br />


for this asset based on<br />

everything that’s going on<br />

in the market? It doesn’t<br />

have to be a value-add deal.<br />

You could just look to see<br />

if you’re in line with the<br />

market and how you should<br />

adjust your rents to maximize<br />

revenue.<br />

John Wilhoit: Let’s talk<br />

about a new development<br />

deal, brand new coming out<br />

of the ground. How does<br />

Enodo assist with underwriting<br />

that transaction?<br />

Marc Rutzen: Enodo<br />

is collecting data from<br />

about two million properties<br />

nationwide on a daily<br />

basis. This data is coming<br />

from Property Management<br />

Software, property web<br />

sites, user uploads of rent<br />

rolls and T12s. What we’re<br />

doing is building all the<br />

components of real estate<br />

value into our data. We assess<br />

and quantify buildings<br />

individually in each market<br />

so that you can hypothetically<br />

build a building from<br />

the ground up having this<br />

comparable data.<br />

Enodo is collecting data<br />

from about two million<br />

properties nationwide on a<br />

daily basis.<br />

That new building is just<br />

the sum of its parts; put in<br />

the number of three bedroom<br />

units and the square<br />

footage of those units then<br />

the number of bathrooms<br />

in those units and continue<br />

this for the entire unit mix<br />

and you are building the<br />

build-out virtually. Then add<br />

amenities to each one of<br />

those different floor plans.<br />

Enodo allows you, as the<br />

developer, to virtually build<br />

out your amenity package<br />

at the community level and<br />

at the individual unit level.<br />

Using Enodo, You Can buildout<br />

a new development –<br />

virtually.<br />

You can instantly see as<br />

soon as you’ve crafted it<br />

(and you can do all of this<br />

in the platform) a virtual<br />

model of the asset. You<br />

see what rents the new development<br />

it can generate<br />

as if it were to exist today.<br />

You see what the comps<br />

are (the closest comps).<br />

For comps, if you’re doing<br />

development in the<br />

suburbs if there’s no new<br />

development near by the<br />

Enodo platform will go to<br />

the next similar suburb<br />

to your building and find<br />

comps. This way you always<br />

have comparable properties<br />

to compare.<br />

And then finally the Enodo<br />

platform will show you the<br />

operation as stabilized. You<br />

can then represent to a<br />

lender or an investor this is<br />

what stabilized operations<br />

look like were the asset<br />

built.<br />

John Wilhoit: Tell me how<br />

artificial intelligence is<br />

assisting in making better<br />

decisions about those<br />

structures that you just<br />

mentioned.<br />

Marc Rutzen: On our<br />

platform, type in an address<br />

for your new development.<br />

You’re able to see, if you’re<br />

crafting a new development<br />

from the ground up,<br />

average square footage for<br />

units of each type in the<br />

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market and what frequency<br />

