UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2019

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from  to

Commission file number 000-54674

STEADFAST INCOME REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	27-0351641
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
18100 Von Karman Avenue, Suite 500
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer o	Accelerated filer o
Non-Accelerated filer þ	Smaller reporting company o
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 1, 2019, there were 73,905,170 shares of the Registrant’s common stock issued and outstanding.

STEADFAST INCOME REIT, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	2
Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018	2
Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)	3
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)	4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)	6
Condensed Notes to Consolidated Financial Statements as of September 30, 2019 (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3. Quantitative and Qualitative Disclosures About Market Risk	65
Item 4. Controls and Procedures	66
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	67
Item 1A. Risk Factors	67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3. Defaults Upon Senior Securities	69
Item 4. Mine Safety Disclosures	69
Item 5. Other Information	70
Item 6. Exhibits	70
Signatures	73

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	89,822,014		$	90,153,980
Building and improvements	804,194,436			795,383,423
Total real estate held for investment, cost	894,016,450			885,537,403
Less accumulated depreciation and amortization	(190,527,296		)	(165,112,070		)
Total real estate held for investment, net	703,489,154			720,425,333
Real estate held for sale, net	—			126,464,504
Total real estate, net	703,489,154			846,889,837
Cash and cash equivalents	120,202,920			142,078,166
Restricted cash	9,362,825			11,265,317
Investment in unconsolidated joint venture	13,316,283			14,085,399
Rents and other receivables	2,501,546			1,791,881
Assets related to real estate held for sale	—			848,960
Other assets	2,496,144			2,698,438
Total assets	$	851,368,872		$	1,019,657,998
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	20,356,476		$	23,899,595
Notes payable:
Mortgage notes payable, net	498,426,493			566,900,461
Credit facility, net	—			52,363,460
Mortgage notes payable related to real estate held for sale, net	—			74,237,653
Total notes payable, net	498,426,493			693,501,574
Distributions payable	3,371,492			3,515,310
Due to affiliates	1,645,472			4,985,918
Liabilities related to real estate held for sale	—			2,994,267
Total liabilities	523,799,933			728,896,664
Commitments and contingencies (Note 10)
Redeemable common stock	1,289,113			—
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $0.01 par value per share; 999,999,000 shares authorized, 73,983,866 and 74,650,139 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	739,839			746,502
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	10			10
Additional paid-in capital	650,253,927			656,204,073
Cumulative distributions and net income	(324,713,950		)	(366,189,251		)
Total stockholders’ equity	326,279,826			290,761,334
Total liabilities and stockholders’ equity	$	851,368,872		$	1,019,657,998

See accompanying condensed notes to consolidated financial statements.

2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Rental income	$	26,857,176		$	35,421,095		$	84,948,693		$	102,999,303
Other income	966,375			820,623			3,218,233			2,754,349
Total revenues	27,823,551			36,241,718			88,166,926			105,753,652
Expenses:
Operating, maintenance and management	6,871,764			10,457,331			21,720,715			28,936,191
Real estate taxes and insurance	4,031,558			5,657,098			13,376,128			18,329,576
Fees to affiliates	3,934,709			4,113,139			11,083,920			11,854,429
Depreciation and amortization	8,520,813			12,579,032			25,961,590			34,781,722
Interest expense	6,044,495			8,496,658			20,505,685			24,408,327
Loss on debt extinguishment	597,681			—			3,432,058			2,282,247
General and administrative expenses	3,063,653			1,107,644			6,181,745			4,448,377
Total expenses	33,064,673			42,410,902			102,261,841			125,040,869
Loss before other income (expense)	(5,241,122		)	(6,169,184		)	(14,094,915		)	(19,287,217		)
Other income (expense):
Equity in loss from unconsolidated joint venture	(228,667		)	(287,540		)	(427,816		)	(3,102,044		)
(Loss) gain on sales of real estate, net	(88,137		)	—			86,800,659			81,247,054
Total other (expense) income	(316,804		)	(287,540		)	86,372,843			78,145,010
Net (loss) income	$	(5,557,926	)	$	(6,456,724	)	$	72,277,928		$	58,857,793
(Loss) income per common share — basic and diluted	$	(0.08	)	$	(0.09	)	$	0.97		$	0.78
Weighted average number of common shares outstanding — basic	74,051,096			74,928,285			74,273,151			75,164,006
Weighted average number of common shares outstanding — diluted	74,056,721			74,940,350			74,278,776			75,176,774

See accompanying condensed notes to consolidated financial statements.

3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (Unaudited)

	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Income			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, July 1, 2019	74,206,848		$	742,069		1,000	$	10	$	652,239,394		$	(308,806,598	)	$	344,174,875
Repurchase of common stock	(222,982	)	(2,230		)	—	—		(1,997,770		)	—			(2,000,000		)
Distributions declared ($0.140 per share of common stock)	—		—			—	—		—			(10,349,426		)	(10,349,426		)
Amortization of stock-based compensation	—		—			—	—		12,303			—			12,303
Net loss for the three months ended September 30, 2019	—		—			—	—		—			(5,557,926		)	(5,557,926		)
BALANCE, September 30, 2019	73,983,866		$	739,839		1,000	$	10	$	650,253,927		$	(324,713,950	)	$	326,279,826
	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Income			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, January 1, 2019	74,650,139		$	746,502		1,000	$	10	$	656,204,073		$	(366,189,251	)	$	290,761,334
Repurchase of common stock	(666,273	)	(6,663		)	—	—		(5,993,337		)	—			(6,000,000		)
Distributions declared ($0.415 per share of common stock)	—		—			—	—		—			(30,802,627		)	(30,802,627		)
Amortization of stock-based compensation	—		—			—	—		43,191			—			43,191
Net income for the nine months ended September 30, 2019	—		—			—	—		—			72,277,928			72,277,928
BALANCE, September 30, 2019	73,983,866		$	739,839		1,000	$	10	$	650,253,927		$	(324,713,950	)	$	326,279,826

See accompanying condensed notes to consolidated financial statements.

4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 (Unaudited)

	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, July 1, 2018	75,079,994		$	750,800		1,000	$	10	$	660,149,499		$	(369,043,111	)	$	291,857,198
Issuance of common stock	7,500		75			—	—		(75		)	—			—
Repurchase of common stock	(218,555	)	(2,185		)	—	—		(1,997,815		)	—			(2,000,000		)
Distributions declared ($0.140 per share of common stock)	—		—			—	—		—			(10,472,649		)	(10,472,649		)
Amortization of stock-based compensation	—		—			—	—		34,832			—			34,832
Net loss for the three months ended September 30, 2018	—		—			—	—		—			(6,456,724		)	(6,456,724		)
BALANCE, September 30, 2018	74,868,939		$	748,690		1,000	$	10	$	658,186,441		$	(385,972,484	)	$	272,962,657
	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, January 1, 2018	75,479,409		$	754,794		1,000	$	10	$	664,110,915		$	(334,217,946	)	$	330,647,773
Issuance of common stock	7,500		75			—	—		(75		)	—			—
Repurchase of common stock	(617,970	)	(6,179		)	—	—		(5,993,821		)	—			(6,000,000		)
Distributions declared ($1.470 per share of common stock)	—		—			—	—		—			(110,612,331		)	(110,612,331		)
Amortization of stock-based compensation	—		—			—	—		69,422			—			69,422
Net income for the nine months ended September 30, 2018	—		—			—	—		—			58,857,793			58,857,793
BALANCE, September 30, 2018	74,868,939		$	748,690		1,000	$	10	$	658,186,441		$	(385,972,484	)	$	272,962,657

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net income	$	72,277,928		$	58,857,793
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	25,961,590			34,781,722
Amortization of deferred financing costs	729,401			799,989
Amortization of stock-based compensation	43,191			69,422
Amortization of loan premiums	(48,562		)	(222,466		)
Change in fair value of interest rate cap agreements	163,363			(103,506		)
Gain on sales of real estate	(86,800,659		)	(81,247,054		)
Loss on debt extinguishment	3,432,058			2,282,247
Insurance claim recoveries	(86,190		)	(1,005		)
Loss on disposal of building and improvements	53,207			427
Equity in loss from unconsolidated joint venture	427,816			3,102,044
Changes in operating assets and liabilities:
Rents and other receivables	(921,795		)	457,299
Other assets	(35,407		)	1,244,119
Accounts payable and accrued liabilities	(3,490,110		)	358,873
Due to affiliates	(3,357,984		)	(427,837		)
Net cash provided by operating activities	8,347,847			19,952,067
Cash Flows from Investing Activities:
Cash contribution to unconsolidated joint venture	(548,800		)	(2,931,578		)
Cash distribution from unconsolidated joint venture	890,100			530,100
Acquisition of real estate investments	—			(67,886,062		)
Additions to real estate investments	(9,423,100		)	(6,754,330		)
Escrow deposits for pending real estate acquisitions	—			(2,600,000		)
Purchase of interest rate cap agreements	(47,000		)	(203,300		)
Proceeds from sales of real estate, net	211,990,358			178,277,349
Proceeds from insurance claims	298,320			1,005
Net cash provided by investing activities	203,159,878			98,433,184
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	222,934,000			106,482,000
Principal payments on mortgage notes payable	(365,119,705		)	(158,021,981		)
Principal payments on credit facility	(52,656,750		)	(38,410,500		)
Payment of deferred financing costs	(1,356,539		)	(1,323,128		)
Payment of debt extinguishment costs	(2,988,984		)	(1,526,431		)
Distributions to common stockholders	(30,946,445		)	(111,795,742		)
Repurchases of common stock	(6,000,000		)	(6,000,000		)
Net cash used in financing activities	(236,134,423		)	(210,595,782		)
Net decrease in cash, cash equivalents and restricted cash	(24,626,698		)	(92,210,531		)
Cash, cash equivalents and restricted cash, beginning of period	154,192,443			205,096,008
Cash, cash equivalents and restricted cash, end of period	$	129,565,745		$	112,885,477

6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Nine Months Ended September 30,
	2019		2018
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	21,272,206	$	24,026,631
Supplemental Disclosure of Noncash Transactions:
Distributions payable	$	3,371,492	$	3,411,890
Assumption of mortgage notes payable to acquire real estate	$	—	$	65,000,000
Application of escrow deposits to acquire real estate	$	—	$	2,600,000
Redeemable common stock	$	1,289,113	$	—
Mortgage notes payable assumed by buyer in connection with property sales	$	—	$	(67,140,194	)
Assets and liabilities deconsolidated in connection with the Second Closing Properties:
Real estate, net	$	—	$	(98,350,076	)
Notes payable, net	$	—	$	76,336,778
Restricted cash	$	—	$	(913,408	)
Accounts payable and accrued liabilities	$	—	$	674,912
Accounts payable and accrued liabilities from additions to real estate investments	$	362,179	$	81,950
Due to affiliates from additions to real estate investments	$	22,180	$	6,613
Repurchases payable	$	710,887	$	2,000,000
Operating lease right-of-use asset, net	$	107,080	$	—
Operating lease liabilities, net	$	114,332	$	—

See accompanying condensed notes to consolidated financial statements.

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

1. Organization and Business

Steadfast Income REIT, Inc. (the “Company”) was formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust (“REIT”). On June 12, 2009, the Company was initially capitalized pursuant to the sale of 22,223 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $9.00 per share for an aggregate purchase price of $200,007. On July 10, 2009, Steadfast Income Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on May 1, 2009, invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 7 (Stockholders’ Equity).

The Company owns a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of September 30, 2019, the Company owned 27 multifamily properties comprising a total of 7,527 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. On March 13, 2019, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $9.40 as of December 31, 2018.

Public Offering

On July 19, 2010, the Company commenced its initial public offering of up to a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also offered up to 15,789,474 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $9.50 per share.

The Company terminated its Public Offering on December 20, 2013. Following termination of the Public Offering, the Company continued to offer shares of common stock pursuant to the DRP until the Company’s board of directors suspended the DRP effective beginning with distributions earned on December 1, 2014. Through December 1, 2014, the Company issued 76,095,116 shares of common stock in the Public Offering for gross offering proceeds of $769,573,363, including 4,073,759 shares of common stock pursuant to the DRP for gross offering proceeds of $39,580,847.

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement by and among the Company, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009 (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on November 15, 2020. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager for the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009. The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership will pay all of the Company’s administrative costs and expenses, and such expenses will be treated as expenses of the Operating Partnership.

Pending Merger with Steadfast Apartment REIT, Inc.

On August 5, 2019, the Company, Steadfast Apartment REIT, Inc. (“STAR”), a public non-traded REIT sponsored by the Sponsor, Steadfast Apartment REIT Operating Partnership, L.P., STAR’s operating partnership (“STAR Operating Partnership”), the Operating Partnership, and SI Subsidiary, LLC, a wholly-owned subsidiary of STAR (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, the Company will merge with and into SIR Merger Sub (the “Merger”), with SIR Merger Sub surviving the Merger, such that following the Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of the Company shall cease.

At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of the Company’s common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 0.5934 shares of STAR’s common stock, $0.01 par value per share.

The obligation of each party to consummate the Merger is subject to a number of conditions, including receipt of the approval of the Merger and of an amendment to the Company’s Third Articles of Amendment and Restatement (the “Charter”) to delete certain provisions regarding roll-up transactions by the holders of a majority of the outstanding shares of SIR Common Stock (the “SIR Stockholder Approval”).

The Company (with the prior approval of the special committee of its board of directors) may terminate the Merger Agreement in order to enter into an “Alternative Acquisition Agreement” with respect to a “Superior Proposal” (each as defined in the Merger Agreement) at any time prior to receipt by the Company of the SIR Stockholder Approval pursuant to the terms of the Merger Agreement. STAR may terminate the Merger Agreement at any time prior to the receipt of the SIR Stockholder Approval, in certain limited circumstances, including upon an “Adverse Recommendation Change” (as defined in the Merger Agreement).

If the Merger Agreement is terminated in connection with the Company’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, then the Company must pay to STAR a termination fee of $20,866,122 and up to $2,000,000 as reimbursement for STAR’s Expenses (as defined in the Merger Agreement).

On August 5, 2019, STAR, Steadfast Apartment REIT III Inc., a public non-traded REIT sponsored by the Sponsor, (“STAR III”), STAR Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, and SIII Subsidiary, LLC, a wholly-owned subsidiary of STAR (“STAR III Merger Sub”), entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement”). Subject to the terms and conditions of the STAR III Merger Agreement, STAR III will merge with and into STAR III Merger Sub (the “STAR III Merger”), with STAR III Merger Sub surviving the STAR III Merger, such that following the STAR III Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III shall cease.

The consummation of the Company’s merger with STAR is not contingent upon the completion of the merger between STAR and STAR III, and the consummation of the merger between STAR and STAR III is not contingent upon the completion of the Company’s merger with STAR.

