In this episode of the Ironclad Underwriting Podcast, Jason Williams and co-host Frank Patalano break down the true financial impact of concessions in multifamily real estate. As part of their mini-series on the real cost of vacancy, they explain how concessions inflate economic vacancy, quietly erode effective rents, and can wipe millions off a property’s valuation if misused. Through real-world examples, math walkthroughs, and candid asset management stories, they make the case for using concessions sparingly, strategically, and with a clear exit plan.

Topics Covered

• Economic vs. physical vacancy and why concessions widen the gap
• Why two months of free rent equals a ~16% annual rent discount
• How concessions directly reduce NOI and property valuation
• Short-term “burn-off” concessions vs. long-term/perpetual concessions
• Real examples: free rent, TVs, gift cards, waived fees, parking, and internet
• Concession creep and the danger of always running “specials”
• Competitive pressure and how market behavior distorts true market rent
• When concessions make sense (lease-up, distressed occupancy, seasonality)
• How to think about concessions during underwriting and pro forma modeling

Notable Quotes

• “If you give two months free rent, you’re basically giving a 16% discount on the rent for the year.”
• “That $300,000 in lost rent at a six cap is a $5 million hit to your valuation.”

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In Part 3 of The Real Cost of Vacancy series, Jason Williams and co-host Frank Patalano break down one of the most misunderstood concepts in commercial real estate underwriting: the difference between physical occupancy and economic occupancy. This episode dives deep into why properties can appear “full” on paper yet still bleed cash, how bad debt, concessions, loss to lease, and operational decisions impact true performance, and what red flags investors should look for during due diligence.

Topics Covered

• Physical vacancy versus economic vacancy and why the difference matters

• How a property can be 95 percent occupied and still lose money

• The impact of bad debt, delinquency, and non-paying residents

• Concessions, loss to lease, and how they reduce economic occupancy

• Model units and employee units as hidden drivers of economic vacancy

• Step-by-step examples calculating economic occupancy on a 100-unit property

• Why expenses and debt structure can erase strong occupancy numbers

• Agency debt requirements including the 90 for 90 rule

• Red flags on rent rolls including balances due, payment plans, and eviction notes

• Risks tied to lease expirations during low leasing seasons

• How eviction timelines and local laws affect underwriting assumptions

• What a healthy spread between physical and economic occupancy looks like

Quotes

“Physical vacancy is completely different than economic vacancy. You can be full and still be broke.”

“You don’t underwrite buildings based on how full they look. You underwrite them based on how much money they actually collect.”

🎧 Connect with Jason:

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✅ https://IroncladUnderwriting.com

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🎧 Connect with Frank:

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Overview

In this episode of the Ironclad Underwriting Podcast, Jason Williams and Frank Patalano continue their deep dive into the real cost of vacancy by unpacking lease up assumptions. They explore what lease up really means in acquisitions and ground up development, why many investors get it wrong, and how competition, concessions, seasonality, and management execution directly impact underwriting accuracy and returns.

Topics Covered

• What lease up means in real world underwriting scenarios
• The difference between physical occupancy and economic occupancy
• Why 90% occupancy is not the same as being stabilized
• How agency lenders define stabilization with the 90 for 90 rule
• Lease up challenges in acquisitions versus ground up development
• The impact of competition, concessions, and nearby properties
• Absorption rates and how to interpret them without overcomplicating models
• Seasonality and why lease expirations matter more than timelines
• The hidden cost of concessions and how they affect long term value
• Operational realities like staffing, marketing channels, and leasing execution

Quotes

• “Nobody is living in a vacuum so you have to figure out what exactly is going to affect your lease up projections”

🎧Connect with Jason

✅ LinkedIn

✅ https://IroncladUnderwriting.com

✅Linktree

🎧 Connect with Frank:

✅LinkedIn