By-the-bed underwriting for student housing, worked through

Student housing leases by the bed, so it underwrites by the bed. Each bedroom is its own lease, rent is quoted per bed, and every line from vacancy to reserves scales with beds rather than units. The example below is a 600-bed property.

1. Gross potential rent

Beds times rent per bed times months. At $900 a bed and 12-month leases: 600 × $900 × 12 = $6,480,000.

Fannie Mae’s Guide says how to pick the rent for a Dedicated Student Housing property: the lower of the rents actually in place (per unit or per bed) and market rents at comparable student properties, with market rent used for vacant units. It allows by-the-bed income only when the property has at least two years of operating statements kept that way.

2. Vacancy, concessions and bad debt

Fannie Mae requires these three lines together to equal at least the greater of the real gap between trailing-12 collections and gross potential rent, or 5% of gross potential rent. With no trailing-12 history, the floor is 10%. On the example, 5% is $324,000.

Concessions matter more here than in conventional apartments. A free month to fill the last 30 beds in August is a 1/12 rent cut on those leases, and lenders take it off.

3. Summer and other income

Freddie Mac’s summary allows leases shorter than 12 months only if the property met its DSCR for the previous two leasing cycles and no more than 80% of summer income is underwritten as other income. Parking, fees and utility billbacks come in as other income too, usually at what the trailing statements support. The example adds $25 a bed a month: $180,000.

Effective gross income: $6,480,000 − $324,000 + $180,000 = $6,336,000.

4. Expenses and reserves

Student properties turn every August, so payroll, turnover and furniture run higher than in a conventional building. Use the property’s own history. The example assumes $4,200 a bed a year, or $2,520,000.

Reserves: Freddie Mac requires at least $300 a unit or $150 a bed. At $150 a bed the example reserves $90,000.

Net operating income: $6,336,000 − $2,520,000 − $90,000 = $3,726,000, or $6,210 a bed.

5. The loan

Now the constraints. At a 1.30x DSCR, NOI of $3,726,000 supports $2,866,154 a year of principal and interest. Turn that into a loan amount with your quoted rate and amortization, compare it with the LTV limit on value, and the smaller number is the loan. The loan sizer does exactly that, with Freddie Mac’s published LTV and DSCR tiers as presets.

What moves the number most

Rent per bed comes first: $50 a month on 600 beds is $360,000 a year of rent. The vacancy floor is next. Without a clean trailing-12, the floor doubles to 10% and the example loses another $324,000 of income. Rate is the third lever, and the biggest at a fixed DSCR: on the sample’s NOI, moving from 6% to 7% on 30-year amortization cuts the 1.30x loan from about $39.8 million to about $35.9 million.

Before any of that, check the campus: its enrollment trend and how many students sit beyond the college’s own beds are on its campus page.