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The combined company after the planned mergers will retain the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

Concurrently with the entry into the SIR Merger Agreement, the Company and the Advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the Advisory Agreement will be terminated at the effective time of the SIR Merger. Also pursuant to the Termination Agreement, the Advisor agreed to waive any disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the SIR Merger.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2018, other than Accounting Standards Update (“ASU”) 2016-02 and the Securities and Exchange Commission’s (“SEC”) Disclosure Update and Simplification rule (Release 33-10532), as further described below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2019.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE as the limited partner lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months endedSeptember 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying unaudited consolidated statements of operations.

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following table reflects the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	September 30, 2019
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	1,315	$	—
	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	117,678	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts.

The fair value of the notes payable is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2019 and December 31, 2018, the fair value of the notes payable was $498,323,633 and $681,095,544, respectively, compared to the carrying value of $498,426,493 and $693,501,574, respectively. The Company has determined that its notes payable are classified as Level 3 within the fair value hierarchy.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants. As of September 30, 2019 and December 31, 2018, the Company had a restricted cash balance of $9,362,825 and $11,265,317, respectively, which represents impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as of September 30, 2019 and December 31, 2018, respectively.

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018:

	September 30,
	2019		2018
Cash and cash equivalents	$	120,202,920	$	97,309,038
Restricted cash	9,362,825		15,576,439
Total cash, cash equivalents and restricted cash	$	129,565,745	$	112,885,477

The beginning of period cash, cash equivalents and restricted cash balance for the nine months ended September 30, 2019, includes $142,078,166 of cash and cash equivalents, $11,265,317 of restricted cash and $848,960 of restricted cash related to real estate held for sale as of December 31, 2018, on the accompanying consolidated balance sheet. In conjunction with property sales during the nine months ended September 30, 2019, $848,960 of restricted cash related to real estate held for sale was disposed of during the period.

Investments in Unconsolidated Joint Ventures

The Company accounts for investments in unconsolidated joint venture entities in which it may exercise significant influence over, but does not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and the Company’s proportionate share of equity in the joint venture’s earnings (loss). The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in earnings (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluates its investment in an unconsolidated joint venture for other-than-temporary impairments. The Company has elected the cumulative earnings approach to classify cash receipts from the unconsolidated joint venture on the accompanying consolidated statements of cash flows. 

Distribution Policy

The Company has elected to be taxed as, and qualifies as, a REIT commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the three and nine months ended September 30, 2019 were based on daily record dates and calculated at a rate of $0.001519 per share per day. Distributions were based on daily record dates and calculated at a rate of $0.001964 per share per day, $0.001683 per share per day and $0.001519 per share per day during the three months ended March 31, 2018, June 30, 2018 and September 30, 2018, respectively.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months endedSeptember 30, 2019, the Company declared aggregate distributions of $0.140 and $0.415 per common share, respectively. During the three and nine months endedSeptember 30, 2018, the Company declared aggregate distributions of $0.140 and $1.470 per common share, respectively, including a special distribution the Company’s board of directors declared in the amount $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2018.

Per Share Data

Basic earnings (loss) per share attributable to common stockholders for all periods presented are computed by dividing net income by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings (loss) per share is computed based on the weighted average number of shares of the Company’s common stock and all

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock.

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings (loss) per share. Basic earnings (loss) per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income (loss) remaining after deduction of dividends declared during the period. The undistributed earnings (loss) are allocated to all outstanding common shares based on the relative percentage of each class of shares. The Company does not have any participating securities outstanding other than the shares of common stock and the unvested restricted common stock during the periods presented. Earnings (loss) attributable to the unvested restricted common stock are deducted from earnings (loss) in the computation of per share amounts where applicable.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to

the current period presentation. These reclassifications did not change the results of operations of those prior periods. On January 1, 2019, the Company adopted ASU 2016-02, as further described below. As a result, all income earned pursuant to tenant leases is reflected as one-line item, “Rental Income,” in the consolidated statements of operations. To facilitate comparability, the Company has reclassified prior period’s lease and non-lease income consistently with the current year.

The table below provides a reconciliation of the prior period presentation of the income statement line items that were reclassified in our consolidated statements of operations to conform to the current period presentation, pursuant to the adoption of the new lease accounting standard and election of the single component practical expedient:

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Rental income (presentation prior to January 1, 2019)	$	31,892,448	$	93,133,369
Tenant reimbursements(1) (presentation prior to January 1, 2019)	3,528,647		9,865,934
Rental income (presentation effective January 1, 2019)	$	35,421,095	$	102,999,303

_______________

(1) Tenants reimbursements include reimbursements for recoverable costs.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In February 2016, the FASB established ASC Topic 842, Leases (“ASC 842”), by issuing ASU 2016-02, which requires lessees to recognize right-of-use assets and lease liabilities for operating leases on the balance sheet and disclose key information about leasing arrangements. ASC 842 also makes targeted changes to lessor accounting. ASC 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842 (“ASU 2018-01”), ASU 2018-10, Codification Improvements to Topic 842 (“ASU 2018-10”), ASU 2018-11, Targeted Improvements (“ASU 2018-11”) and ASU 2018-20, Leases (Topic 842), Narrow-scope Improvements for Lessors (“ASU 2018-20”). ASC 842 requires a modified retrospective transition approach and was effective in the first quarter of 2019 and allowed for early adoption. The Company elected an optional transition method that allows entities to initially apply ASC 842 at the adoption

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

date (January 1, 2019) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company evaluated the impact of ASC 842 on its leases both as it relates to the Company acting as a lessee and as a lessor. Based on its evaluation, as it relates to the former, the Company elected to apply each of the practical expedients described in ASC 842-10-65-1(f) that allowed the Company, among other things, to not reassess lease classification conclusions or initial direct cost accounting as of December 31, 2018, therefore these leases continue to be accounted for as operating leases. The Company also elected the practical expedient described in ASC 842-20-25-2 not to apply the recognition requirements in ASC 842 to short-term leases and instead, to recognize lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements. Upon adoption, the Company recognized an initial operating lease right-of-use asset, net, of $94,742 and an operating lease liability, net, of $87,862.

As it relates to the Company as lessor, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because under ASC 842, lessors continue to account for leases using an approach that is substantially equivalent to historical guidance for sales-type leases, direct financing leases, and operating leases. The Company elected a practical expedient which allows lessors to not separate non-lease components from the lease component when the timing and pattern of transfer for the lease components and non-lease components are the same and if the lease component is classified as an operating lease. As a result, on January 1, 2019, the Company began presenting all rentals and reimbursements from tenants as a single line item rental income within the consolidated statements of operations. As of January 1, 2019, the Company implemented changes to its business processes and controls related to accounting for and the presentation and disclosure of leases, including the reclassification of tenant reimbursements, previously disclosed as part of tenant reimbursements and other, to rental income, in the consolidated statements of operations.

Under ASC 842, beginning on January 1, 2019, changes in the probability of collecting tenant rental income could result in direct adjustments of rental income and tenant receivables. The Company did not experience a material impact on its rental income and tenant receivables as of the adoption date.

The Company’s rental income consists of fixed rental payments from tenants under operating leases and is recognized on a straight-line basis over the respective operating lease terms. The Company recognizes minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the non-cancelable term of the related lease. The Company’s rental income that relates to variable lease payments consists of tenant reimbursements and includes reimbursements for recoverable costs, which are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse the Company arises. 

The Company recognized $26,857,176 and $84,948,693 of rental income related to operating lease payments of which $2,709,239 and $8,017,862 was for variable lease payments for the three and nine months ended September 30, 2019, respectively.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASU 2016-13”). ASU 2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”), which clarifies that operating lease receivables accounted for under ASC 842 Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU 2016-13. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The FASB issued ASU 2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The issuance of ASU 2018-13 is part of a disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. Achieving the objective of improving the effectiveness of the notes to financial statements includes: (1) the development of a framework that promotes consistent decisions by the FASB board about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities. The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefit. ASU 2018-13 removed certain disclosure requirements under Topic 820 such as the disclosure requirements of the valuation process for level 3 fair value measurements and modified and added certain of the disclosure requirements in Topic 820. ASU 2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU 2018-13.

The SEC’s Disclosure Update and Simplification rule (Release 33-10532) amends the interim financial statement requirements to require a reconciliation of changes in stockholder’ equity in the notes or as a separate statement. This analysis should reconcile the beginning balance to the ending balance of each caption in stockholders’ equity for each period for which an income statement is required to be filed and comply with the remaining content requirements of Rule 3-04 of Regulation S-X. As a result, registrants will have to provide the reconciliation for both the year-to-date and quarterly periods and comparable periods in Form 10-Q but only for the year-to-date periods in registration statements. The rule does not prescribe the format of the presentation as long as the appropriate periods are provided. Per a Compliance and Disclosure Interpretation (Q 105.09, Exchange Act Forms, 10-Q), “The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the staff would not object if the filer’s first presentation of the changes in the shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.” This allows the Company to adopt the amendment for the Company’s first quarter 2019 filing. The Company has adopted this guidance in the nine months ended September 30, 2019 by presenting a reconciliation of changes in stockholders’ equity for the current and prior period as a separate statement.

3. Real Estate

As of September 30, 2019, the Company owned 27 multifamily properties encompassing in the aggregate 7,527 residential apartment homes. The total purchase price of the Company’s real estate portfolio was $862,854,253. As of September 30, 2019 and December 31, 2018, the Company’s portfolio was approximately 95.8% and 94.3% occupied and the average monthly rent was $1,123 and $1,068, respectively.

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

As of September 30, 2019 and December 31, 2018, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:

	September 30, 2019
	Assets
	Land		Building and Improvements			Total Real Estate Held for Investment			Real Estate Held for Sale
Investments in real estate	$	89,822,014	$	804,194,436		$	894,016,450		$	—
Less: Accumulated depreciation and amortization	—		(190,527,296		)	(190,527,296		)	—
Net investments in real estate and related lease intangibles	$	89,822,014	$	613,667,140		$	703,489,154		$	—

	December 31, 2018
	Assets
	Land		Building and Improvements			Total Real Estate Held for Investment			Real Estate Held for Sale
Investments in real estate	$	90,153,980	$	795,383,423		$	885,537,403		$	165,346,251
Less: Accumulated depreciation and amortization	—		(165,112,070		)	(165,112,070		)	(38,881,747		)
Net investments in real estate and related lease intangibles	$	90,153,980	$	630,271,353		$	720,425,333		$	126,464,504

Total depreciation and amortization expenses were $8,520,813 and $25,961,590 for the three and nine months endedSeptember 30, 2019, and $12,579,032 and $34,781,722 for the three and nine months endedSeptember 30, 2018, respectively.

Depreciation of the Company’s buildings and improvements was $8,519,728 and $25,945,678 for the three and nine months endedSeptember 30, 2019, and $11,657,288 and $33,498,945 for the three and nine months endedSeptember 30, 2018, respectively.

Amortization of the Company’s other intangible assets was $0 and $12,764 for the three and nine months endedSeptember 30, 2019, and $38,292 and $114,876 for the three and nine months endedSeptember 30, 2018, respectively.

Operating Leases

As of September 30, 2019, the Company’s real estate portfolio comprised 7,527 residential apartment homes and was 97.5% leased by a diverse group of residents. For each of the three and nine months endedSeptember 30, 2019 and 2018, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial office tenants, respectively. The residential tenant lease terms consist of lease durations equal to 12 months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

cash related to tenant leases are included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets and totaled $2,340,759 and $2,868,600 as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019 and December 31, 2018, no tenant represented over 10% of the Company’s annualized base rent.

Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.

On November 10, 2017, the Company, BREIT Steadfast MF JV LP (the “Joint Venture”), BREIT Steadfast MF Parent LLC (“BREIT LP”) and BREIT Steadfast MF GP LLC (“BREIT GP”, and together with BREIT LP, “BREIT”), executed a Contribution Agreement (the “Contribution Agreement”) whereby the Company agreed to contribute a portfolio of 20 properties owned by the Company to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture (the “Transaction”). BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, a wholly-owned subsidiary of the Company, holds the Company’s 10% interest in the Joint Venture.

The 20 properties contributed by the Company to the Joint Venture consist of properties located in Austin, Dallas and San Antonio, Texas, Nashville, Tennessee and Louisville, Kentucky (the “LANDS Portfolio”). On November 15, 2017 (the “First Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed 12 apartment communities (the “First Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. On January 31, 2018 (the “Second Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed eight apartment communities (the “Second Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. For additional information on the Transaction, see Note 4 (Investment in Unconsolidated Joint Venture).

The aggregate purchase price of the First Closing Properties was $318,576,792, exclusive of closing costs. On the First Closing Date, the Company sold a 90% interest in the First Closing Properties for $335,430,000, resulting in a gain of $76,135,530, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The aggregate purchase price of the Second Closing Properties was $117,240,032, exclusive of closing costs. On the Second Closing Date, the Company sold a 90% interest in the Second Closing Properties for $125,370,000, resulting in a gain of $38,523,427, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of the First Closing Properties and Second Closing Properties was the Joint Venture.

2019 Property Dispositions

Dawntree Apartments

On August 15, 2013, the Company, through an indirect wholly-owned subsidiary, acquired Dawntree Apartments, a multifamily property located in Carrollton, Texas, containing 400 apartment homes. The purchase price of Dawntree Apartments was $24,000,000, exclusive of closing costs. On March 8, 2019, the Company sold Dawntree Apartments for $46,200,000, resulting in a gain of $24,141,403, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Dawntree Apartments was not affiliated with the Company or the Advisor.

In connection with the disposition of Dawntree Apartments, the Company, through an indirect wholly-owned subsidiary, entered into an agreement to defease the remaining outstanding principal balance of $14,201,657 under the note payable. As a result of this agreement, the Company made a $903,564 defeasance payment (excluding expenses), the collateral was released, and the Company was released from all primary debtor obligations associated with the note payable. The Company recognized a $811,084 loss associated with the defeasance, which is included in loss on debt extinguishment on the consolidated statement of income.

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Estancia Apartments

On June 29, 2012, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Estancia Apartments, a multifamily property located in Tulsa, Oklahoma, containing 294 apartment homes. The purchase price of Estancia Apartments was $27,900,000, exclusive of closing costs. On March 22, 2019, the Company sold Estancia Apartments for $30,683,000, resulting in a gain of $6,892,244, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Estancia Apartments was not affiliated with the Company or the Advisor.

Sonoma Grande Apartments

On May 24, 2012, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Sonoma Grande Apartments, a multifamily property located in Tulsa, Oklahoma, containing 336 apartment homes. The purchase price of Sonoma Grande Apartments was $32,200,000, exclusive of closing costs. On March 22, 2019, the Company sold Sonoma Grande Apartments for $35,067,000, resulting in a gain of $9,367,938, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Sonoma Grande Apartments was not affiliated with the Company or the Advisor.

