Operating evidence and financing
What this package helps you examine
An occupied apartment is not necessarily a paying apartment, and a signed lease is not the same as collected cash. Prepare a financing case that connects unit-level rent, concessions, arrears and operating costs to a repeatable cash-flow figure. The objective is to explain why the proposed loan remains supportable after the temporary benefits and missing expenses are removed.
Build a unit-to-cash bridge
Start with the same dated inventory in the rent roll, lease file and collection system. Separate vacant units, nonrevenue units, employee units and units unavailable for repair. Show contractual rent, billed concessions, cash collections and unpaid balances in separate columns. A tenant balance transferred to a payment plan is not cash received. Reconcile the monthly totals to bank deposits and identify timing items rather than forcing the rent roll to equal the income statement.
Normalize costs without hiding capital
Reconcile taxes, insurance, management, utilities, payroll, maintenance and turnover to actual bills and the proposed ownership structure. A seller-managed property may require a new management charge. Distinguish ordinary repairs from capital replacements and show both cash needs even if they sit in different model lines. An underwritten replacement reserve is not evidence that the owner has enough cash for a near-term roof, boiler or unit rehabilitation program.
Explain the trend and the proposed execution
Compare recent months with the trailing year using consistent units and definitions. A stronger recent run rate may reflect durable rent collection or merely a concession cycle, delayed repairs or seasonal costs. Preserve an adjustment log with amount, reason, supporting document and lender response. Agency, bank and other lender cash-flow treatments can differ; use the applicable program guide and lender instructions instead of treating one definition as universal.
Use the workbook
- Use Assumptions!D5 for Base (1) or Downside (2), and the labeled scenario input rows. Enter source data in Unit Mix!D10:K21; preserve formula cells and an untouched workbook copy.
- Reconcile units, rent, occupancy and turnover in Unit Mix. A turn concession is a cash deduction; turn capital is below NOI. Average monthly occupancy is not a unit-level rent roll.
- Reconcile Operations to Summary. Apply the entered lender adjustment separately to the modeled cash flow. Sizing uses amortizing debt service, while first-year payments reflect the entered interest-only period.
- In Assumptions, replace illustrative value, LTV, DSCR, debt yield, rate, amortization and requested ceiling with the intended scenario. Review capacities in Debt and Funding. The smallest modeled capacity does not establish eligibility or approval.
- Closing equity includes the entered opening cash and restricted reserves. Additional operating cash need is measured after that opening cash, so do not add it twice. Inspect monthly cash and remaining principal at maturity.
- Read Review for model conventions and limitations. Save each scenario with its supporting evidence and date; actual lender definitions, legal rights and professional findings control the transaction.
Questions to prepare for a lender
Which occupied units are actually paying?
Dated rent roll, tenant ledger, arrears aging and bank-reconciled collections using the same cutoff date.
Which rents are contractual, collected or projected?
Executed leases, renewals, concession addenda and a separate market-rent schedule.
What changed between the trailing year and recent months?
Monthly operating statements, unit-level changes and a bridge for each material adjustment.
What does the first year require beyond recurring expenses?
Condition assessment, bids, turnover schedule and a funded capital plan.
Can the sponsor absorb a slower collection recovery?
Verified available liquidity after closing, with restrictions and other commitments identified.
Which definition controls the loan sizing?
Written lender assumptions identifying income exclusions, expense floors and reserve treatment.
03 / Prepare
Build the evidence file
Use this as a preparation checklist. The lender determines the documents, definitions and review conditions for the actual transaction.
Cash flow and operations
- Current rent roll with unit type, size, occupied status and lease dates.
- Executed lease sample plus all material concessions, renewals and unusual terms.
- Tenant-level collections, arrears aging, write-offs and payment-plan history.
- Monthly operating statements and general ledger covering the requested periods.
- Bank-deposit reconciliation distinguishing rent, deposits, owner advances and other cash.
- Tax bills, insurance quotes, utility bills, payroll and management agreement.
Property and collateral
- Unit inventory reconciled to legal use, survey and reported rentable area.
- Property-condition report with immediate repairs and replacement schedule.
- Environmental and other third-party reports requested for the proposed execution.
- Evidence of required occupancy approvals and unresolved violation responses.
- Capital bids with scope, access, tenant disruption and completion dates.
- Affordable, rent-regulatory or other restrictions applicable to actual units.
Sponsor and execution
- Ownership chart and borrowing-entity documents identifying control and guarantors.
- Sponsor experience with comparable property size, condition and resident profile.
- Liquidity statements with restricted balances and overlapping commitments separated.
- Real-estate debt schedule with maturities, guaranties and contingent obligations.
- Management transition plan, staffing coverage and collection procedures.
- Source-of-equity evidence and authority to make the required contribution.
Closing and funding
- Purchase agreement or current payoff statement and transaction deadlines.
- Sources-and-uses ledger separating fees, deposits, escrows and usable proceeds.
- Repair-holdback conditions, reimbursement steps and temporary cash requirement.
- Insurance and tax-escrow instructions matched to the closing budget.
- Loan assumptions, covenants and reserve definitions reconciled to the model.
- Open-item log naming evidence owner, acceptance authority and funding consequence.
Watch for these assumptions
- Do not count billed rent and later collections twice when converting accrual records to cash evidence.
- Avoid using a full-property vacancy deduction after already excluding the same vacant units from rent.
- A replacement reserve and an actual capital project have different purposes; trace where each dollar is funded.
- Higher projected rents do not cure a closing cash shortage or prove an agency program will accept the projection.
Before you rely on the result
- Reconcile unit count, leased rent and collected cash before requesting a final quote.
- Resolve unsupported adjustments or show a separate lower-income scenario.
- Identify who funds repairs and operating deficits before any reimbursement.
Scope and limitations
- Educational analysis; not a financing offer, appraisal, legal opinion or program eligibility determination.
- Workbook figures and thresholds are illustrative editable assumptions, not current lender quotes or universal underwriting standards.
- Document requests depend on the lender, transaction, jurisdiction and property; address unresolved issues with the relevant qualified professional.
Sources and applicability
Fannie Mae Section 905.01 was checked in the official PDF downloaded on October 21, 2026 (edition effective September 28, 2026), pages 3-6. Its cash-flow framework is program-specific; the guide does not apply its numerical thresholds to all apartment loans. Confirm the controlling version and lender treatment for the actual transaction.
- Fannie Mae — Small Mortgage Loan property income analysisSection 905.01, Required Underwritten Net Cash Flow table, PDF pages 3-6; edition effective September 28, 2026 · Checked 2026-10-21Source-specific context; numerical examples and decision workflow are original hypothetical analysis.