of properties have different<br />

amenities. For example, I<br />

go into a market and I can<br />

see that ninety percent<br />

of buildings in this market<br />

have a pool that means I<br />

need a pool or I’m not going<br />

to be competitive. And<br />

then in Enodo you can click<br />

on that amenity and see<br />

what you’re going to get<br />

in terms of rent for that<br />

particular amenity. What’s<br />

great is sorting by the<br />

most frequent amenities<br />

in the market. You could<br />

sort by the highest premium<br />

and craft your amenities<br />

packages to select<br />

the highest premium and<br />

the most frequently listed<br />

amenities.<br />

John Wilhoit: The “AI” part<br />

is having all of that on one<br />

page at one time?<br />

Marc Rutzen: Yes. The “AI”<br />

is being able to individually<br />

quantify what the variables<br />

are doing. Otherwise you<br />

can’t do it. You know that<br />

Building A has X Y and Z<br />

and Building B has X Y Z and<br />

one generates more income<br />

but you don’t know exactly<br />

why. The AI analyses a<br />

hundred different variables<br />

recognizing walk-ability<br />

in one location is slightly<br />

higher and the median<br />

income slightly higher than<br />

a similar location. Therefore,<br />

even with similar amenities<br />

one location is going to<br />

have a higher premium than<br />

another similar location.<br />

John Wilhoit: So, with<br />

Enodo I can look at comps<br />

and review the amenities in<br />

each of those comps<br />

determine which ones are<br />

adding the most value?<br />

Marc Rutzen: Exactly.<br />

John Wilhoit: This tells<br />

me that Enodo is amenities-centric<br />

and it allows<br />

me to add value based<br />

on what’s occurring in a<br />

particular market and not<br />

the market in general is that<br />

correct?<br />

Marc Rutzen: Correct.<br />

John Wilhoit: Tell us the<br />

difference between AI and<br />

machine learning. What’s<br />

the difference between<br />

those two?<br />

Marc Rutzen: There is<br />

no difference. Machine<br />

Learning is AI when you’re<br />

training a model. What is<br />

commonly understood to<br />

be AI is a little bit different<br />

when you’re talking about<br />

it from a non-data science<br />

perspective.<br />

John Wilhoit: For users of<br />

the platform they represent<br />

the same thing?<br />

Marc Rutzen: In terms of<br />

what they see in the platform<br />

it represents the exact<br />

same thing. The only difference<br />

is that in AI the way<br />

people see, the way people<br />

view AI, the machine takes<br />

data and determines exactly<br />

what to do with it and that<br />

result is the output. I’s very<br />

nebulous and frightening,<br />

right? You don’t know what<br />

it’s doing exactly. But the<br />

way we craft these models<br />

is we select the features.<br />

Because we’ve surveyed<br />

hundreds of real people we<br />

know which variables are<br />

important.<br />

Then, we feed those variables<br />

into our model.<br />

We control the range of<br />

influence that variables can<br />

have so we don’t get anything<br />

crazy excluding things<br />

like seeing a rent premium<br />

because it rains slightly less<br />

in one area. If you just fed<br />

variables randomly into a<br />

model you could come up<br />

with some weird stuff like<br />

that. We put a lot of human<br />

intelligence into our model<br />

on the front end so that<br />

you don’t get crazy results.<br />

John Wilhoit: Tell us<br />

more about how Enodo<br />

provides locational characteristics<br />

and demographic<br />

characteristics. How can<br />

users of the Enodo platform<br />

implement this information<br />

into their decision-making<br />

processes?<br />

Marc Rutzen: What our<br />

platform does is it takes<br />

median income, population<br />

density, average family size,<br />

the proportion of one-beds,<br />

two-beds, three-beds in<br />

the market, the walk score,<br />

transit access and negative<br />

externalities - all the things<br />

that real estate people<br />

intuitively know have an<br />

impact. If you were to put<br />

all this data into an excel<br />

sheet and try to tell me<br />

the impact of each variable<br />

it would be impossible.<br />

There’s is not enough datayou<br />

can’t fit enough data<br />

into Excel. What the Enodo<br />

platform does is quantify<br />

each variable. Then it tells<br />

you if you land on a place<br />

on the map the market is<br />

contributing this much (X<br />

dollars). Thus, anything<br />

you do to this property the<br />

market is<br />

contributing exactly this<br />

much. In other words, just<br />

being in this area generates<br />

X dollars towards rents.<br />

The Enodo platform<br />

quantifies each variable<br />

As you look at the different<br />

amenities and add them to<br />

your virtual model, each<br />

one is a component and<br />

tells you what it adds to<br />

rents. The amenities package<br />

is going to be the sum<br />

of the parts from the community<br />

and from the unit<br />

level. Our data scientists<br />

are looking to bring into the<br />

platform a tool that allows<br />

our customers to click on<br />

a map and see what the<br />

key drivers of value are<br />

in a market. Imagine being<br />

able to see that an area has<br />

an 80% college educated<br />

population and median<br />

income of $110,<strong>00</strong>0 a<br />

year- that’s what’s driving<br />

value the most. You know<br />

in this area that’s what’s<br />

driving value the most. So,<br />

it doesn’t matter if you do<br />

anything else. It’s that kind<br />

of insight that helps people<br />

craft your plan for an asset,<br />

your plan for an investment<br />

to maximize value.<br />

John Wilhoit: We’ve spent<br />

a lot of time talking about<br />

the income side. How<br />

does a developer or an<br />

analyst review the operating<br />

expense side of a deal using<br />

Enodo?<br />

Marc Rutzen: On the<br />

operating expense side,<br />

what we do, we pull in data<br />

from all the T12s that<br />

are uploaded from users<br />

(anonymously of course).<br />

We’re taking that data and<br />

keying it into a location<br />





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and then loading it into the<br />

