Hello, this is Shuo.
Today let’s talk about bad debt and concessions.
Bad debt refers to the uncollected rent from the renters who either skip out or have to be evicted due to the nonpayment.
Concession is different, considered to be a temporary financial incentive used to induce the signing of a lease. So, the common example of concession will be: first month free moving in with the signing of a 12 month lease.
So, both concession and bad debt need to be taken into consideration when underwriting for the economic vacancy.
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Patrick Grimes is a design engineer and CEO and Founder of Invest on Main Street, LLC. His real estate holdings include general partner ownership of a multifamily and single-family real estate portfolio valued over $146M, including 1,950+ units across the southeastern United States and Texas.
He has been active in real estate investment since 2007, including purchasing land and distressed assets, renovating them, and stabilizing them for long-term cash flow. To scale his real estate portfolio, Patrick moved from single-family to multifamily investing and founded Invest on Main Street, a private equity firm specializing in multifamily value-add projects in emerging markets.