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, 2012

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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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

Large Accelerated filer o Accelerated filer o Non-Accelerated filer o (Do not check if smaller reporting company) Smaller reporting company þ

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 9, 2012, there were 20,236,629 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, 2012 (unaudited) and December 31, 2011	2
Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited)	3
Consolidated Statements of Equity for the year ended December 31, 2011 and for the nine months ended September 30, 2012 (unaudited)	4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited)	5
Condensed Notes to Consolidated Financial Statements as of September 30, 2012 (unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3. Quantitative and Qualitative Disclosures About Market Risk	64
Item 4. Controls and Procedures	65
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	66
Item 1A. Risk Factors	66
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	69
Item 6. Exhibits	70
Signatures	73
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	27,298,570		$	5,648,561
Building and improvements	293,646,458			61,552,400
Tenant origination and absorption costs	8,503,002			2,665,720
Total real estate, cost	329,448,030			69,866,681
Less accumulated depreciation and amortization	(12,587,204		)	(3,115,505		)
Total real estate, net	316,860,826			66,751,176
Cash and cash equivalents	20,985,462			12,200,681
Restricted cash	3,317,755			818,348
Rents and other receivables	1,693,126			609,203
Deferred financing costs and other assets, net	3,587,827			1,472,853
Total assets	$	346,444,996		$	81,852,261
LIABILITIES AND EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	6,549,357		$	1,629,479
Notes payable	207,914,276			47,973,049
Distributions payable	1,010,158			254,592
Due to affiliates, net	2,209,502			1,386,065
Total liabilities	217,683,293			51,243,185
Commitments and contingencies (Note 9)
Redeemable common stock	1,915,460			385,458
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, 18,336,342 and 4,638,699 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	183,363			46,387
Convertible stock, $0.01 par value per share; 1,000 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively	10			10
Additional paid-in capital	152,807,438			38,260,059
Cumulative distributions and net losses	(26,144,568		)	(8,082,838		)
Total stockholders’ equity	126,846,243			30,223,618
Total liabilities and stockholders' equity	$	346,444,996		$	81,852,261

See accompanying 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,
	2012			2011			2012			2011
Revenues:
Rental income	$	7,793,628		$	1,629,652		$	16,843,373		$	3,367,794
Tenant reimbursements and other	823,921			147,834			1,621,631			365,238
Total revenues	8,617,549			1,777,486			18,465,004			3,733,032
Expenses:
Operating, maintenance and management	2,547,385			654,231			5,364,639			1,333,249
Real estate taxes and insurance	1,026,023			321,444			2,159,130			533,137
Fees to affiliates	2,790,393			355,698			6,928,656			868,382
Depreciation and amortization	4,147,366			629,085			9,471,699			1,850,038
Interest expense	1,800,346			375,346			3,887,837			759,431
General and administrative expenses	730,332			32,398			2,094,725			570,834
Other acquisition costs	538,853			140,241			1,694,574			478,432
	13,580,698			2,508,443			31,601,260			6,393,503
Net loss	(4,963,149		)	(730,957		)	(13,136,256		)	(2,660,471		)
Net loss per common share — basic and diluted	$	(0.36	)	$	(0.29	)	$	(1.39	)	$	(1.40	)
Weighted average number of common shares outstanding — basic and diluted	13,787,105			2,525,536			9,423,555			1,896,815
Distributions declared per common share	$	0.177		$	0.176		$	0.525		$	0.523

See accompanying notes to consolidated financial statements.

3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2011

AND FOR THENINE MONTHS ENDEDSEPTEMBER 30, 2012 (Unaudited)