algorithm to train. We’ve<br />

loaded 39<strong>00</strong> CMBS (Commercial<br />

Mortgage Backed<br />

Securities) deals nationwide.<br />

These are CMBS deals<br />

that are not distressed. We<br />

control for those that have<br />

too low of an DSCR (Debt<br />

Service Coverage Ratio)<br />

or had notes on the deal<br />

that it was under water.<br />

We use CMBS data and we<br />

use benchmark data from<br />

NAA (National Association<br />

of Apartments and IREM -<br />

Institute of Real Estate Management.<br />

We also have partnerships<br />

with several lenders that<br />

contribute T12 operating<br />

statements from closed<br />

transactions nationwide. We<br />

feed all this data in and we<br />

control for each variable<br />

the same way we do on the<br />

income side; we do this on<br />

the expense side. We control<br />

for each variable and<br />

determine, based on the<br />

number of units, the year<br />

build, the market, net rentable<br />

square footage and income<br />

profile for this property,<br />

those being the biggest<br />

drivers, that you should<br />

be at this level for salaries<br />

and personnel or that you<br />

should be at this amount<br />

per unit to budget for insurance,<br />

taxes et cetera. We<br />

calculate that as a series of<br />

market benchmarks and<br />

then compare the outcomes<br />

to your uploaded T12.<br />

This calculation compares<br />

your T12 to market benchmarks<br />

delivering actionable<br />

information about your<br />

property and if it is in line<br />

with the market in terms of<br />

each individual line item.<br />

John Wilhoit: When you say<br />

“market” what do you mean<br />

by that?<br />

Marc Rutzen: One of<br />

the things that Enodo<br />

has created is an algorithm<br />

that will dynamically<br />

pull in census tracts that<br />

are similar in terms of<br />

supply and demand fundamentals;<br />

similar types of<br />

properties and percentages<br />

of different unit types and<br />

rent that they’re achieving<br />

and similar types of people<br />

seeking those assets.<br />

What we do is dynamically<br />

build a market area instead<br />

of drawing a rectangle or<br />

circle or some oblong shape<br />

to statistically determine<br />

what your effective market<br />

area is by bringing in adjacent<br />

census tracks until<br />

we’ve got enough data to<br />

analyze statistics.<br />

Going into an urban area the<br />

“market” could be as small<br />

as a few blocks. Going into<br />

a suburban area the market<br />

could be wide yet still<br />

represents your effective<br />

market area with just less<br />

density.<br />

John Wilhoit: We understand<br />

that markets are<br />

not round or square. Markets<br />

are certainly property<br />

specific. I think what<br />

they’ve done within this<br />

product can outline competitive<br />

market areas versus<br />

something that is often<br />

esoteric. Marc, you don’t<br />

use the term sub-market?<br />

Marc Rutzen: Yeah, we don’t<br />

use the term sub-market<br />

because what is equivalent<br />

in size to a sub-market is<br />

determined algorithmically.<br />

John Wilhoit: And that offends<br />

the senses for those<br />

of us that have been working<br />

in sub-markets for years<br />

and years. That’s all we<br />

know, right? We know that<br />

we like this sub-market and<br />

we don’t like that sub-market.<br />

What you’re doing with<br />

AI is redrawing those lines<br />

where the sub-markets are<br />

more distinctive around a<br />

specific asset or group of<br />

assets versus that oblong<br />

or square or circle that you<br />

were talking about earlier.<br />

That does throw people I<br />

think, originally, to be able<br />

to look at the outputs from<br />

Enodo and see something<br />

different than sub-markets.<br />

Your response to that is?<br />

Marc Rutzen: Our response<br />

is to ask how is the<br />

sub-market determined?<br />

What data went into that<br />

sub-market and is it continually<br />

updating and refining?<br />

If you look at community<br />

areas within the city they<br />

were drawn decades ago<br />

and they don’t change.<br />

Does that neighborhood<br />

represent the people in that<br />

neighborhood and the properties<br />

in that neighborhood<br />

or have those boundaries<br />

changed? That’s why we’ve<br />

built an algorithm that’s<br />

dynamic that will show, at<br />

any given point in time, the<br />

most relevant competitive<br />

market area. And that may<br />

offend the senses but you<br />

want the best answer- you<br />

don’t want the answer<br />

that’s most comfortable.<br />

John Wilhoit: Which is why<br />

we’re talking about artificial<br />

intelligence driven<br />


decisions versus things that<br />

are based on what might<br />

have been in a textbook<br />

from 1982.<br />

Marc Rutzen: Exactly.<br />

John Wilhoit: There’s<br />

always somebody that<br />

wants to know how you<br />

come up with that number,<br />

right? My question to you<br />

Marc is about Enodo Rents.<br />

How did you come up with<br />

that number and how do we<br />

know it’s a number we can<br />

rely on?<br />

Marc Rutzen: The way we<br />

get to Enodo Rents is by<br />

utilizing both in-place and<br />

advertised rents. This is<br />

after removing outliers- so<br />

we don’t take anything like<br />

six month leases or something<br />

that’s going to be<br />

artificially high. We train on<br />

that data alongside all the<br />