EBT Lofts, Library Lofts East and Stuart Hall Lofts

On December 30, 2011, February 28, 2013 and August 27, 2013, the Company, through wholly-owned subsidiaries of the Operating Partnership, acquired EBT Lofts, Library Lofts East and Stuart Hall Lofts, respectively, multifamily properties located in Kansas City, Missouri, collectively containing 335 apartment homes. The combined purchase price of EBT Lofts, Library Lofts East and Stuart Hall Lofts was $38,175,000, exclusive of closing costs. On April 26, 2019, the Company sold EBT Lofts, Library Lofts East and Stuart Hall Lofts for $50,685,000, resulting in a gain of $19,120,514, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of EBT Lofts, Library Lofts East and Stuart Hall Lofts was not affiliated with the Company or the Advisor.

In connection with the disposition of Library Lofts East, the Company, through an indirect wholly-owned subsidiary, entered into an agreement to defease the remaining outstanding principal balance of $8,120,272 under the note payable. As a result of this agreement, the Company made a $95,417 defeasance payment (excluding expenses), the collateral was released, and the Company was released from all primary debtor obligations associated with the note payable. The Company recognized a $160,080 loss associated with the defeasance, which is included in loss on debt extinguishment on the consolidated statement of income.

Waterford on the Meadow

On July 3, 2013, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Waterford on the Meadow, a multifamily property located in Plano, Texas, containing 350 apartment homes. The purchase price of Waterford on the Meadow was $23,100,000, exclusive of closing costs. On May 14, 2019, the Company sold Waterford on the Meadow for $42,000,000, resulting in a gain of $20,315,545, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Waterford on the Meadow was not affiliated with the Company or the Advisor.

In connection with the disposition of Waterford on the Meadow, the Company, through an indirect wholly-owned subsidiary, entered into an agreement to defease the remaining outstanding principal balance of $12,484,478 under the note payable. As a result of this agreement, the Company made a $449,231 defeasance payment (excluding expenses), the collateral was released, and the Company was released from all primary debtor obligations associated with the note payable. The Company recognized a $517,294 loss associated with the defeasance, which is included in loss on debt extinguishment on the consolidated statement of income.

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Truman Farm Villas

On December 22, 2011, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Truman Farm Villas, a multifamily property located in Grandview, Missouri, containing 200 apartment homes. The purchase price of Truman Farm Villas was $9,100,000, exclusive of closing costs. On May 15, 2019, the Company sold Truman Farm Villas for $14,650,000, resulting in a gain of $7,051,452, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Truman Farm Villas was not affiliated with the Company or the Advisor.

The results of operations for the three and nine months endedSeptember 30, 2019 and 2018, through the date of sale for all properties disposed of through September 30, 2019, including the properties contributed to the Joint Venture on the Second Closing Date, were included in continuing operations on the Company’s consolidated statements of operations and are as follows:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2019			2018		2019		2018
Revenues:
Rental income	$	—		$	9,736,098	$	6,436,219	$	31,835,371
Tenant reimbursements and other	—			115,260		193,397		497,245
Total revenues	—			9,851,358		6,629,616		32,332,616
Expenses:
Operating, maintenance and management	(37,765		)	3,490,991		2,535,242		10,342,146
Real estate taxes and insurance	(41,310		)	1,374,515		421,347		5,019,372
Fees to affiliates	3			396,267		299,468		1,234,699
Depreciation and amortization	—			2,956,533		531,447		9,160,479
Interest expense	—			1,719,077		954,160		6,039,544
Loss on debt extinguishment	—			—		1,796,532		2,011,282
General and administrative expenses	—			79,728		38,587		222,989
Total expenses	$	(79,072	)	$	10,017,111	$	6,576,783	$	34,030,511

4. Investment in Unconsolidated Joint Venture

On November 10, 2017, the Company, the Joint Venture, BREIT LP and BREIT GP executed the Contribution Agreement whereby the Company agreed to contribute the LANDS Portfolio to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture. BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, a wholly-owned subsidiary of the Operating Partnership, holds the Company’s 10% interest in the Joint Venture.

The Company does not exercise significant influence nor does it control the Joint Venture. Accordingly, as of the First Closing Date and Second Closing Date, the Company deconsolidated the First Closing Properties and Second Closing Properties and has accounted for its investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

As of September 30, 2019 and December 31, 2018, the book value of the Company’s investment in the Joint Venture was $13,316,283 and $14,085,399, respectively, which includes $7,640,166 and $7,640,166 of outside basis difference, respectively. The outside basis difference represents the Company’s transaction costs related to entering into the Joint Venture. During the three and nine months endedSeptember 30, 2019 and 2018, $60,294 and $180,882, and $60,294 and $534,592, respectively, of amortization of this basis difference was included in equity in losses from unconsolidated joint venture on the accompanying consolidated statements of operations. During the three and nine months endedSeptember 30, 2019 and 2018, the Company received distributions of $580,700 and $890,100 and $0 and $530,100, respectively, related to its investment in the Joint Venture.

Unaudited financial information for the Joint Venture as of September 30, 2019 and December 31, 2018, and for the three and nine months endedSeptember 30, 2019, is summarized below:

	September 30, 2019		December 31, 2018
Assets:
Real estate assets, net	$	491,510,283	$	493,776,142
Other assets	17,446,734		24,091,229
Total assets	$	508,957,017	$	517,867,371
Liabilities and equity:
Notes payable, net	$	340,252,366	$	340,840,505
Other liabilities	19,061,703		21,501,680
Company’s capital	14,964,279		15,552,513
Other partner’s capital	134,678,669		139,972,673
Total liabilities and equity	$	508,957,017	$	517,867,371

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues	$	15,849,829		$	15,571,241		$	48,303,658		$	44,783,429
Expenses	17,533,557			17,843,699			50,772,998			70,457,945
Net loss	$	(1,683,728	)	$	(2,272,458	)	$	(2,469,340	)	$	(25,674,516	)
Company’s proportional net loss	$	(168,373	)	$	(227,246	)	$	(246,934	)	$	(2,567,452	)
Amortization of outside basis	(60,294		)	(60,294		)	(180,882		)	(534,592		)
Equity in losses of unconsolidated joint venture	$	(228,667	)	$	(287,540	)	$	(427,816	)	$	(3,102,044	)

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

5. Other Assets

As of September 30, 2019 and December 31, 2018, other assets consisted of:

	September 30, 2019		December 31, 2018
Prepaid expenses	$	1,484,154	$	1,866,024
Interest rate cap agreements (Note 11)	1,315		117,678
Deposits	885,043		714,736
Operating lease right-of-use assets, net	125,632		—
Other assets	$	2,496,144	$	2,698,438

Amortization of the Company’s operating lease right-of-use assets for the three and nine months endedSeptember 30, 2019 were $1,085 and $3,148, respectively. Amortization of the Company’s operating lease right-of-use assets for the three and nine months endedSeptember 30, 2018 were $0 and $0, respectively.

6. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable secured by real property as of September 30, 2019 and December 31, 2018:

	September 30, 2019
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum				Principal Outstanding
Mortgage notes payable - fixed	20	1/1/2020 - 10/1/2056	3.19	%	4.63	%	3.75	%	$	502,584,586
Mortgage notes payable - variable(1)	—	—	—		—		—		—
Total mortgage notes payable, gross	20						3.75	%	502,584,586
Premium, net(2)									—
Deferred financing costs, net(3)									(4,158,093		)
Total mortgage notes payable, net									$	498,426,493

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

	December 31, 2018
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum				Principal Outstanding
Mortgage notes payable - fixed	20	5/1/2019 - 10/1/2056	3.19	%	5.48	%	3.95	%	$	361,723,899
Mortgage notes payable - variable(1)	10	7/1/2023 - 11/1/2027	1-Mo LIBOR + 1.77%		1-Mo LIBOR + 2.38%		4.69	%	283,046,390
Total mortgage notes payable, gross	30						4.27	%	644,770,289
Premium, net(2)									302,530
Deferred financing costs, net(3)									(3,934,705		)
Total mortgage notes payable, net									$	641,138,114

_____________________________

(1) See Note 11 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to debt premiums as of September 30, 2019 and December 31, 2018 was $0 and $960,519, respectively.

(3) Accumulated amortization related to deferred financing costs as of September 30, 2019 and December 31, 2018 was $2,241,230 and $2,929,134, respectively.

Refinancing Transactions

On the closing dates set out in the table below, the Company, through its indirect wholly-owned subsidiaries (each a “Borrower” and collectively, the “Borrowers”), refinanced $203,010,610 of existing variable rate loans with its existing lenders, Jones Lang LaSalle Multifamily, LLC (“JLL”), Berkadia Commercial Mortgage LLC (“Berkadia”), PNC Bank, National Association (“PNC Bank”) and Newmark Knight Frank (“NKF”) (collectively, the “Lenders”) with new fixed rate Freddie Mac loans and a fixed rate Fannie Mae loan in an aggregate principal amount of $222,934,000. Each of the loans has a maturity date of October 1, 2029. Interest only payments are payable monthly through October 1, 2025, with interest and principal payments due monthly thereafter. The Borrowers paid $1,016,689 in the aggregate in loan origination fees to the Lenders in connection with the refinancings, and the Advisor earned loan coordination fees of $600,000. The Refinancing Transactions are treated as loan modifications in accordance with ASC 470 Debt, with lender direct expenses capitalized as deferred financing costs in mortgage notes payable in the accompanying consolidated balance sheets and third-party loan fees expensed in interest expense in the accompanying consolidated statements of operations.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following is a summary of the refinancing of mortgage notes payable secured by real property during the three months ended September 30, 2019:

Secured Property	Closing Dates	Lender	Interest Rate		Principal Loan Amount
Jefferson at Perimeter Apartments	9/20/2019	JLL	3.48	%	$	73,800,000
Reserve at Creekside	9/20/2019	Berkadia	3.57	%	15,000,000
Tapestry Park Apartments	9/26/2019	NKF	3.66	%	48,750,000
Sycamore Terrace Apartments	9/26/2019	NKF	3.62	%	23,067,000
Villas at Huffmeister	9/27/2019	PNC Bank	3.56	%	27,440,000
Villas of Kingwood	9/27/2019	PNC Bank	3.56	%	34,877,000
					$	222,934,000

Credit Facility

On July 29, 2016, nine wholly-owned subsidiaries of the Company entered into a credit agreement and a multifamily note with PNC Bank (as amended, the credit agreement, multifamily note, loan and security agreements, mortgages and guaranty are collectively referred to herein as the “Loan Documents”) that provided for a new credit facility (the “Credit Facility”) in an amount not to exceed $350,000,000 to refinance certain of the Company’s then-existing mortgage loans. The Credit Facility had a maturity date of August 1, 2021, subject to extension, as further described in the credit agreement. Advances made under the Credit Facility were secured by the subsidiaries’ properties (the “Collateral Pool Property”), pursuant to a mortgage deed of trust with the Company’s subsidiaries party to the Credit Facility in favor of PNC Bank.

The Credit Facility accrued interest at the one-month London Inter-bank Offered Rate (“LIBOR”) plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.73% and 1.93%, as further described in the credit agreement. Interest only payments on the Credit Facility were payable monthly in arrears and were due and payable on the first day of each month. The entire outstanding principal balance and any accrued and unpaid interest on the Credit Facility were due on the maturity date. The Company’s subsidiaries could voluntarily prepay all or a portion of the amounts advanced under the Loan Documents. Notwithstanding the foregoing, in the event a Collateral Pool Property was released or the credit agreement was terminated, a termination fee would be due and payable by the Company’s subsidiaries (as applicable). In certain instances of a breach of the credit agreement, the Company guaranteed to PNC Bank the full and prompt payment and performance when due of all amounts for which the Company’s nine wholly-owned subsidiaries were personally liable under the Loan Documents, in addition to all costs and expenses incurred by PNC Bank in enforcing such guaranty. Between November 15, 2017 and May 31, 2018, seven of the Collateral Pool Properties were either disposed of or refinanced, with the advances made to each of the seven Collateral Pool Properties being repaid in full. On July 29, 2019, the Company made a final remaining principal payment of $10,000,000 and terminated the Credit Facility. The Company incurred $597,681 in debt extinguishment costs related to the extinguishment of the Credit Facility.

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of September 30, 2019:

			Remainder of 2019		Maturities During the Years Ending December 31,
Contractual Obligation	Total				2020		2021		2022		2023		Thereafter
Principal payments on outstanding debt obligations(1)	$	502,584,586	$	787,141	$	15,663,605	$	3,295,375	$	28,056,772	$	52,688,373	$	402,093,320

__________________

(1) Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs associated with the notes payable.

The Company’s notes payable contain customary financial and non-financial debt covenants. At September 30, 2019 and December 31, 2018, the Company was in compliance with all financial and non-financial debt covenants.

For the three and nine months endedSeptember 30, 2019, the Company incurred interest expense of $6,044,495 and $20,505,685, respectively. Interest expense for the three and nine months endedSeptember 30, 2019, includes amortization of deferred financing costs of $130,114 and $729,401, amortization of loan premiums of $0 and $48,562, loan fees associated with mortgage notes refinancing of $587,615 and $595,040 and net unrealized loss from the change in fair value of interest rate cap agreements of $2,066 and $163,363, respectively.

For the three and nine months endedSeptember 30, 2018, the Company incurred interest expense of $8,496,658 and $24,408,327, respectively. Interest expense for the three and nine months endedSeptember 30, 2018 includes amortization of deferred financing costs of $263,009 and $799,989, amortization of loan premiums of $48,326 and $222,466, loan fees associated with mortgage notes refinancing of $43,696 and $386,931 and net unrealized gain from the change in fair value of interest rate cap agreements of $18,199 and $103,506, respectively.

Interest expense of $909,601 and $2,520,324 was payable as of September 30, 2019 and December 31, 2018, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

7. Stockholders’ Equity

General

Under the Company’s Third Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares of preferred stock with a par value of $0.01 per share.

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the MGCL and to all rights of a stockholder pursuant to the MGCL. The Company’s common stock has no preferences or preemptive, conversion or exchange rights.

During 2009, the Company issued 22,223 shares of common stock to the Sponsor for $200,007. From inception to September 30, 2019, the Company had issued 76,732,395 shares of common stock in a private offering and the Public Offering for aggregate offering proceeds of $679,572,220, net of offering costs of $95,845,468, including 4,073,759 shares of common stock pursuant to the DRP, for total offering proceeds of $39,580,847. Offering costs primarily consisted of selling commissions and dealer manager fees. The Company terminated its Public Offering on December 20, 2013, but continued to offer shares pursuant to the DRP through November 30, 2014.