	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, December 31, 2010	1,184,283		$	11,843		1,000	$	10	$	9,568,008		$	(2,392,983	)	$	7,186,878
Issuance of common stock	3,454,416		34,544			—	—		34,217,712			—			34,252,256
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—	—		(3,198,703		)	—			(3,198,703		)
Transfers to redeemable common stock	—		—			—	—		(539,220		)	—			(539,220		)
Other offering costs to affiliates	—		—			—	—		(1,849,905		)	—			(1,849,905		)
Distributions declared	—		—			—	—		—			(1,640,845		)	(1,640,845		)
Amortization of stock-based compensation	—		—			—	—		62,167			—			62,167
Net loss for the year ended December 31, 2011	—		—			—	—		—			(4,049,010		)	(4,049,010		)
BALANCE, December 31, 2011	4,638,699		46,387			1,000	10		38,260,059			(8,082,838		)	30,223,618
Issuance of common stock	13,737,918		137,379			—	—		136,448,370			—			136,585,749
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—	—		(12,731,375		)	—			(12,731,375		)
Transfers to redeemable common stock	—		—			—	—		(1,735,741		)	—			(1,735,741		)
Redemption of common stock	(40,275	)	(403		)	—	—		—			—			(403		)
Other offering costs to affiliates	—		—			—	—		(7,483,880		)	—			(7,483,880		)
Distributions declared	—		—			—	—		—			(4,925,474		)	(4,925,474		)
Amortization of stock-based compensation	—		—			—	—		50,005			—			50,005
Net loss for the nine months ended September 30, 2012	—		—			—	—		—			(13,136,256		)	(13,136,256		)
BALANCE, September 30, 2012	18,336,342		$	183,363		1,000	$	10	$	152,807,438		$	(26,144,568	)	$	126,846,243

See accompanying notes to consolidated financial statements.

4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash Flows from Operating Activities:
Net loss	$	(13,136,256	)	$	(2,660,471	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	9,471,699			1,850,038
Amortization of deferred financing costs	182,692			19,844
Amortization of stock-based compensation	50,005			67,871
Amortization of debt premium	(180,625		)	—
Change in fair value of interest rate cap	171,320			—
Changes in operating assets and liabilities:
Restricted cash for operating activities	(2,038,074		)	(247,696		)
Rent and other receivables	(611,308		)	(69,785		)
Other assets	(859,461		)	(52,743		)
Accounts payable and accrued liabilities	5,092,393			408,269
Due to affiliates, net	903,257			92,998
Net cash used in operating activities	(954,358		)	(591,675		)
Cash Flows from Investing Activities:
Acquisition of real estate investments	(184,673,061		)	(28,135,000		)
Addition to real estate investments	(1,660,982		)	(81,118		)
Restricted cash for investing activities	(461,333		)	(295,566		)
Purchase of interest rate cap	(295,870		)	—
Net cash used in investing activities	(187,091,246		)	(28,511,684		)
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable	94,001,000			20,945,000
Principal payments on notes payable	(7,126,455		)	(38,955		)
Proceeds from issuance of common stock	134,377,392			17,791,934
Payments of commissions on sale of common stock and related dealer manager fees	(12,731,375		)	(1,704,033		)
Reimbursement of other offering costs to affiliates	(7,563,697		)	(976,643		)
Payment of deferred financing costs	(1,313,656		)	(184,450		)
Distributions to common stockholders	(2,432,092		)	(546,871		)
Redemptions of common stock	(380,732		)	—
Net cash provided by financing activities	196,830,385			35,285,982
Net increase in cash and cash equivalents	8,784,781			6,182,623
Cash and cash equivalents, beginning of period	12,200,681			2,858,197
Cash and cash equivalents, end of period	$	20,985,462		$	9,040,820
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	3,294,503		$	640,606
Supplemental Disclosure of Noncash Transactions:
Increase in distributions payable	$	755,566		$	99,137
Assumption of notes payable to acquire real estate	$	73,247,307		$	—
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	1,737,817		$	341,829

See accompanying notes to consolidated financial statements.

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

1. Organization and Business

Steadfast Income REIT, Inc. (the “Company”) was formed on May 4, 2009 as a Maryland corporation that has elected to qualify 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, a Delaware limited liability company formed on May 1, 2009 (the “Advisor”), invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 6.

Substantially all of the Company’s business is conducted through Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009 (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. As the Company accepts subscriptions for shares of its common stock, the Company will transfer substantially all of the net offering proceeds to the Operating Partnership in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership will increase proportionately. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009.

As of September 30, 2012, the Company owned 19 multifamily properties comprising a total of 4,102 apartment units with 4,102,925 square feet of rentable space and 8,995 square feet of rentable commercial space. For more information on the Company's real estate portfolio, see Note 3.