demographic and economic<br />

and local demand drivers.<br />

We will calculate what we’ll<br />

get (what rents will be) if<br />

you were to take this unit<br />

in this building to market<br />

today. What are you going<br />

to be able to get for it?<br />

The market rent that you<br />

see in rent rolls is not necessarily<br />

appropriate market<br />

rents to use. The trends in<br />

the market when analyzed<br />

by AI can inform you as to<br />

where rents are going and<br />

where the optimal price<br />

point is more so than just<br />

looking at the operations of<br />

your own asset. You have a<br />

look at the entirety of market<br />

and what’s going on to<br />

determine where to price<br />

your units.<br />

John Wilhoit: That’s<br />

right. And that’s where<br />

I come in with my book<br />

Rent Roll Triangle: The Ultimate<br />

Rental Property Grading<br />

System because you’re<br />

not just looking at what’s<br />

on the rent roll. There’s<br />

always going to be a disparity<br />

between gross potential<br />

rent, effective rent, stated<br />

lease rents (what’s in the<br />

lease document) and collections.<br />

So, there’s four different<br />

price points none of<br />

which necessarily tells you<br />

effective rents on a given<br />

day until you analyze what<br />

those differentials are and<br />

see where you should be<br />

from a market rate perspective.<br />

Marc Rutzen: Right.<br />

John Wilhoit: Back to Enodo<br />

Rent...<br />

Marc Rutzen: Enodo rent is<br />

not biased. There’s no bias<br />

from the property managers<br />

saying I’ll never hit<br />

those numbers or someone<br />

saying we’ve got to keep<br />

rents artificially low to keep<br />

occupancy high. There’s<br />

no human bias whatsoever.<br />

We’re just looking at pure<br />

data in the market and<br />

determining what your price<br />

(rental pricing) should be.<br />

You may have different<br />

opinions about it and in<br />

some cases, there may not<br />

be enough data in the market<br />

and Enodo rent may<br />

not be the right one to use-<br />

I’m not going to say it’s<br />

perfect. But in a lot of cases<br />

you’d be surprised. You<br />

look at the Enodo prediction<br />

of rent and you compare it<br />

to what you think the rent<br />

should be and there could<br />

be a pretty sizable Delta.<br />

Then maybe you might<br />

want to reconsider, wait a<br />

second, can I raise rents<br />

for this unit type and if I<br />

do you I’ll make some more<br />

money on the deal, right?<br />

So, that’s what Enodo Rent<br />

is there to provide; that<br />

market context and the<br />

upside or downside potential<br />

for an asset.<br />

John Wilhoit: It’s good to<br />

have a target, and more<br />

than one to compare, so<br />

that when we go out into<br />

the marketplace we’re<br />

not relying on just what’s<br />

in advertised rental rates<br />

because that doesn’t tell us<br />

anything about discounts<br />

or concessions. Enodo<br />

Rent takes that into consideration<br />

and tells you, or<br />

shares with you, what a unit<br />

should be renting for net of<br />

concessions. Is that a fair<br />

statement?<br />

Marc Rutzen: Absolutely.<br />

John Wilhoit: There have<br />

been times when two<br />

months free rent was<br />

not uncommon in metro<br />

Houston, Texas. So, that<br />

doesn’t necessarily tell you<br />

what stuff rents for, right?<br />

If there’s nothing sharing<br />

with you, the buyer or the<br />

operator, that a market is<br />

offering two months free<br />

rent as the norm to get<br />

occupancy anywhere near<br />

normalization. Enodo Rents<br />

takes that factor into consideration<br />

and tells you<br />

what the rents are versus<br />

what some conflated or<br />

inflated number is that may<br />

or may not be real.<br />

Marc Rutzen: Yep. That’s<br />

the beauty of it.<br />

John Wilhoit: This article<br />

is a transcrbed from a live<br />

recording and podcast with<br />

Marc Rutzen about<br />

Artificial Intelligence Driven<br />

Real Estate Underwriting.<br />

We’ve been talking with<br />

Marc Rutzen of Enodo Inc.<br />

Use the discount code:<br />

<strong>MIM</strong>_50 to try out the<br />

product.<br />

Give it a try. Marc loves<br />

feedback. Hit them up on<br />

the Enodo Inc. web site<br />

with any questions that<br />

you have. They’re always<br />

improving the product. I<br />

endorse Enodo and I think<br />

they’re building a great<br />

system. I think it’s got legs<br />

and a great future. Hopefully<br />

you’ll take the time<br />

to check them out and see<br />

they are delivering on their<br />

promises.<br />

Marc Rutzen: We’re excited<br />

to hear from your audience.<br />

Tell us what you think.<br />

We’re always improving as<br />

John said. We look forward<br />

to working with you.<br />

To listen to the Podcast of this<br />

interview Click Here.<br />





5 Multifamily Rental Revenue<br />

Growth Strategies<br />

By John Wilhoit<br />

Every operator wants rent growth. Rent growth, rent growth, rent growth. Year-over-year rent growth<br />

is the most important driver of revenue growth. How do you get it? Like any business, multifamily requires<br />

an action plan for growing revenue including multiple moving parts to gain traction towards to<br />

goal. Following are five methods to get there faster. For more tips about multifamily operations and property<br />

management read John Wilhoit’s book Multifamily Insight <strong>Vol</strong> 1 and <strong>Vol</strong> II.<br />