The issuance and vesting activity for the nine months endedSeptember 30, 2019, and for the year ended December 31, 2018, for the restricted stock issued to the Company’s independent directors were as follows:

	For the Nine Months Ended September 30, 2019		For the Year Ended December 31, 2018
Nonvested shares at the beginning of the period	11,250		11,875
Granted shares	—		7,500
Vested shares	(5,625	)	(8,125	)
Nonvested shares at the end of the period	5,625		11,250

The weighted average fair value of restricted stock issued to the Company’s independent directors for the nine months endedSeptember 30, 2019 and for the year ended December 31, 2018 is as follows:

Grant Year	Weighted Average Fair Value
2018	$	9.84
2019	n/a

The shares of restricted common stock vest and become non-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant and will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to death or disability or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan (as defined below).

Included in general and administrative expenses is $12,303 and $43,191 for the three and nine months endedSeptember 30, 2019, and $34,832 and $69,422 for the three and nine months endedSeptember 30, 2018, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the Company’s restricted common stock is 1.36 years as of September 30, 2019. As of September 30, 2019, the compensation expense related to the issuance of the Company’s restricted common stock not vested was $42,713.

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Convertible Stock

During 2009, the Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of the Company’s common stock if and when: (A) the Company has made total distributions on the then outstanding shares of common stock equal to the original issue price of those shares plus an 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) subject to specified conditions, the Company lists the common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed by the Company (other than for “cause” as defined in the Advisory Agreement). A “listing” will also be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (1) the Company’s “enterprise value” (as defined in the Charter) plus the aggregate value of distributions paid to date on the outstanding shares of common stock exceeds (2) the aggregate purchase price paid by the stockholders for those shares plus an 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event of a termination or non-renewal of the Advisory Agreement by the Company for cause, all of the shares of Convertible Stock will be redeemed by the Company for $1.00.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2019 and December 31, 2018, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors approved the DRP through which common stockholders could elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The initial purchase price per share under the DRP was $9.50. Effective September 10, 2012, shares of the Company’s common stock were issued pursuant to the DRP at a price of $9.73 per share. Effective with distributions earned beginning on December 1, 2014, the Company’s board of directors elected to suspend the DRP. As a result, all distributions are paid in cash. The Company’s board of directors may, in its sole discretion, from time to time, reinstate the DRP, although there is no assurance as to if or when this will happen, and change the DRP price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

No selling commissions or dealer manager fees were payable on shares sold through the DRP.

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The repurchase price for shares repurchased under the Company’s share repurchase program prior to April 28, 2018, was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

________________

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) The “Estimated Value per Share” equals the most recently determined estimated value per share determined by the Company’s board of directors.

(3) The required one-year holding period to be eligible to repurchase shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The Company’s board of directors elected to suspend the Company’s share repurchase program, effective April 28, 2018. The board of directors of the Company subsequently determined to reinstate and amend the terms of the Company’s share repurchase program, effective May 20, 2018. Pursuant to the amended and reinstated share repurchase program, the revised repurchase price is equal to 93% of the most recently publicly disclosed estimated value per share. The current share repurchase price is $8.74 per share, which represents 93% of the estimated value per share of $9.40, as approved by the Company’s board of directors. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

________________

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) The “Share Repurchase Price” shall equal 93% of the Estimated Value per Share.

(3) The required one-year holding period to be eligible to repurchase shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the share repurchase program is further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter during which the share repurchase program is in effect. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the end of the applicable quarter.

In connection with the proposed SIR Merger, on August 5, 2019, the Company’s board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied with repurchases made on Repurchase Dates (as defined in the Amended & Restated SRP) subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by the Company’s board in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended and Restated SRP will continue to be limited to $2,000,000 per quarter (as explained below).

The Company is not obligated to repurchase shares of the Company’s common stock under the share repurchase program. In no event shall repurchases under the share repurchase program exceed 5% of the weighted average number of shares of the Company’s common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter put in place by the Company’s board of directors. There is no fee in connection with a repurchase of shares of the Company’s common stock. As of September 30, 2019 and 2018, the Company had outstanding and unfulfilled repurchase requests of 77,453 (pursuant to the Amended & Restated SRP) and 218,800 shares of common stock and recorded $710,887 and $2,000,000 in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests, all of which were repurchased on the October 31, 2019 and 2018 repurchase dates, respectively.

During the three and nine months endedSeptember 30, 2019, the Company repurchased a total of 222,982 and 666,273 shares with a total repurchase value of $2,000,000 and $6,000,000, respectively, and received requests for the repurchase of 78,845 and 2,062,474 shares with a total repurchase value of $723,786 and $18,155,528, respectively. During the three and nine months endedSeptember 30, 2018, the Company repurchased a total of 218,555 and 617,970 shares with a total repurchase value of $2,000,000 and $6,000,000, respectively, and received requests for the repurchase of 540,098 and 2,111,753 shares with a total net repurchase value of $4,927,921 and $18,790,955.

The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. To the extent that the repurchase requests exceed the Company’s limitations on repurchases or the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority is given to repurchase requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

any quarter, with respect to any shares which have not been repurchased, the requesting stockholder could (1) withdraw the request for repurchase or (2) ask that the Company honor the request in a future quarter, if any, when such repurchases may be made pursuant to the limitations of the share repurchase program and when sufficient funds were available. Such pending requests are honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to the Company’s stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program.

For the three and nine months endedSeptember 30, 2019, the Company reclassified $1,289,113, net, pursuant to the share repurchase program from accounts payable and accrued liabilities to temporary equity. For the three and nine months endedSeptember 30, 2018, the Company had no amounts to reclassify from accounts payable and accrued liabilities to temporary equity. 

Distributions Declared

Distributions declared (1) accrued daily to stockholders of record as of the close of business on each day, (2) were payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.001519 per share per day during the nine months endedSeptember 30, 2019, which if paid each day over a 365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock. Distributions were calculated at a rate of $0.001519 per share per day during the three months ended September 30, 2018, which if paid each day over a 365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock, were calculated at a rate of $0.001683 per share per day during the three months ended June 30, 2018, which if paid each day over a 365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock and were calculated at a rate of $0.001964 per share per day during the three months ended March 31, 2018, which if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. On April 16, 2018, the Company’s board of directors authorized a special distribution in the amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018.

Distributions declared for the three and nine months endedSeptember 30, 2019, were $10,349,426 and $30,802,627, respectively, all of which were attributable to cash distributions. Distributions declared for the three and nine months endedSeptember 30, 2018, were $10,472,649 and $110,612,331, all of which were attributable to cash distributions.

As of September 30, 2019 and December 31, 2018, $3,371,492 and $3,515,310 in distributions declared were payable.

Distributions Paid

For the three and nine months endedSeptember 30, 2019, the Company paid cash distributions of $10,359,596 and $30,946,445, which related to distributions declared for each day in the period from June 1, 2019 through August 31, 2019, and December 1, 2018 through August 31, 2019, respectively. All such distributions were paid in cash.

For the three and nine months endedSeptember 30, 2018, the Company paid cash distributions of $10,851,615 and $111,795,742, which related to distributions declared for each day in the period from June 1, 2018 through August 31, 2018, and December 1, 2017 through August 31, 2018, respectively, inclusive of the special distribution in the amount of $75,298,163

30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

paid on May 2, 2018, to stockholders of record as of the close of business on April 20, 2018. All such distributions were paid in cash.

8. Related Party Arrangements

Pursuant to the Company’s Advisory Agreement with the Advisor, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments, the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is obligated to reimburse the Advisor and its affiliates for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and nine months endedSeptember 30, 2019 and 2018, and amounts that are payable (prepaid) to the Advisor and its affiliates as of September 30, 2019 and December 31, 2018, are as follows:

	Incurred (Received) For the				Incurred (Received) For the				Payable (Prepaid) as of
	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		September 30, 2019			December 31, 2018
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	1,973,063	$	2,543,225	$	6,276,766	$	7,309,666	$	—		$	1,640,485
Due diligence costs(2)	—		7,415		—		230,732		—			211,188
Property management:
Fees(1)	796,493		1,035,326		2,522,318		3,038,678		266,966			334,577
Reimbursement of onsite personnel(3)	2,407,875		3,383,288		7,870,440		9,469,655		747,564			589,551
Reimbursements - other(1)	565,153		474,588		1,684,836		1,083,925		27,214			39,349
Reimbursements - property operations(3)	17,625		27,993		56,228		70,386		—			—
Reimbursements - G&A(2)	22,362		37,028		79,011		71,754		—			—
Other operating expenses(2)	379,446		129,426		1,226,048		805,175		181,548			115,212
Disposition fees(4)	—		—		3,289,275		3,841,050		—			2,052,750
Disposition transaction costs(4)	—		—		39,483		67,464		—			—
Loan coordination fee(1)	600,000		60,000		600,000		422,160		400,000			—
Property insurance(5)	452,566		503,734		1,303,149		1,131,915		(268,596		)	(119,055		)
Insurance proceeds(6)	—		—		—		—		—			(75,000		)
Rental Revenue(7)	4,491		—		8,283		—		—			—
Consolidated Balance Sheets:
Capitalized
Construction management:
Fees(8)	215,696		43,739		371,098		109,212		16,601			2,608
Reimbursement of labor costs(8)	50,099		29,392		104,316		64,829		5,579			198
Capital expenditures(8)	—		1,500		—		39,680		—			—
Capitalized costs on investment in unconsolidated joint venture(9)	—		—		—		58,386		—			—
Acquisition expenses(10)	—		—		—		245,048		—			—
Acquisition fees(10)	—		—		—		705,722		—			—
	$	7,484,869	$	8,276,654	$	25,431,251	$	28,765,437	$	1,376,876		$	4,791,863

_____________________________

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(2) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(4) Included in gain on sales of real estate, net in the accompanying consolidated statements of operations.

(5) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(6) Included in other income in the accompanying consolidated statements of operations.

(7) Included in rental income in the accompanying consolidated statements of operations.

(8) Included in building and improvements in the accompanying consolidated balance sheets.

(9) Included in investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

(10) Included in total real estate, cost in the accompanying consolidated balance sheets.

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal to one-twelfth of 0.80% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. The cost of real properties and real estate-related assets that have been sold by the Company during the applicable month is excluded from the fee.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the cost of investment, as defined in the Advisory Agreement, in connection with the investigation, selection and acquisition (by purchase, investment or exchange) of any type of real property or real estate-related asset; provided, however, that the total acquisition fee payable by the Company to the Advisor or its affiliates shall equal 0.5% of the cost of investment in the event that proceeds from a prior sale of an investment are used to fund the acquisition of an investment, or (2) the Company’s allocable cost of a real property or real estate-related asset acquired in a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments.

In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor or its affiliates, including personnel-related costs for acquisition due diligence, legal and non-recurring management services, and amounts the Advisor pays to third parties in connection with the selection, acquisition or development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a Financial Industry Regulatory Authority, Inc. (“FINRA”) member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Property Management Fees and Expenses

The Company entered into Property Management Agreements (as amended from time to time, each a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the acquisition of each of the Company’s properties (other than EBT Lofts, Library Lofts and Stuart Hall Lofts, which were managed by an unaffiliated third-party management company). As of September 30, 2019, the property management fee payable with respect to each property under each Property Management Agreement, ranged from 2.50% to 3.50% of the annual gross revenue collected, which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the members of the Company’s board of directors, including a majority of the independent directors. The Property Manager also received an oversight fee of 1% of gross revenues at certain of the properties at which it did not serve as a property manager. Generally, each Property Management Agreement has an initial one year term and will continue thereafter on a month-to-month basis unless either party gives 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager.

In addition to the property management fee, the Property Management Agreements also specify certain other reimbursements payable to the Property Manager or its affiliates, including reimbursements for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits of on-site property management employees.

Construction Management

The Company entered into Construction Management Agreements with Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with the planned capital improvements and renovation for certain of the Company’s properties. As of September 30, 2019, the construction management fee payable with respect to each property pursuant to the Construction Management Agreements (each, a “Construction Management Agreement”) ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for units taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations at its properties.

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property insurance across certain properties of the Company.

34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified. For purposes of determining the 2%/25% Limitation, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

At September 30, 2019, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

The Company pays the Advisor a disposition fee in connection with a sale of a property or real estate-related asset and in the event of the sale of the entire Company (a “Final Liquidity Event”), in either case when the Advisor or its affiliates provides a substantial amount of services as determined by a majority of the Company’s independent directors. With respect to a sale of a property or real estate-related asset, the Company pays the Advisor a disposition fee equal to 1.5% of the contract sales price of the investment sold. With respect to a Final Liquidity Event, the Company will pay the Advisor a disposition fee equal to (i) 0.5% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is less than or equal to $9.00; (ii) 0.75% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $9.01 and $10.24; (iii) 1.00% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $10.25 and $11.24; (iv) 1.25% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $11.25 and $12.00; and (v) 1.50% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is greater than or equal to $12.01; provided, however, that the price per share paid to stockholders as listed in each of clauses (i) through (v) above shall be adjusted for any special distributions, stock splits, combinations, recapitalizations or any similar transaction with respect to our shares. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is

35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. The Charter limits the maximum amount of the disposition fees payable to the Advisor for the sale of any real property to the lesser of one-half of the brokerage commission paid or 3.0% of the contract sales price, but in no event shall the total real estate commissions paid, including any disposition fees payable to the Advisor, exceed 6.0% of the contract sales price.

Loan Coordination Fee

The Company pays the Advisor a loan coordination fee equal to 0.50% of the amount of debt financed or refinanced (in each case, other than at the time of the acquisition of a property or a real estate-related asset), or the Company’s proportionate share of the initial amount of new debt financed or refinanced or the amount of any debt refinanced in the case of investments made through a joint venture. In some instances, the Company and the Advisor have agreed to a loan coordination fee of $100,000 per loan refinanced.

Pending Merger with STAR

Termination Agreement

Concurrently with the entry into the Merger Agreement, the Company and Advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the current Advisory Agreement will be terminated at the effective time of the Merger. Also pursuant to the Termination Agreement, the Advisor waived any disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the SIR Merger

The Termination Agreement also provides that upon approval of the special committee of the Company’s board of directors, the Company shall consent (which consent shall not be unreasonably withheld, delayed or conditioned) and shall take all necessary actions (including amending the Merger Agreement) to provide for the Exchange (as defined below) if, pursuant to the Merger Agreement, prior to consummation of the Merger, STAR Advisor (as defined herein) requests that, in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee provided for and defined in the Amended and Restated Advisory Agreement between STAR and Steadfast Apartment Advisor, LLC, its external advisor (“STAR Advisor”), STAR issue, at the closing of the Merger, convertible stock in exchange for the convertible stock currently owned by STAR Advisor.

9. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of September 30, 2019 and December 31, 2018, except those awards granted to the independent directors as described below.

Under the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan, each of the Company’s then independent directors was entitled to receive 5,000 shares of restricted common stock in connection with the initial meeting of the Company’s full board of directors. The Company’s initial board of directors, and each of the independent directors, agreed to delay the initial grant of restricted stock until the Company raised $2,000,000 in gross offering proceeds in a private offering that preceded the Public Offering. Each subsequent independent director that joins the Company’s board of directors would receive 5,000 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 2,500 shares of restricted common stock. One-fourth of the shares of restricted common stock generally vest and become non-

36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the first anniversary of the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan. These restricted stock awards entitle the holders to participate in distributions even if the shares are not fully vested.

The Company recorded stock-based compensation expense of $12,303 and $43,191 for the three and nine months endedSeptember 30, 2019, respectively, and $34,832 and $69,422 for the three and nine months endedSeptember 30, 2018, respectively.

10. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Houston, Texas, Oklahoma City, Oklahoma, Columbus, Ohio, Atlanta, Georgia and Lexington, Kentucky apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

11. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2019 and December 31, 2018:

September 30, 2019
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate		Weighted Average Rate Cap		Fair Value
Interest rate cap	1/1/2020 - 7/1/2021	One-Month LIBOR	6	$	203,266,995	2.02	%	3.49	%	$	1,315

December 31, 2018
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate		Weighted Average Rate Cap		Fair Value
Interest rate cap	6/1/2019 - 7/1/2021	One-Month LIBOR	10	$	283,654,000	2.52	%	2.81	%	$	117,678

The interest rate cap agreements are not designated as cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months endedSeptember 30, 2019, resulted in an unrealized loss of $2,066 and $163,363, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the three and nine months endedSeptember 30, 2019 and 2018, the Company acquired interest rate cap agreements of $0 and $47,000 and $0 and $203,300, respectively. The fair value of the interest rate cap agreements of $1,315 and $117,678 as of September 30, 2019 and December 31, 2018, respectively, is included in other assets on the accompanying consolidated balance sheets.

12. Subsequent Events

Distributions Paid

On October 1, 2019, the Company paid distributions of $3,371,492, which related to distributions declared for each day in the period from September 1, 2019 through September 30, 2019. All such distributions were paid in cash.

On November 1, 2019, the Company paid distributions of $3,483,761, which related to distributions declared for each day in the period from October 1, 2019 through October 31, 2019. All such distributions were paid in cash.

Shares Repurchased

On October 31, 2019, the Company repurchased 78,845 shares of its common stock for a total repurchase value of $723,786, or $9.18 per share, pursuant to the Company’s share repurchase program.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Refinancing of the Montecito Apartments

On October 31, 2019, the Company, through its indirect wholly-owned subsidiary, refinanced $12,572,626 of existing variable rate loan with PNC Bank with a new fixed rate Fannie Mae loan in an aggregate principal amount of $18,900,000. The loan has a ten-year term, with interest only payments for the entire term of the loan. The Company paid $151,200 in the aggregate in loan origination fees to PNC Bank in connection with the refinancing, and the Advisor earned a loan coordination fee of $94,500.

Distributions Declared

On November 6, 2019, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on January 1, 2020 and ending on March 31, 2020. The distributions will be equal to $0.001515 per share of the Company’s common stock. The distributions for each record date in January 2020, February 2020 and March 2020 will be paid in February 2020, March 2020 and April 2020, respectively. The distributions will be payable to stockholders from legally available funds therefor.

Advisory Agreement

On November 6, 2019, the Company entered into Amendment No. 12 (the “Amendment”) to the Advisory Agreement. The Amendment renews the Advisory Agreement for a one-year term beginning on November 15, 2019, and ending on November 15, 2020.

Restricted Stock Grant

On November 7, 2019, the Company granted 2,500 shares of restricted common stock to each of its three independent directors upon their re-election to the Company’s board of directors at the 2019 annual meeting of stockholders.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Steadfast Income REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Income REIT, Inc., a Maryland corporation, and, as required by context, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries. References to “our advisor” are to Steadfast Income Advisor, LLC, our external advisor.

Certain statements regarding future estimates and expectations may not be applicable to the extent the Merger (as defined herein) is completed.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• changes in economic conditions generally and the real estate and debt markets specifically;

• risks inherent in the real estate business, including tenant defaults, tenant vacancies, potential liability relating to environmental matters and liquidity of real estate investments;

• our ability to secure resident leases at favorable rental rates;

• our ability to execute on our value-enhancement strategy;

• risks related to owning investments with joint venture partners;

• our ability to identify and acquire multifamily properties;

• changes to our share repurchase program, distribution rate and other decisions;

• the fact we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our advisor, our property manager and our affiliates;

• completion of the Merger is subject to many conditions and if these conditions are not satisfied or waived, the Merger will not be completed, which could result in the expenditure of significant unrecoverable transaction costs;

• failure to complete the Merger could negatively impact our future business and financial results;

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

• the pendency of the Merger, including as a result of the restrictions on the operation of our business during the period between signing the related merger agreement and the completion of the Merger, could adversely affect our business and operations;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

• our ability to generate sufficient cash flows to pay distributions to our stockholders;

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed on any forward-looking statements included herein. All forward-looking statements are made as of the date this quarterly report is filed with the Securities and Exchange Commission, or SEC, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made herein, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this quarterly report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this quarterly report will be achieved.

All forward-looking statements included herein should be read in light of the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 15, 2019.

Overview

We were formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust, or REIT. We own and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of September 30, 2019, we owned (1) 27 multifamily properties located within the greater Midwest and southern geographic regions of the United States that comprised a total of 7,527 apartment homes and (2) a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. The total purchase price of our real estate portfolio was $862,854,253. At September 30, 2019, our portfolio was approximately 97.5% leased.

On July 19, 2010, we commenced our initial public offering of up to a maximum of 150,000,000 shares of common stock and up to 15,789,474 shares of common stock pursuant to our distribution reinvestment plan. Upon termination of our public offering on December 1, 2014, we had sold 76,095,116 shares of common stock for gross offering proceeds of $769,573,363, including 4,073,759 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $39,580,847. Following the termination of our initial public offering, we continued to offer shares of our common stock pursuant to our distribution reinvestment plan until our board of directors determined to suspend our distribution reinvestment plan effective with distributions earned beginning on December 1, 2014. Our board of directors may, in its sole discretion, reinstate the distribution reinvestment plan and change the price at which we offer shares of common stock to our stockholders pursuant to the distribution reinvestment plan based upon changes in the estimated value per share and other factors our board of directors deems relevant. On March 13, 2019, our board of directors approved an estimated value per share of our common stock of $9.40 as of December 31, 2018.

Steadfast Income Advisor, LLC is our advisor. Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Substantially all of our business is conducted through Steadfast Income REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership. The initial limited partner of our operating partnership is our advisor. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating real properties, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2010. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect our net income.  

Market Outlook

We believe economic and demographic trends will benefit our existing portfolio and that we have unique future investment opportunities in the multifamily sector. Home ownership rates are near all-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until their mid-30s. Today, approximately 30% of Millennials are still living with their parents or are still in school. When they are employed, Millennials will likely rent moderate income apartments based upon an average income of $45,000 - $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

Pending Merger with Steadfast Apartment REIT, Inc.

On August 5, 2019, we, Steadfast Apartment REIT, Inc., or STAR, Steadfast Apartment REIT Operating Partnership, L.P., STAR’s operating partnership, our operating partnership, and SI Subsidiary, LLC, a wholly-owned subsidiary of STAR, or Merger Sub, entered into an Agreement and Plan of Merger, or the Merger Agreement. 

Subject to the terms and conditions of the Merger Agreement, we will merge with and into Merger Sub with Merger Sub surviving the merger, or the Merger, such that following the Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law, our separate existence shall cease.

At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of our common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 0.5934 shares of STAR’s common stock, $0.01 par value per share.

The obligation of each party to consummate the Merger is subject to a number of conditions, including receipt of the approval of the Merger and an amendment to our Charter to delete certain provisions regarding roll-up transactions by the holders of a majority of the outstanding shares of our common stock, or the SIR Stockholder Approval.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

We (with the prior approval of the special committee of our board of directors) may terminate the Merger Agreement in order to enter into an “Alternative Acquisition Agreement” with respect to a “Superior Proposal” (each as defined in the Merger Agreement) at any time prior to our receipt of the SIR Stockholder Approval pursuant to the terms of the Merger Agreement. STAR may terminate the Merger Agreement at any time prior to the receipt of the SIR Stockholder Approval, in certain limited circumstances, including upon an “Adverse Recommendation Change” (as defined in the Merger Agreement).

If the Merger Agreement is terminated in connection with our acceptance of a Superior Proposal or making an Adverse Recommendation Change, then we must pay to STAR a termination fee of $20,866,122 and up to $2,000,000 as reimbursement for STAR’s Expenses (as defined in the Merger Agreement).

On August 5, 2019, STAR also entered into an Agreement and Plan of Merger to acquire Steadfast Apartment REIT III, Inc., or STAR III. STAR’s proposed merger with STAR III is also a stock-for-stock transaction whereby STAR III will be merged into a wholly-owned subsidiary of STAR. The consummation of STAR’s merger with us is not contingent upon the completion of STAR’s merger with STAR III, and the consummation of STAR’s merger with STAR III is not contingent upon the completion of STAR’s merger with us.

The combined company after the mergers will retain the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

For additional information on the Merger, see our Current Report on Form 8-K filed with the SEC on August 6, 2019.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our Real Estate Portfolio

As of September 30, 2019, we owned the 27 multifamily properties listed below:

				Number of Units	Total Purchase Price		Mortgage Debt Outstanding at September 30, 2019		Average Occupancy(1) as of				Average Monthly Rent(2) as of
	Property Name	Location	Purchase Date						Sep 30, 2019		Dec 31, 2018		Sep 30, 2019		Dec 31, 2018
1	Clarion Park Apartments	Olathe, KS	6/28/2011	220	$	11,215,000	$	11,936,941	95.7	%	96.4	%	$	872	$	841
2	Spring Creek Apartments	Edmond, OK	3/9/2012	252	19,350,000		17,145,073		97.4	%	94.0	%	873		848
3	Montclair Parc Apartment Homes	Oklahoma City, OK	4/26/2012	360	35,750,000		—		96.8	%	94.4	%	891		857
4	Hilliard Park Apartments	Columbus, OH	9/11/2012	201	19,800,000		12,173,887		96.2	%	94.5	%	1,140		1,120
5	Sycamore Terrace Apartments	Terre Haute, IN	9/20/2012 & 3/5/2014	250	23,174,157		22,728,173		93.1	%	94.0	%	1,171		1,138
6	Hilliard Summit Apartments	Columbus, OH	9/28/2012	208	24,100,000		14,757,094		95.3	%	95.7	%	1,236		1,217
7	Forty 57 Apartments	Lexington, KY	12/20/2012	436	52,500,000		34,982,843		96.3	%	93.1	%	970		912
8	Riverford Crossing Apartments	Frankfort, KY	12/28/2012	300	30,000,000		19,904,276		96.9	%	97.3	%	978		933
9	Montecito Apartments	Austin, TX	12/31/2012	268	19,000,000		12,596,576		96.7	%	95.1	%	1,039		1,008
10	Hilliard Grand Apartments	Dublin, OH	12/31/2012	314	40,500,000		28,108,786		96.1	%	96.5	%	1,317		1,290
11	Deep Deuce at Bricktown	Oklahoma City, OK	3/28/2013	294	38,271,000		32,087,170		94.6	%	93.9	%	1,284		1,235
12	Retreat at Quail North	Oklahoma City, OK	6/12/2013	240	25,250,000		16,103,751		94.4	%	92.9	%	978		954
13	Tapestry Park Apartments	Birmingham, AL	8/13/2013 & 12/1/2014	354	50,285,000		48,223,343		95.6	%	92.9	%	1,376		1,311
14	BriceGrove Park Apartments	Canal Winchester, OH	8/29/2013	240	20,100,000		—		95.6	%	95.8	%	911		879
15	Retreat at Hamburg Place	Lexington, KY	9/5/2013	150	16,300,000		—		97.0	%	96.0	%	1,038		897
16	Villas at Huffmeister	Houston, TX	10/10/2013	294	37,600,000		27,213,547		95.4	%	93.9	%	1,228		1,209
17	Villas of Kingwood	Kingwood, TX	10/10/2013	330	40,150,000		34,598,132		96.9	%	94.8	%	1,246		1,282
18	Waterford Place at Riata Ranch	Cypress, TX	10/10/2013	228	23,400,000		—		96.3	%	93.9	%	1,149		1,104
19	Carrington Place	Houston, TX	11/7/2013	324	32,568,034		—		94.3	%	91.7	%	1,117		1,076
20	Carrington at Champion Forest	Houston, TX	11/7/2013	284	33,000,000		—		95.6	%	94.0	%	1,147		1,106
21	Carrington Park at Huffmeister	Cypress, TX	11/7/2013	232	25,150,000		19,472,583		95.3	%	94.4	%	1,170		1,198

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

				Number of Units	Total Purchase Price		Mortgage Debt Outstanding at September 30, 2019		Average Occupancy(1) as of				Average Monthly Rent(2) as of
	Property Name	Location	Purchase Date						Sep 30, 2019		Dec 31, 2018		Sep 30, 2019		Dec 31, 2018
22	Heritage Grand at Sienna Plantation	Missouri City, TX	12/20/2013	240	$	27,000,000	$	16,654,527	93.4	%	95.8	%	$	1,160	$	1,147
23	Mallard Crossing Apartments	Loveland, OH	12/27/2013	350	39,800,000		—		96.1	%	93.7	%	1,142		1,095
24	Reserve at Creekside	Chattanooga, TN	3/28/2014	192	18,875,000		14,701,227		97.2	%	96.4	%	1,055		1,040
25	Oak Crossing Apartments	Fort Wayne, IN	6/3/2014	222	24,230,000		20,235,203		97.2	%	95.9	%	1,024		1,002
26	Double Creek Flats	Plainfield, IN	5/7/2018	240	31,852,079		21,893,600		96.3	%	93.8	%	1,050		1,063
27	Jefferson at Perimeter Apartments	Dunwoody, GA	6/11/2018	504	103,633,983		72,909,761		94.6	%	89.3	%	1,413		1,331
				7,527	$	862,854,253	$	498,426,493	95.8	%	94.3	%	$	1,123	$	1,068

________________

(1) At September 30, 2019 and December 31, 2018, our portfolio was approximately 97.5% and 95.5% leased, respectively.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.