Private Offering

On October 13, 2009, the Company commenced a private offering of up to $94,000,000 in shares of the Company’s common stock at a purchase price of $9.40 per share (with discounts available for certain categories of purchasers) (the “Private Offering”). The Company offered its shares of common stock for sale in the Private Offering pursuant to a confidential private placement memorandum and only to persons that were “accredited investors,” as that term is defined under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. On July 9, 2010, the Company terminated the Private Offering and on July 19, 2010, the Company commenced its registered public offering described below. The Company sold 637,279 shares of common stock in the Private Offering for gross offering proceeds of $5,844,325.

Public Offering

On July 23, 2009, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer 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 “Public Offering”). The Company also registered up to 15,789,474 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP”) at an initial price of $9.50 per share.The SEC declared the Company’s registration statement effective on July 9, 2010. The Company commenced the Public Offering on July 19, 2010. The Company may reallocate the shares between the Public Offering and the DRP.

On July 12, 2012, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $10.24 as of March 31, 2012. As a result of the determination of the estimated value per share of the Company's common stock as of March 31, 2012, effective September 10, 2012, the offering price of the Company’s common stock in the ongoing Public Offering increased from the previous price of $10.00 per share to $10.24 per share. Additionally, effective September 10, 2012, the price of shares of the Company's common stock issued pursuant to the DRP increased from a price of $9.50 per share to a price of $9.73 per share, or 95% of the new offering price. Effective September 10, 2012, the Company’s

6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

board of directors increased the amount of distributions paid on each share of the Company’s common stock from $0.001917 per share per day to $0.001964 per share per day, which, if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on the new offering price of $10.24 per share. The Company’s board of directors may again, in its sole discretion, change the price at which the Company offers shares of common stock to the public in the Public Offering or to its stockholders pursuant to the DRP to reflect future changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

From the commencement of the Public Offering on July 19, 2010 to September 30, 2012, the Company sold 17,678,132 shares of common stock in the Public Offering for gross proceeds of $175,747,619, including 246,033 shares of common stock issued pursuant to the DRP for gross offering proceeds of $2,337,249.

The Company intends to use substantially all of the net proceeds from the Public Offering to invest in and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. In addition to the Company’s focus on multifamily properties, the Company may also selectively invest in other types of commercial properties. The Company may also acquire or originate mortgage, mezzanine, bridge and other real estate loans and equity securities of other real estate companies.

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement (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 May 4, 2013. 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. The Company has retained Steadfast Capital Markets Group, LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager for the Public Offering. The Dealer Manager is responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, also provides offering services, marketing, investor relations and other administrative services on the Company's behalf.

The Partnership Agreement provides that the Operating Partnership will be 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 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.

The Company commenced its operations on August 11, 2010 upon acquiring a fee simple interest in a multifamily property located in Springfield, Illinois.

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership 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 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 ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The 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, 2011.

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.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties will be capitalized. Acquisition costs are expensed as incurred. Repair and maintenance and tenant turnover costs will be charged to expense as incurred and significant replacements and betterments will be capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

Buildings	25-40 years
Building improvements	5-25 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Real Estate Purchase Price Allocation

The Company records the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. Acquisition costs are expensed as incurred.

The Company assesses the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis), which utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up.

The Company estimates the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, the Company estimates the amount of lost rentals using market rates during the expected lease-up periods.

The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) the Company’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as a reduction or increase to rental income over the remaining non-cancelable terms of the respective leases.

The total amount of other intangible assets acquired will be further allocated to in-place lease values and customer relationship intangible values based on the Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with that respective tenant. Characteristics that the Company considers in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, and the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

The Company amortizes the value of in-place leases to expense over the remaining non-cancelable term of the respective leases. The value of customer relationship intangibles will be amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense in that period.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of the Company’s net income.

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Impairment of Real Estate Assets

The Company will continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset.

Rents and Other Receivables

The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of tenants in developing these estimates. Due to the short-term nature of the operating leases, the Company does not maintain an allowance for deferred rent receivable related to the straight-lining of rents.