1<br />

Always at the top of the list. Nothing keeps<br />

income ticking like retaining in-place residents.<br />

Always start the renewal process early. Recognize<br />

this as your number one tool for maintaining<br />

stabilized occupancy. If there is a leasing<br />

office on site, having posted hours is a small<br />

thing that brings big results because your residents<br />

(customers) know when the “store” is<br />

open. Does your asset have trained staff responding<br />

professionally? Is customer service<br />

at the forefront of company policy with an eye<br />

towards quality customer service? These are<br />

operational must-haves for increasing renewal<br />

rates.<br />

2<br />

1<br />


Our customers make or break our business. Set<br />

your standards, stick to your standards. The<br />

‘great recession” created the need for some<br />

changes in credit underwriting but not so much<br />

as to bend past the point of reasonableness.<br />

Today, with a full-employment economy and<br />

historic low housing affordability, the renter<br />

pool is robust. Even still - think long-term and<br />

resist the tendency to accept below-standard<br />

applications for the sake of a quick bump in percent<br />

occupancy. Just like the fairy tale: the tortoise<br />

tends to win the race.<br />

2<br />


3<br />


3<br />

If your other income revenue includes only application,<br />

late and pet fees there is room for<br />

expansion. Storage, services, cable revenue<br />

sharing, RUBS (Renter Utility Billing Systems),<br />

parking (premium parking spaces). Do some<br />

brain storming to see what works best for your<br />

assets. To learn more read this article at Multifamily<br />

Insight: Property Management: What is<br />

the Composition of Your Ancillary Income?<br />

4<br />

4<br />


Are you offering existing customers an incentive<br />

to bring in their friends and co-workers?<br />

Resident referrals are a cost-effective method<br />

to create an opportunity to have satisfied customers<br />

introduce your property to new customers.<br />

Consider the positive financial impact<br />

of just one referral a month at each property<br />

under management - convert this to dollars and<br />

you can see why this should be implemented<br />

across all of your ;assets under management.<br />

Read: Multifamily Apartment Marketing: 21<br />

Leasng Touch Points.<br />

5<br />

EMAIL.<br />

5<br />

Do you email your customers and potential customers?<br />

Oh no! Not another task! Like with<br />

this blog, we try to keep in regular contact with<br />

our readers via email. An email as often as only<br />

once a month can assist in maintaining name<br />

recognition. It’s just one more place to keep<br />

your name in front of your customers. That’s<br />

why Nike pays to have their “swoosh” on every<br />

high-profile athlete possible. Multifamily Insight<br />

uses, and highly recommends: Aweber Email<br />

Management System.<br />


Multifamily Insight Magazine<br />

Multifamily Financing: Is it Still a<br />

Great Time to be a Borrower?<br />

By David Garfinkel<br />

I wrote a similar article in 2012<br />

titled “It’s a great time to be a<br />

borrower”.<br />

Is this how you choose a<br />

real estate investment?<br />

Maybe there’s a better way.<br />

Learn how experienced investors evaluate<br />

rental property investments. No hype, no<br />

motivational cheerleading, no upsells –<br />

just a straightforward, comprehensive<br />

series of video lessons that teach you the<br />

formulas, metrics and techniques.<br />

Click to learn more.<br />

The 10-Year US Treasury<br />

was at a 60-year<br />

historic low, hovering<br />

around 1.40%. Today, the<br />

10-year Treasury is now at<br />

2.65%. Here is part of what I<br />

wrote then:<br />

“The big question is when<br />

are interest rates going up?<br />

Since we are at historic lows,<br />