On November 10, 2017, we, BREIT Steadfast MF JV LP, or the joint venture, BREIT Steadfast MF Parent LLC, or BREIT LP, and BREIT Steadfast MF GP LLC, or BREIT GP, executed a Contribution Agreement whereby we agreed to contribute a portfolio of 20 properties owned by us to the joint venture in exchange for a combination of cash and a 10% ownership interest in the joint venture. BREIT LP owns a 90% interest in the joint venture and BREIT GP serves as the general partner of the joint venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, or SIR LP, a wholly-owned subsidiary, holds our 10% interest in the joint venture.

The transaction closed in two stages. The first closing occurred November 15, 2017, and included those properties for which the existing debt was prepaid at closing. The second closing occurred January 31, 2018, and included those properties for which the joint venture assumed the existing loans.

2019 Property Dispositions

Dawntree Apartments

On August 15, 2013, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Dawntree Apartments, a multifamily property located in Carrollton, Texas, containing 400 apartment homes. The purchase price of Dawntree Apartments was $24,000,000, exclusive of closing costs. On March 8, 2019, we sold Dawntree Apartments for $46,200,000, resulting in a gain of $24,141,403, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Dawntree Apartments was not affiliated with us or our advisor.

Estancia Apartments

On June 29, 2012, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Estancia Apartments, a multifamily property located in Tulsa, Oklahoma, containing 294 apartment homes. The purchase price of Estancia Apartments was $27,900,000, exclusive of closing costs. On March 22, 2019, we sold Estancia Apartments for $30,683,000, resulting in a

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

gain of $6,892,244, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Estancia Apartments was not affiliated with us or our advisor.

Sonoma Grande Apartments

On May 24, 2012, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Sonoma Grande Apartments, a multifamily property located in Tulsa, Oklahoma, containing 336 apartment homes. The purchase price of Sonoma Grande Apartments was $32,200,000, exclusive of closing costs. On March 22, 2019, we sold Sonoma Grande Apartments for $35,067,000, resulting in a gain of $9,367,938, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Sonoma Grande Apartments was not affiliated with us or our advisor.

EBT Lofts, Library Lofts East and Stuart Hall Lofts

On December 30, 2011, February 28, 2013 and August 27, 2013, we, through wholly-owned subsidiaries of the Operating Partnership, acquired EBT Lofts, Library Lofts East and Stuart Hall Lofts, respectively, multifamily properties located in Kansas City, Missouri, collectively containing 335 apartment homes. The combined purchase price of EBT Lofts, Library Lofts East and Stuart Hall Lofts was $38,175,000, exclusive of closing costs. On April 26, 2019, we sold EBT Lofts, Library Lofts East and Stuart Hall Lofts for $50,685,000, resulting in a gain of $19,120,514, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of EBT Lofts, Library Lofts East and Stuart Hall Lofts was not affiliated with us or our advisor.

Waterford on the Meadow

On July 3, 2013, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Waterford on the Meadow, a multifamily property located in Plano, Texas, containing 350 apartment homes. The purchase price of Waterford on the Meadow was $23,100,000, exclusive of closing costs. On May 14, 2019, we sold Waterford on the Meadow for $42,000,000, resulting in a gain of $20,315,545, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Waterford on the Meadow was not affiliated with us or our advisor.

Truman Farm Villas

On December 22, 2011, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Truman Farm Villas, a multifamily property located in Grandview, Missouri, containing 200 apartment homes. The purchase price of Truman Farm Villas was $9,100,000, exclusive of closing costs. On May 15, 2019, we sold Truman Farm Villas for $14,650,000, resulting in a gain of $7,051,452, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Truman Farm Villas was not affiliated with us or our advisor.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes to our accounting policies during the period covered by this report other than described in Note 2 (Summary of Significant Accounting Policies) to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification was lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2019 and December 31, 2018, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, we have established valuation allowances, primarily in connection with the net operating loss carryforward related to the REIT. We have not been assessed material interest or penalties by any major tax jurisdictions. Our evaluation was performed for all open tax years through December 31, 2018.

Distributions

Our board of directors has historically declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We have and may continue to declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are calculated at a rate of $0.001519 per share per day during the nine months ended September 30, 2019.

The distributions declared and paid during the first and second quarters of 2019 were as follows:

Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Distributions Paid(3)		Sources of Distributions Paid				Net Cash (Used in) Provided By Operating Activities
							Cash Flow From Operations		Cash and Cash Equivalents
First Quarter 2019	$	10,186,657	$	0.137	$	10,196,066	$	—	$	10,196,066	$	(2,306,329	)
Second Quarter 2019	10,266,544		0.138		10,390,783		5,792,413		4,598,370		5,792,413
Third Quarter 2019	10,349,426		0.140		10,359,596		4,861,763		5,497,833		4,861,763
	$	30,802,627	$	0.415	$	30,946,445	$	10,654,176	$	20,292,269	$	8,347,847

________________

(1) Distributions are based on daily record dates and calculated at a rate of $0.001519 per share per day during the three and nine months ended September 30, 2019.

(2) Assumes each share was issued and outstanding each day during the periods presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end. All distributions were paid in cash.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

For the three and nine months endedSeptember 30, 2019, we paid aggregate distributions of $10,359,596 and $30,946,445, respectively. All such distributions were paid in cash. For the three and nine months endedSeptember 30, 2019, our net (loss) income was $(5,557,926) and $72,277,928, we had funds from operations, or FFO, of $3,695,333 and $13,190,454 and net cash provided by operating activities of $4,861,763 and $8,347,847, respectively. For the three and nine months endedSeptember 30, 2019, of the $10,359,596 and $30,946,445 in total distributions paid, all of which were paid in cash, we funded $4,861,763 and $10,654,176, or 47% and 34%, of distributions paid with net cash provided by operating activities and $5,497,833 and $20,292,269, or 53% and 66%, with existing cash and cash equivalents, respectively. Since inception, of the $406,180,132 in total distributions paid through September 30, 2019, including shares issued pursuant to our distribution reinvestment plan, 58% of such amounts were funded from cash flow from operations, 19% of such amounts were funded from the sales of real estate investments, 9% of such amounts were funded from offering proceeds, 2% of such amounts were funded from credit facilities and 12% of such amounts were funded from cash and cash equivalents. For information on how we calculate FFO and the reconciliation of FFO to net income (loss), see “—Funds from Operations and Modified Funds from Operations.”

Over the long-term, we expect that our distributions will be paid from cash flow from operations (except with respect to distributions related to sales of our real estate and real estate-related investments). However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements,” and “Results of Operations” herein. In the event our cash flow from operations decreases in the future, the level of our distributions may also decrease.

Inflation

Substantially all of our multifamily property leases will be for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit tenants to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

As of September 30, 2019, we had not entered into any material leases as a lessee.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We will monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At September 30, 2019, our debt was approximately 50% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties, as determined by an independent third-party appraiser or qualified independent valuation expert. Under our Third Articles of Amendment and Restatement, or our charter, we have a limitation on borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances. As of September 30, 2019, our aggregate borrowings were not in excess of 300% of the value of our net assets.

Our principal demand for funds will be to acquire investments in accordance with our investment strategy, fund value-enhancement and other capital improvement projects at our properties, pay operating expenses and interest on our outstanding

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

indebtedness and to make distributions to our stockholders. In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor in connection with the acquisition and disposal of investments, the management of our assets and costs incurred by our advisor in providing services to us.

We intend to generally fund our cash needs for items, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current unrestricted cash balances, which was $120,202,920 as of September 30, 2019;

• various forms of secured and unsecured financing, including the financing of our unencumbered properties; and

• equity capital from joint venture partners.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the sources of capital noted above, which we will rely on to meet our short term liquidity requirements, we may also utilize proceeds from the sale of our properties. We may also conduct additional public or private securities offerings. We expect these resources to be adequate to fund our operating activities, debt service and distributions, and will be sufficient to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures.

Refinancing Transactions

On the closing dates set out in the table below, we, through our indirect wholly-owned subsidiaries, refinanced $203,010,610 of existing variable rate loans with our existing lenders, Jones Lang LaSalle Multifamily, LLC, or JLL, Berkadia Commercial Mortgage LLC, or Berkadia, PNC Bank, National Association, or PNC Bank, and Newmark Knight Frank, or NKF, or collectively, the Lenders, with new fixed rate Freddie Mac loans and a fixed rate Fannie Mae loan in an aggregate principal amount of $222,934,000. Each of the loans has a maturity date of October 1, 2029. Interest only payments are payable monthly through October 1, 2025, with interest and principal payments due monthly thereafter. The borrowers paid $1,016,689 in the aggregate in loan origination fees to the Lenders in connection with the refinancings, and the Advisor earned loan coordination fees of $600,000.

Secured Property	Closing Dates	Lender	Interest Rate		Principal Loan Amount
Jefferson at Perimeter Apartments	9/20/2019	JLL	3.48	%	$	73,800,000
Reserve at Creekside	9/20/2019	Berkadia	3.57	%	15,000,000
Tapestry Park Apartments	9/26/2019	NKF	3.66	%	48,750,000
Sycamore Terrace Apartments	9/26/2019	NKF	3.62	%	23,067,000
Villas at Huffmeister	9/27/2019	PNC Bank	3.56	%	27,440,000
Villas of Kingwood	9/27/2019	PNC Bank	3.56	%	34,877,000
					$	222,934,000

Credit Facility

On July 29, 2016, we entered into a credit agreement and a multifamily note with PNC Bank, that provided for a credit facility in an amount not to exceed $350,000,000 to refinance certain of our then-existing mortgage loans. The credit facility had a maturity date of August 1, 2021, subject to extension. During 2017 and 2018, seven of the collateralized properties, were either disposed or refinanced, with the advances made to each of the collateralized properties being repaid in full. On July 29, 2019, we made a final remaining principal payment and terminated the credit facility.

Cash Flows Provided by Operating Activities

During the nine months endedSeptember 30, 2019, net cash provided by operating activities was $8,347,847, compared to net cash provided by operating activities of $19,952,067 for the nine months endedSeptember 30, 2018. The decrease in net

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

cash provided by operating activities was primarily due to the disposition of 12 multifamily properties subsequent to September 30, 2018 in addition to changes in net income, investment in unconsolidated joint venture, other assets, accounts payable and accrued liabilities and due to affiliates compared to the nine months ended September 30, 2018.

Cash Flows Provided by Investing Activities

During the nine months endedSeptember 30, 2019, net cash provided by investing activities was $203,159,878, compared to $98,433,184 during the nine months endedSeptember 30, 2018. The increase in net cash provided by investing activities was primarily due to the disposition of eight multifamily properties during the nine months ended September 30, 2019 compared to disposition of 11 multifamily properties including the contribution of eight multifamily properties to the joint venture in exchange for cash and a 10% interest in the joint venture, partially offset by the acquisition of two multifamily properties during the nine months ended September 30, 2018. Net cash provided by investing activities during the nine months endedSeptember 30, 2019, consisted of the following:

• $341,300 of cash provided by the investment in an unconsolidated joint venture, net of contributions paid to the unconsolidated joint venture of $548,800;

• $9,423,100 of cash used for improvements to real estate investments;

• $47,000 of cash used for the purchase of interest rate cap agreements;

• $211,990,358 of cash provided by the sales of real estate investments; and

• $298,320 of cash provided by insurance claims.

Cash Flows Used in Financing Activities

During the nine months endedSeptember 30, 2019, net cash used in financing activities was $236,134,423, compared to $210,595,782 during the nine months endedSeptember 30, 2018. The increase in cash flows used in financing activities is due primarily to the increase in principal repayments on mortgage notes payable, the increase in principal repayments on our credit facility and the payment of debt extinguishment costs, partially offset by the increase in proceeds from the issuance of notes payable and the reduction in the amount of cash distributions paid to our stockholders. Net cash used in financing activities during the nine months endedSeptember 30, 2019, consisted of the following:

• $143,542,244 of net cash used for mortgage notes payable, comprised of $365,119,705 of cash used for principal repayments, $222,934,000 of proceeds from mortgage notes payable and the payment of deferred financing costs of $1,356,539;

• $52,656,750 of cash used for principal payments of the credit facility;

• $2,988,984 of cash paid for the extinguishment of debt;

• $30,946,445 of cash distributions; and

• $6,000,000 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

We use secured borrowings, and intend to use secured and unsecured borrowings in the future. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At September 30, 2019, our debt was approximately 50% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2019, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor or its affiliates in connection with the selection and origination or

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of September 30, 2019, we had indebtedness totaling $498,426,493, comprised of an aggregate principal amount of $502,584,586, and net deferred financing costs of $4,158,093. For more information on our outstanding indebtedness, see Note 6 (Debt) to the unaudited consolidated financial statements.

The following is a summary of our contractual obligations as of September 30, 2019:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	178,690,201	$	4,096,894	$	37,107,319	$	33,761,132	$	103,724,856
Principal payments on outstanding debt obligations(2)	502,584,586		787,141		18,958,980		80,745,145		402,093,320
Total	$	681,274,787	$	4,884,035	$	56,066,299	$	114,506,277	$	505,818,176

_____________________________

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2019. We incurred interest expense of $6,044,495 and $20,505,685 during the three and nine months endedSeptember 30, 2019, including amortization of deferred financing costs totaling $130,114 and $729,401, amortization of loan premiums of $0 and $48,562, loan fees associated with mortgage notes refinancing of $587,615 and $595,040 and net unrealized losses from the change in fair value of interest rate cap agreements of $2,066 and $163,363, respectively.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs associated with the notes payable.

Our debt obligations contain customary financial or non-financial debt covenants. As of September 30, 2019 and December 31, 2018 we were in compliance with all of our financial and non-financial debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months endedSeptember 30, 2019 and 2018. The ability to compare one period to another is affected by the acquisitions and dispositions made during those periods and our value-enhancement strategy. The number of multifamily properties wholly owned by us decreased to 27 as of September 30, 2019, from 39 as of September 30, 2018. Our results of operations were primarily affected by (1) the disposition of three multifamily properties and the contribution of eight multifamily properties to the joint venture in exchange for cash and a proportionate 10% interest in the joint venture during the nine months ended September 30, 2018, (2) the acquisition of two multifamily properties during the nine months ended September 30, 2018, (3) the disposition of 12 multifamily properties subsequent to September 30, 2018 and (4) our value-enhancement activity completed through September 30, 2019, as further discussed below.

Throughout this “Results of Operations” discussion, for the nine months ended September 30, 2018, references to the disposition of 11 multifamily properties includes the contribution of eight multifamily properties to the joint venture.

Our results of operations for the three and nine months ended September 30, 2019, are not indicative of those expected in future periods. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of organic rent increases and, to a lesser extent, anticipated value-enhancement projects.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versus non-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (a non-GAAP measure) to net income (loss), see “—Net Operating Income.”

