Trended rents are rental rates that are based on market growth projections for inflation and other factors. Usually, historical market data is used to predict future rental growth of annual rents. While using trended rents may present a slightly more accurate version of a property’s future financial position than using untrended rents, it’s usually not a good idea to rely on future rent increases in order to make a property profitable.

Trended rents can be used to project a more accurate picture of a property's future financial position when applying for a commercial real estate loan. Trended rents take into account historical market data, projected rent growth, inflation, and other factors to provide a more accurate estimate of rental income. This can be beneficial when applying for a loan, such as a HUD 223(f) loan, as it can provide a more accurate picture of the property's future financial position. However, it is important to note that trended rents may not be accurate in times of economic upheaval, as rents may decrease.

Untrended rents, on the other hand, are today's rental rates without any projected increases. This is a more conservative approach to estimating rental income, but it may underestimate rental revenues from the property. Additionally, untrended rents may not be accurate in the event of sudden changes to the economy.

The main benefit of using trended rents in commercial real estate financing is that it can provide a more accurate version of a property’s future financial position than using untrended rents. Trended rents are rental rates that are based on market growth projections for inflation and other factors, usually based on historical market data. This can help to paint an accurate picture of rental income during times of stability, but may not be as accurate during major upheavals in the economy. Additionally, using trended rents can help to conserve cash flow in the short term, as monthly payments will be lower than if you were paying both principal and interest.

Lenders use trended rents when evaluating commercial real estate financing applications to paint an accurate picture of rental income during times of stability. Trended rents are rental rates that are based on market growth projections for inflation and other factors. Usually, historical market data is used to predict future rental growth of annual rents. This helps lenders to better understand the potential rental income of a property and make more informed decisions when evaluating a loan application.

However, lenders should be aware that trended rents may fall short if rents were to decrease due to major upheavals in the economy. In this case, lenders may opt to use untrended rents, which are today’s rental rates, unchanged by projected increases at the market or national level. This is a more conservative approach to anticipating a property’s returns, but it is a safer bet in the event of sudden changes to the economy.

The main risk associated with using trended rents in commercial real estate financing is that it may not accurately predict future rental growth of annual rents. This could lead to a property not being profitable if the rent increases are not as expected. Additionally, during major upheavals in the economy, trended rents may fall short if rents were to decrease. Source 1, Source 2.

Another risk associated with interest-only loans is that your monthly payments could increase significantly at the end of the interest-only period when you are required to start paying both principal and interest. Additionally, if your property’s value decreases, you could find yourself underwater on your loan – owing more than the property is worth. Source 3.