there is a lot of speculation<br />

that interest rats will rise.<br />

But when? Once must assume<br />

that eventually, rates will<br />

start to climb, and then the<br />

next question is where will<br />

they stop?”<br />

Well, rates are up, but where<br />

will they stop? (rates jumped<br />

after the 2016 election). The<br />

bigger question may be, is<br />

it still a good time to be a<br />

borrower? I’d say<br />

the answer is yes. Life<br />

Insurance Companies are<br />

currently lending; Fannie<br />

Mae, Freddie Mac and<br />

HUD are still aggressively<br />

lending on multi-family,<br />

and the CMBS is market is<br />

back (Commercial Mortgage<br />

Backed Securities, also<br />

known as Conduit loans).<br />

Life Insurance Company<br />

rates can be had somewhere<br />

around 4.25% – 4.75% fixed<br />

for 10-years. Freddie and<br />

Fannie have 10-year rates<br />

around 4.75%, with HUD<br />

rates around 4.50% fixed<br />

for 35-years (plus Mortgage<br />

Insurance Premium, also<br />

known as MIP). CMBS<br />

rates can be had for around<br />

5.25% – 5.50% fixed for<br />


10-years. These assumptions<br />

are based on fuller<br />

leverage. Historically, these<br />

are still great rates!<br />

All our capital sources are<br />

lending, and that is a good<br />

thing. Fannie/Freddie and<br />

HUD are lending to historic<br />

levels.<br />

The fact that CMBS is back<br />

is a good thing, as this has<br />

opened a new channel of<br />

capital into the marketplace.<br />

CMBS is lending on all<br />

property types and still has<br />

attractive debt. The hope is<br />

that these lenders can pickup<br />

loans that a Life company<br />

may not bid as aggressively<br />

for, including loans where<br />

leverage needs to be pushed<br />

or in markets that aren’t<br />

major metropolitan areas.<br />

It is crucial to note that<br />

the fundamentals of<br />

underwriting are still very<br />

important. Lenders aren’t<br />

pushing leverage. They<br />

are evaluating each loan as<br />

it relates to location, lease<br />

rollover, borrower strength<br />

and many other factors for<br />

making a real estate loan.<br />

But if the fundamentals<br />

work, then you should be<br />

able to take advantage of<br />

still very attractive longterm<br />

rates. It is still a great<br />

time to be a borrower. John<br />

Wilhoit’s book about rent<br />

roll analysis - How to<br />

Read a Rent Roll: A Guide<br />

to Understanding Rental<br />

Income is a great place to<br />

learn about the fundamentals<br />

of lender underwriting.<br />

David Garfinkel is an<br />

employee of NorthMarq<br />

Capital. His views and<br />

opinions expressed in this<br />

article are his alone and<br />

do not represent the official<br />

views of the company.<br />

David can be reached at<br />

Dgarfinkel@northmarq.com<br />

314-301-1808.<br />






In Every Issue! 1<strong>00</strong> Words to make you a better Property Manager.<br />

Wi-Fi programmable thermostats are creating<br />

thousands of dollars in savings for property owners<br />

every day. They can be accessed from your<br />

on-site or central property management office to<br />

reflect real time needs at the property level. Snow<br />

coming? You can make sure each vacant unit has<br />

heat set correctly to avoid costly repairs from<br />

freezing pipes. Summer showings only in the afternoon?<br />

Program vacant units to cool from 12-5<br />

only. Start with installing them at turnover and<br />

expand over time. A simple cost/benefit analysis<br />

should reflect a payback of less one year. That’s<br />

smart property management! Read John Wilhoit’s<br />

book How to Read a Rent Roll to learn professional<br />

rent roll analysis..<br />

Multifamily<br />

Cash Buyer<br />

Major U.S. Markets<br />

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Liquidity in Real Estate Investing<br />