Consolidated Results of Operations for the Three Months Ended September 30, 2019 and 2018

The following table summarizes the consolidated results of operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,											$ Change Due to Dispositions(1)			$ Change Due to Properties Held Throughout Both Periods(2)
	2019			2018			Change $			Change %
Total revenues	$	27,823,551		$	36,241,718		$	(8,418,167	)	(23	)%	$	(9,851,358	)	$	1,433,191
Operating, maintenance and management	(6,871,764		)	(10,457,331		)	3,585,567			34	%	3,528,756			56,811
Real estate taxes and insurance	(4,031,558		)	(5,657,098		)	1,625,540			29	%	1,415,825			209,715
Fees to affiliates	(3,934,709		)	(4,113,139		)	178,430			4	%	985,540			(807,110		)
Depreciation and amortization	(8,520,813		)	(12,579,032		)	4,058,219			32	%	2,956,533			1,101,686
Interest expense	(6,044,495		)	(8,496,658		)	2,452,163			29	%	1,719,077			733,086
Loss on debt extinguishment	(597,681		)	—			(597,681		)	(100	)%	—			(597,681		)
General and administrative expenses	(3,063,653		)	(1,107,644		)	(1,956,009		)	(177	)%	79,728			(2,035,737		)
Equity in loss from unconsolidated joint venture	(228,667		)	(287,540		)	58,873			20	%	58,873			—
Loss on sale of real estate, net	(88,137		)	—			(88,137		)	(100	)%	(88,137		)	—
Net loss	$	(5,557,926	)	$	(6,456,724	)	$	898,798		14	%
NOI(3)	$	15,772,474		$	18,940,482		$	(3,168,008	)	(17	)%
FFO(4)	$	3,695,333		$	6,770,832		$	(3,075,499	)	(45	)%
MFFO(4)	$	4,295,080		$	6,766,274		$	(2,471,194	)	(37	)%

________________

(1) Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, related to multifamily properties acquired or disposed of on or after July 1, 2018.

(2) Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, related to multifamily properties owned by us throughout both periods presented.

(3) NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net income (loss), see “—Net Operating Income.”

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(4) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate book values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or the IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net income (loss) or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net income (loss), see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the three months ended September 30, 2019, we had a net loss of $5,557,926, compared to a net loss of $6,456,724 for the three months ended September 30, 2018. The decrease in net loss of $898,798 over the comparable prior year period was primarily due to the decrease in operating, maintenance and management expenses of $3,585,567, the decrease in real estate taxes and insurance of $1,625,540, the decrease in fees to affiliates of $178,430, the decrease in depreciation and amortization expense of $4,058,219, the decrease in interest expense of $2,452,163 and the decrease in equity in losses of unconsolidated joint venture of $58,873, partially offset by the decrease in total revenues of $8,418,167, the increase in loss on debt extinguishment of $597,681, the increase in general and administrative expenses of $1,956,009 and the increase in loss on sales of real estate, net of $88,137. Our results of operations were primarily impacted by the disposition of 12 multifamily properties since September 30, 2018.

Total revenues

Rental income and other income for the three months ended September 30, 2019, were $27,823,551 compared to $36,241,718 for the three months ended September 30, 2018. The decrease of $8,418,167 was primarily due to our total number of units decreasing by 3,095 from 10,622 at September 30, 2018, to 7,527 at September 30, 2019, as a result of the disposition of 12 multifamily properties, partially offset by the average occupancy increasing from 94.2% at September 30, 2018 to 95.8% at September 30, 2019, and the average monthly rent increasing from $1,058 at September 30, 2018 to $1,123 at September 30, 2019. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases and any value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the three months ended September 30, 2019, were $6,871,764 compared to $10,457,331 for the three months ended September 30, 2018. The decrease of $3,585,567 was primarily due to the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to a decrease of $56,811 in operating, maintenance and management expenses at the multifamily properties held throughout both periods. We expect that these amounts will decrease as a percentage of total revenues as we continue to implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the three months ended September 30, 2019, were $4,031,558 compared to $5,657,098 for the three months ended September 30, 2018. The decrease of $1,625,540 was due primarily to a decrease of $1,415,825 as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to the decrease of $209,715 at the properties held throughout both periods as a result of successful challenges to assessed real

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estate tax values. These amounts may increase in future periods as a result of municipal property tax rate increases and/or increases in the assessed value of our properties.

Fees to affiliates

Fees to affiliates for the three months ended September 30, 2019, were $3,934,709 compared to $4,113,139, for the three months ended September 30, 2018. The decrease of $178,430 was primarily due to the decrease of investment management fees and property management fees as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, partially offset by the increase in loan coordination fees payable to our advisor of $600,000 as a result of the refinancing of six multifamily properties during the three months ended September 30, 2019. We expect fees to affiliates to decrease in future periods as a result of continued lower property management fees and investment management fees incurred on a smaller portfolio.

Depreciation and amortization

Depreciation and amortization expenses for the three months ended September 30, 2019, were $8,520,813 compared to $12,579,032 for the three months ended September 30, 2018. The decrease of $4,058,219 was primarily due to the decrease in the number of properties in our portfolio subsequent to September 30, 2018. The decrease of $1,101,686 at the properties held throughout both periods was primarily due to the decrease in amortization of tenant origination and absorption costs. We expect these amounts to increase in future periods as a result of anticipated capital expenditures to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2019, was $6,044,495, compared to $8,496,658 for the three months ended September 30, 2018. The decrease of $2,452,163 was primarily due to a net decrease of $275,824,567 in our total notes payable balance as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, the repayment of notes payable related to two properties we still own during the three months ended September 30, 2019 and the repayment of notes payable related to six properties we still own subsequent to September 30, 2018, partially offset by loan fees incurred in connection with the refinancing of six multifamily properties during the three months ended September 30, 2019. Our interest expense in future periods will vary based on our level of borrowings, which will depend on the availability and cost of debt financing, the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the three months ended September 30, 2019, was $597,681 compared to $0 for the three months ended September 30, 2018. These expenses consisted of prepayment penalties and the expense of the unamortized deferred financing costs related to the repayment and extinguishment of the debt at two multifamily properties during the three months ended September 30, 2019. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2019, were $3,063,653 compared to $1,107,644 for the three months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The net increase of $1,956,009 was primarily due to an increase in legal fees and expenses related to the proposed Merger and the increase in director meeting fees as a result of an increase in the number of meetings compared to the prior year period. We expect general and administrative expenses to decrease as a percentage of total revenues in future periods.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the three months ended September 30, 2019, was $228,667 compared to $287,540 for the three months ended September 30, 2018. Our investment in the joint venture has been accounted for as an

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

unconsolidated joint venture under the equity method of accounting. The decrease in equity in loss from unconsolidated joint venture of $58,873 primarily was due to the decrease in amortization of tenant origination and absorption costs. Equity in loss from unconsolidated joint venture will vary in the future based on the operating results of the joint venture.

Loss on sales of real estate

Loss on sales of real estate for the three months ended September 30, 2019, was $88,137 compared to $0 for the three months ended September 30, 2018. The increase in loss on sales of real estate of $88,137 was due to a land condemnation related to one of our held properties during the three months ended September 30, 2019. Our loss (gain) on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

Consolidated Results of Operations for the Nine Months EndedSeptember 30, 2019 and 2018

The following table summarizes the consolidated results of operations for the nine months endedSeptember 30, 2019 and 2018:

	For the Nine Months Ended September 30,											$ Change Due to Acquisitions and Dispositions(1)			$ Change Due to Properties Held Throughout Both Periods(2)
	2019			2018			Change $			Change %
Total revenues	$	88,166,926		$	105,753,652		$	(17,586,726	)	(17	)%	$	(20,617,422	)	$	3,030,696
Operating, maintenance and management	(21,720,715		)	(28,936,191		)	7,215,476			25	%	6,981,145			234,331
Real estate taxes and insurance	(13,376,128		)	(18,329,576		)	4,953,448			27	%	3,433,557			1,519,891
Fees to affiliates	(11,083,920		)	(11,854,429		)	770,509			6	%	1,785,471			(1,014,962		)
Depreciation and amortization	(25,961,590		)	(34,781,722		)	8,820,132			25	%	7,626,480			1,193,652
Interest expense	(20,505,685		)	(24,408,327		)	3,902,642			16	%	3,215,014			687,628
Loss on debt extinguishment	(3,432,058		)	(2,282,247		)	(1,149,811		)	(50	)%	214,750			(1,364,561		)
General and administrative expenses	(6,181,745		)	(4,448,377		)	(1,733,368		)	(39	)%	134,981			(1,868,349		)
Equity in loss from unconsolidated joint venture	(427,816		)	(3,102,044		)	2,674,228			86	%	2,674,228			—
Gain on sales of real estate, net	86,800,659			81,247,054			5,553,605			7	%	5,553,605			—
Net income	$	72,277,928		$	58,857,793		$	13,420,135		23	%
NOI(3)	$	49,192,594		$	55,238,480		$	(6,045,886	)	(11	)%
FFO(4)	$	13,190,454		$	16,607,689		$	(3,417,235	)	(21	)%
MFFO(4)	$	16,785,875		$	19,101,204		$	(2,315,329	)	(12	)%

________________

(1) Represents the favorable (unfavorable) dollar amount change for the nine months endedSeptember 30, 2019, compared to the nine months endedSeptember 30, 2018, related to multifamily properties acquired or disposed of on or after January 1, 2018.

(2) Represents the favorable (unfavorable) dollar amount change for the nine months endedSeptember 30, 2019, compared to the nine months endedSeptember 30, 2018, related to multifamily properties owned by us throughout both periods presented.

(3) See “—Net Operating Income” below for a reconciliation of NOI to net income.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(4) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation FFO and MFFO to net income (loss).

Net income

For the nine months endedSeptember 30, 2019, we had net income of $72,277,928 compared to a net income of $58,857,793 for the nine months endedSeptember 30, 2018. The increase in net income of $13,420,135 over the comparable prior year period was primarily due to the increase in gain on sales of real estate, net of $5,553,605, the decrease in operating, maintenance and management expenses of $7,215,476, the decrease in real estate taxes and insurance of $4,953,448, the decrease in fees to affiliates of $770,509, the decrease in depreciation and amortization expense of $8,820,132, the decrease in interest expense of $3,902,642 and the decrease in equity in loss of unconsolidated joint venture of $2,674,228, partially offset by the decrease in total revenues of $17,586,726, the increase in loss on debt extinguishment of $1,149,811 and the increase in general and administrative expenses of $1,733,368. Our results of operations were primarily impacted by the disposition of 12 multifamily properties since September 30, 2018.

Total revenues

Rental income and other income for the nine months endedSeptember 30, 2019, were $88,166,926 compared to $105,753,652 for the nine months endedSeptember 30, 2018. The decrease of $17,586,726 was primarily due to our total number of units decreasing by 3,095 from 10,622 at September 30, 2018, to 7,527 at September 30, 2019, as a result of the disposition of 12 multifamily properties, partially offset by the average occupancy increasing from 94.2% at September 30, 2018 to 95.8% at September 30, 2019, and the average monthly rent increasing from $1,058 at September 30, 2018 to $1,123 at September 30, 2019. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases and any value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the nine months endedSeptember 30, 2019, were $21,720,715 compared to $28,936,191 for the nine months endedSeptember 30, 2018. The decrease of $7,215,476 was primarily due to a net decrease of $6,981,145 as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to a decrease of $234,331 at the multifamily properties held throughout both periods. We expect that these amounts will decrease as a percentage of total revenues as we continue to implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the nine months endedSeptember 30, 2019, were $13,376,128 compared to $18,329,576 for the nine months endedSeptember 30, 2018. The decrease of $4,953,448 was primarily due to a decrease of $3,433,557 related to the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to the decrease of $1,519,891 at the properties held throughout both periods as a result of successful challenges to assessed real estate tax values. These amounts may increase in future periods as a result of municipal property tax rate increases and/or increases in the assessed value of our properties.

Fees to affiliates

Fees to affiliates for the nine months endedSeptember 30, 2019, were $11,083,920 compared to $11,854,429 for the nine months endedSeptember 30, 2018. The net decrease of $770,509 was primarily due to the decrease of investment management fees and property management fees as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, partially offset by the increase in loan coordination fees payable to our advisor of $600,000 as a result of the refinancing of six multifamily properties during the nine months ended September 30, 2019. We expect fees to affiliates to increase in future periods as a result of higher property management fees from anticipated increases in future rental income.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Depreciation and amortization

Depreciation and amortization expenses for the nine months endedSeptember 30, 2019, were $25,961,590 compared to $34,781,722 for the nine months endedSeptember 30, 2018. The decrease of $8,820,132 was primarily due to the decrease in the number of properties in our portfolio subsequent to September 30, 2018. The decrease of $1,193,652 at the properties held throughout both periods was primarily due to the decrease in amortization of tenant origination and absorption costs. We expect these amounts to increase in future periods as a result of anticipated capital expenditures to our real estate portfolio.

Interest expense

Interest expense for the nine months endedSeptember 30, 2019, was $20,505,685 compared to $24,408,327 for the nine months endedSeptember 30, 2018. The decrease of $3,902,642 was primarily due to a net decrease of $275,824,567 in our total notes payable balance as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, the repayment of notes payable related to six properties we still own during the nine months ended September 30, 2019 and the repayment of notes payable related to two properties we still own subsequent to September 30, 2018, partially offset by loan fees incurred in connection with the refinancing of six multifamily properties during the nine months endedSeptember 30, 2019. Our interest expense in future periods will vary based on our level of borrowings, which will depend on the availability and cost of debt financing, the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the nine months endedSeptember 30, 2019, was $3,432,058 compared to $2,282,247 for the nine months endedSeptember 30, 2018. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of five multifamily properties and repayment of notes payable at six multifamily properties during the nine months endedSeptember 30, 2019, compared to the prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of ten multifamily properties, the refinancing of four multifamily properties and the repayment of notes payable at two multifamily properties during the nine months endedSeptember 30, 2018. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expenses

General and administrative expenses for the nine months endedSeptember 30, 2019, were $6,181,745 compared to $4,448,377 for the nine months endedSeptember 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The net increase of $1,733,368 primarily was due to an increase in legal fees and expenses related to the proposed Merger and the increase in director meeting fees as a result of an increase in the number of meetings compared to the prior year period. We expect general and administrative expenses incurred by our advisor to decrease as a percentage of total revenue.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the nine months endedSeptember 30, 2019, was $427,816 compared to $3,102,044 for the nine months endedSeptember 30, 2018. Our investment in the joint venture has been accounted for as an unconsolidated joint venture under the equity method of accounting. The decrease in equity in loss from unconsolidated joint venture of $2,674,228 primarily was due to the eight multifamily properties contributed to the joint venture in January 2018 experiencing a full period of operations during the nine months ended September 30, 2019, a reduction of amortization expense related to tenant origination and absorption costs that were fully amortized prior to the nine months ended September 30, 2019, and non-recurring insurance proceeds recognized during the nine months ended September 30, 2019. Equity in loss from unconsolidated joint venture will vary in the future based on the operating results of the joint venture.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Gain on sales of real estate

Gain on sales of real estate for the nine months endedSeptember 30, 2019, was $86,800,659, compared to $81,247,054 for the nine months endedSeptember 30, 2018. The increase in gain on sales of real estate of $5,553,605 is due to the gain recognized on the disposition of eight multifamily properties during the nine months ended September 30, 2019, compared to the disposition of 11 multifamily properties during the nine months endedSeptember 30, 2018. Our gain on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

Property Operations for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

For purposes of evaluating comparative operating performance, we categorize properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at July 1, 2018 and September 30, 2019. A “non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2018 and properties accounted for under the equity method. As of September 30, 2019, 27 properties were categorized as same-store properties.