Click to Listen<br />

How to Read a rent roll - Do you know<br />

all the elements of a rent roll? This<br />

book is exclusively for people serious<br />

about buying rental income property.<br />

Rent roll analysis validates contractual rental<br />

revenue; it’s is up to you to get this right.<br />

Buying rental property is not an impulse purchase.<br />

As a rental property buyer, you need<br />

to know how to build, understand and use<br />

the rent roll to your advantage.<br />

This book is a technical guide to rent roll<br />

analysis. The objective is to narrow your<br />

attention to one thing and one thing only:<br />

estimating the validity of contractual rental<br />

revenue collected from rental income property.<br />

Why is this important? Because getting<br />

it wrong undermines the goal of estimating<br />

Net Operating Income (NOI) accurately.<br />


Multifamily Insight Magazine<br />

I am Jamal<br />

Khashoggi<br />

“ ”<br />


Mr. Khashoggi shared this bias; that truth is worth sharing.<br />

Mr. Khashoggi and I have much in common.<br />

Predominantly, we are both<br />

passionate about writing. If the two<br />

of us were awkwardly introduced in a social<br />

setting, once it’s established we are<br />

both writers the perfunctory news-weather-sports<br />

conversation is dismissed in exchange<br />

for the common ground of sharing<br />

stories that may have some small impact on<br />

the world at large.<br />

We might have discussed<br />

wine, where to<br />

find the most comfortable<br />

shirts or how long<br />

we can get away with<br />

“not shaving”. Our<br />

worlds diverge there; I<br />

was born and raised in a<br />

country where the right<br />

to free speech is protected.<br />

Mr. Khashoggi<br />

was not. My constitutional<br />

right to say<br />

and write what I want<br />


is universal within the<br />

borders of my country.<br />

Mr. Khashoggi’s was<br />

not. Rudi Keller writes<br />

a column entitled Rude<br />

Awakenings. From a<br />

recent article:<br />

…The only bias I have<br />

ever found that is universal<br />

among good journalists<br />

is a bias in favor<br />

of the truth.<br />

Mr. Khashoggi shared<br />

this bias; that truth<br />

is worth sharing. His<br />

views so angered leaders<br />

in the country of<br />

his birth that an elaborate<br />

plan to silence his<br />

voice was planned and<br />

executed resulting in<br />

his death. I am Jamal<br />

Khashoggi because I<br />

too believe that truth is<br />

worth sharing.<br />

The United States attempts<br />

to export to the<br />

world the concept that<br />

people should have the<br />

right to express their<br />

political and personal<br />

opinions without fear<br />

of governmental reprisal.<br />

Alas, this is not a<br />

universal truth accepted<br />

by all. In the middle<br />

east and China, the<br />

right to free speech is<br />

far from universally accepted.<br />

If anything, it<br />

is occasionally tolerated<br />

but usually quashed.<br />

The United States attempts to export to the<br />

world the concept that people should have<br />

the right to express their political and personal<br />

opinions without fear of governmental<br />

reprisal.<br />

I am Jamal Khashoggi because we shared<br />

the belief that truth shared is a positive<br />

event.<br />

It matters not if you<br />

agree with my truth; we<br />

believe that we have<br />

the right to express it.<br />

I am Jamal Khashoggi<br />

because I believe in free<br />

speech.<br />

The purveyors or his<br />

death, by smashing the<br />

stone, have broken it<br />

into a thousand pieces<br />

each with a new story<br />

to tell, a new truth to<br />

share.<br />

On the home page of<br />

the Washington Post<br />

you’ll see the tag line<br />

“Democracy Dies in<br />

Darkness”.<br />

Thank you, Mr.<br />

Khashoggi, for bringing<br />

light to darkness, for<br />

advancing democracy,<br />

for standing in for truth,<br />

for binding tyranny with<br />

bold action with your<br />

voice and with your<br />

pen.<br />




I am Jamal Khashoggi<br />

because we shared the<br />

belief that truth shared<br />

is a positive event.<br />


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