The following table presents the same-store and non-same-store results from operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,
	2019		2018		Change $			Change %
Same-store properties:
Revenues	$	27,255,745	$	26,015,519	$	1,240,226		4.8	%
Operating expenses	12,344,040		12,362,568		(18,528		)	(0.1	)%
NOI	14,911,705		13,652,951		1,258,754			9.2	%
Non-same-store properties:
NOI	860,769		5,287,531		(4,426,762		)
Total NOI(1)	$	15,772,474	$	18,940,482	$	(3,168,008	)

________________

(1) See “—Net Operating Income” below for a reconciliation of NOI to net income.

Net Operating Income

Same-store net operating income for the three months ended September 30, 2019, was $14,911,705 compared to $13,652,951 for the three months ended September 30, 2018. The 9.2%increase in same-store net operating income was primarily due to a 4.8%increase in same-store rental revenues in addition to a 0.1%decrease in same-store operating expenses over the comparable prior year period.

Revenues

Same-store revenues for the three months ended September 30, 2019, were $27,255,745 compared to $26,015,519 for the three months ended September 30, 2018. The 4.8%increase in same-store revenues was primarily due to the average rent increases at the same-store properties from $1,083 as of September 30, 2018, to $1,123 as of September 30, 2019, primarily attributable to ordinary monthly rent increases and an increase in occupancy at the same-store properties from 94.2% as of September 30, 2018, to 95.8% as of September 30, 2019.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2019, were $12,344,040 compared to $12,362,568 for the three months ended September 30, 2018. The decrease related to same-store operating expenses did not indicate a meaningful change during the three months ended September 30, 2019, relative to the comparable prior year period.

Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs, (3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs (those that did not meet the criteria for capitalization under ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of business, or ASU 2017-01) and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner. ASU 2017-01 now forms part of ASC 805, Business Combinations, or ASC 805.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

The usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs (those that did not meet the criteria for capitalization under ASC 805), certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following is a reconciliation of our NOI to net income (loss) for the three and nine months endedSeptember 30, 2019 and 2018, computed in accordance with GAAP:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net (loss) income	$	(5,557,926	)	$	(6,456,724	)	$	72,277,928		$	58,857,793
Fees to affiliates(1)	2,573,063			2,603,225			6,876,766			7,731,826
Depreciation and amortization	8,520,813			12,579,032			25,961,590			34,781,722
Interest expense	6,044,495			8,496,658			20,505,685			24,408,327
Loss on debt extinguishment	597,681			—			3,432,058			2,282,247
General and administrative expenses	3,063,653			1,107,644			6,181,745			4,448,377
Loss (gain) on sales of real estate, net	88,137			—			(86,800,659		)	(81,247,054		)
Adjustments for investment in unconsolidated joint venture(2)	1,010,364			1,001,590			2,673,741			5,236,092
Other gains(3)	(567,806		)	(390,943		)	(1,916,260		)	(1,260,850		)
Net operating income	$	15,772,474		$	18,940,482		$	49,192,594		$	55,238,480

________________

(1) Fees to affiliates for the three and nine months endedSeptember 30, 2019, exclude property management fees of $796,493 and $2,522,318 and other reimbursements of $565,153 and $1,684,836, respectively, that are included in NOI. Fees to affiliates for the three and nine months endedSeptember 30, 2018, exclude property management fees of $1,035,326 and $3,038,678 and other reimbursements of $474,588 and $1,083,925, respectively, that are included in NOI.

(2) Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net income attributable to common stockholders to NOI for our equity investment in the unconsolidated joint venture, which principally consists of depreciation, amortization and interest expense incurred by the joint venture.

(3) Other gains for the three and nine months endedSeptember 30, 2019 and 2018 include non-recurring insurance proceeds and interest income that are not included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure of FFO which we believe to be an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in December 2018, or the White Paper. The White Paper defines FFO as net income computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. We adopted ASU 2016-02, Leases, or ASU 2016-02 on January 1, 2019, which requires us, as a lessee, to recognize a liability for obligations under a lease contract and a right-of-use asset. The carrying amount of the right-of-use asset is amortized over the term of the lease. Because we have no ownership rights (current or residual) in the underlying asset, NAREIT concluded that the amortization of the right-of-use asset should not be added back to GAAP net income (loss) in calculating FFO. This amortization expense is included in FFO. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that public, non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases.

Due to the above factors and other unique features of publicly registered, non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically, under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the publication of ASU 2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the event that operational earnings and cash flow are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to our advisor from other sources, including debt, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income or income from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the three and nine months endedSeptember 30, 2019 and 2018:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Reconciliation of net (loss) income to MFFO:	2019			2018			2019			2018
Net (loss) income	$	(5,557,926	)	$	(6,456,724	)	$	72,277,928		$	58,857,793
Depreciation of real estate assets	8,519,728			11,657,288			25,945,678			33,498,945
Amortization of lease-related costs(1)	—			921,744			12,764			1,282,777
Loss (gain) on sales of real estate, net	88,137			—			(86,800,659		)	(81,247,054		)
Adjustments for investment in unconsolidated joint venture(2)	645,394			648,524			1,754,743			4,215,228
FFO	3,695,333			6,770,832			13,190,454			16,607,689
Acquisition expenses(3)(4)	—			13,641			—			314,774
Unrealized loss (gain) on derivative instruments	2,066			(18,199		)	163,363			(103,506		)
Loss on debt extinguishment	597,681			—			3,432,058			2,282,247
MFFO	$	4,295,080		$	6,766,274		$	16,785,875		$	19,101,204

________________

(1) Amortization of lease-related costs for the three and nine months ended September 30, 2019, excludes amortization of operating lease right-of-use assets of $1,085 and $3,148 that are included in FFO, respectively. There was no amortization of operating lease right-of-use assets during the three and nine months ended September 30, 2018.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(2) Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net income attributable to common stockholders to FFO for our equity investment in the unconsolidated joint venture, which principally consists of depreciation and amortization incurred by the joint venture.

(3) By excluding acquisition expenses, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include payments to our advisor or third parties. Historically, acquisition expenses under GAAP were considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Following the publication of ASU 2017-01, which now forms part of ASC 805, acquisition expenses are capitalized and depreciated under certain conditions. All paid and accrued acquisition expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these expenses and other costs related to the property. In the event that operational earnings and cash flow are not available to fund our reimbursement of acquisition expenses incurred by our advisor, such expenses will need to be reimbursed to the advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows.

(4) No acquisition expenses were incurred for each of the three and nine months endedSeptember 30, 2019. Acquisition expenses for the three and nine months endedSeptember 30, 2018 of $13,641 and $314,774, respectively, that related to dead deal costs, did not meet the criteria for capitalization under ASC 805 and were recorded in general and administrative expenses in the accompanying condensed consolidated unaudited statements of operations.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Off-Balance Sheet Arrangements

As of September 30, 2019, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 8 (Related Party Arrangements) to our condensed consolidated unaudited financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related-party transactions, agreements and fees.

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PART I — FINANCIAL INFORMATION (continued)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we have, and may in the future, utilize a variety of financial instruments, including interest rate caps, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds at fixed rates and intend in the future to borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2019, the fair value of our fixed rate debt was $498,323,633 and the carrying value of our fixed rate debt was $498,426,493. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2019. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. As of September 30, 2019, we had no outstanding variable rate debt instruments and therefore were not subject to interest rate risk related to variable debt instruments.

At September 30, 2019, the weighted-average interest rate of our fixed rate debt was 3.75%. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2019 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2019 where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2019, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of September 30, 2019 were not in excess of the capped rates. See also Note 11 (Derivative Financial Instruments) to our condensed consolidated unaudited financial statements included in this Quarterly Report on Form 10-Q.

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PART I — FINANCIAL INFORMATION (continued)

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, 2019, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of September 30, 2019, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

There have been no material changes to the risk factors contained in Part 1, Item 1A set forth in our Annual Report on Form 10-K filed with the SEC on March 15, 2019 and in our Quarterly Report on Form 10-Q filed with the SEC on August 13, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2019, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

During the three months ended September 30, 2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase program as follows:

	Total Number of Shares Requested to be Repurchased(1)	Total Number of Shares Repurchased(2)	Average Price Paid per Share(3)(4)		Approximate Dollar Value of Shares Available That May Yet Be /Repurchased Under the Program
July 2019	28,429	222,982	$	8.97	(5)
August 2019	21,546	—	—		(5)
September 2019	28,870	—	—		(5)
	78,845	222,982	8.97

____________________

(1) We generally repurchase shares on the last business day of the month following the end of each fiscal quarter in which requests were received. At September 30, 2019, we had $710,887, representing 77,453 shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on October 31, 2019.

(2) We are not obligated to repurchase shares under the share repurchase program.

(3) Pursuant to the program, as amended, we currently repurchase shares at prices determined as follows:

• 92.5% of the share repurchase price for stockholders who have held their shares for at least one year;

• 95.0% of the share repurchase price for stockholders who have held their shares for at least two years;

• 97.5% of the share repurchase price for stockholders who have held their shares for at least three years; and

• 100.0% of the share repurchase price for stockholders who have held their shares for at least four years.

The “share repurchase price” is equal to 93% of the estimated value per share less reductions due to the holding period for shares and other events specified in the share repurchase program. Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or qualifying disability (as determined by our board of directors in its sole discretion) will be equal to the average issue price per share for all of the stockholder’s shares purchased from us.

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PART II—OTHER INFORMATION (continued)

(4) For the three months ended September 30, 2019, the sources of the cash used to repurchase shares were 100% from existing cash and cash equivalents.

(5) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to 5% of the weighted-average number of shares outstanding during the prior calendar year and the dollar value of the shares repurchased shall not exceed $2,000,000 in any quarter. In connection with the proposed SIR Merger, on August 5, 2019, our board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied beginning with repurchases made on the repurchase dates (as defined in the Amended & Restated SRP) subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, we will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by our board in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended & Restated SRP continue to be limited to $2,000,000 per quarter.

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PART II—OTHER INFORMATION (continued)

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II—OTHER INFORMATION (continued)

Item 5. Other Information

None.

Item 6. Exhibits

Effective February 1, 2010, Steadfast Secure Income REIT, Inc., Steadfast Secure Income Advisor, LLC and Steadfast Secure Income REIT Operating Partnership, L.P. changed their names to Steadfast Income REIT, Inc., Steadfast Income Advisor, LLC and Steadfast Income REIT Operating Partnership, L.P., respectively. With respect to documents executed prior to the name change, the following Exhibit Index refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the three months ended September 30, 2019 (and are numbered in accordance with Item 601 of Regulation S-K).

2.1 Agreement and Plan of Merger, dated as of August  5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SI Subsidiary, LLC, Steadfast Income REIT, Inc. and Steadfast Income REIT Operating Partnership, L.P. (included as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on August 6, 2019, and incorporated herein by reference).

3.1 Third Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 6, 2014 and incorporated herein by reference).

3.2 Bylaws of Steadfast Income REIT, Inc. (included as Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (File No. 333-160748) filed July 23, 2009 and incorporated herein by reference).

3.3 Amendment No. 1 to Bylaws of Steadfast Income REIT, Inc. (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on August 9, 2019, and incorporated herein by reference).

4.1 Form of Subscription Agreement (incorporated by reference to Appendix B to the prospectus, dated July 9, 2010 of the Registrant).

10.1 Termination Agreement, dated as of August 5, 2019, by and between Steadfast Income REIT, Inc. and Steadfast Income Advisor, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on August 6, 2019, and incorporated herein by reference).

10.2 Multifamily Loan and Security Agreement, made as of September 20, 2019, by and between SIR Jefferson, LLC and Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed September 25, 2019 and incorporated herein by reference).

10.3 Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of September 20, 2019, by and between SIR Jefferson, LLC and Jones Lang LaSalle Multifamily, LLC
(included as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).

10.4 Assignment of Management Agreement, dated as of September 20, 2019, by and among SIR Jefferson, LLC, Jones Lang LaSalle Multifamily, LLC and Steadfast Management Company, Inc. (included as Exhibit 10.3 to

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PART II—OTHER INFORMATION (continued)

the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).

10.5 Guaranty of Non-Recourse Obligations, dated as of September 20, 2019, by Steadfast Income REIT, Inc. for the benefit of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).

10.6 Multifamily Note, made as of September 20, 2019, by SIR Jefferson, LLC, in favor of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).

10.7 Multifamily Loan and Security Agreement, made as of September 26, 2019, by and between SIR Tapestry Park, LLC and Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).

10.8 Multifamily Mortgage, Assignment of Rents, and Security Agreement, dated as of September 26, 2019, by and between SIR Tapestry Park, LLC and Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank
(included as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).

10.9 Assignment of Management Agreement and Subordination of Management Fees, dated as of September 26, 2019, by and among SIR Tapestry Park, LLC, Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank and Steadfast Management Company, Inc. (included as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).

10.10 Guaranty, dated as of September 26, 2019, by Steadfast Income REIT, Inc. for the benefit of Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).

10.11 Multifamily Note, made as of September 26, 2019, by SIR Tapestry Park, LLC, in favor of Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).

99.1 Amended and Restated Share Repurchase Program (included as Exhibit 99.3 to the Company’s Current Report on Form 8-K (SEC File No. 000-54674) filed with the SEC on August 6, 2019, and incorporated herein by reference).

31.1* Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1** Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2** Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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PART II—OTHER INFORMATION (continued)

101.INS* XBRL Instance Document.

101.SCH* XBRL Taxonomy Extension Schema Document.

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB* XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.

____________

* Filed herewith.

** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

72

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Steadfast Income REIT, Inc.
Date:	November 8, 2019	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Date:	November 8, 2019	By:	/s/ Kevin J. Keating
			Kevin J. Keating
			Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)