Revenue Recognition

The Company leases apartment and condominium units under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. The Company will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and amounts expected to be received in later years will be recorded as deferred rents. The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.

The Company recognizes gains on sales of real estate either in total or deferred for a period of time, depending on whether a sale has been consummated, the extent of the buyer’s investment in the property being sold, whether the receivable is subject to future subordination, and the degree of the Company’s continuing involvement with the property after the sale. If the criteria for profit recognition under the full-accrual method are not met, the Company will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery method, as appropriate, until the appropriate criteria are met.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value. As of September 30, 2012 and December 31, 2011, the Company had amounts in excess of federally insured limits in deposit accounts with a financial institution. The Company limits such deposits to financial institutions with high credit standing.

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants. As of September 30, 2012 and December 31, 2011, the Company had a restricted cash balance of $3,317,755 and $818,348, respectively, which represents amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company's lenders.

Deferred Financing Costs

The Company capitalizes deferred financing costs such as commitment fees, legal fees and other third party costs associated with obtaining commitments for financing that result in a closing of such financing. The Company amortizes these costs over the terms of the respective financing agreements using the interest method. The Company expenses unamortized deferred financing costs when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Derivative Financial Instruments

The Company's objective in using derivatives is to add stability to interest expense and to manage the Company's exposure to interest rate movements or other identified risks. To accomplish these objectives, the Company may use various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR or other applicable benchmark rates. As of September 30, 2012, the Company's derivative instruments include an interest rate cap based on the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Index.

The Company measures its derivative instruments and hedging activities at fair value and records them as an asset or liability, depending on its rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedges and ineffective portions of hedges are recognized in earnings in the affected period. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of September 30, 2012, the Company did not have any derivatives designated as cash flow or fair value hedges, nor are derivatives being used for trading or speculative purposes.

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:

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

• 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 - This derivative did not qualify as a fair value hedge. Fair value was based on a model-driven valuation using the SIFMA Municipal Swap Index curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the cap. Therefore, the Company’s interest rate cap was classified within Level 2 of the fair value hierarchy.

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, 2012
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	124,550	$	—

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, due to affiliates and notes payable.

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables and accounts payable and accrued liabilities 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, 2012 and December 31, 2011, the fair value of the notes payable was $209,769,005 and $48,555,347, respectively, compared to the carrying value of $207,914,276 and $47,973,049, respectively. The Company has determined that its notes payable are classified as Level 3 within the fair value hierarchy.

Accounting for Stock-Based Compensation

The Company amortizes the fair value of stock-based compensation awards to expense over the vesting period and records any dividend equivalents earned as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

Distribution Policy

The Company has elected to be taxed as a REIT and to operate as a REIT beginning with its taxable year ending December 31, 2010. To maintain its qualification 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). For the period from January 1, 2012 to September 9, 2012, distributions were based on daily record dates and calculated at a rate of $0.001917 per share per day and $0.001964 per share per day beginning September 10, 2012 through September 30, 2012. Each day during the period from January 1, 2012 through September 30, 2012 was a record date for distributions.

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.

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions and related dealer manager fees) to be paid by the Company in connection with the Public Offering and the Private Offering, including legal, accounting, printing, mailing and filing fees, charges of the Company’s transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services.

The Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares of common stock and the ownership of the Company’s shares of common stock by such broker-dealers’ customers; provided, however, that the Company will not pay any of the foregoing costs to the extent that such payment would cause total

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

underwriting compensation for the Public Offering to exceed 10% of the gross proceeds of the Public Offering, as required by the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

Pursuant to the Advisory Agreement and the dealer manager agreement by and among the Company, the Operating Partnership and the Dealer Manager (the “Dealer Manager Agreement”), the Company is obligated to reimburse the Advisor, the Dealer Manager, or their affiliates, as applicable, for organization and offering costs paid by them on behalf of the Company, provided that the Advisor is obligated to reimburse the Company to the extent selling commissions, dealer manager fees and organization and offering costs incurred by the Company in the Public Offering exceed 15% of gross offering proceeds of the completed Public Offering. Any reimbursement of expenses paid to Advisor will not exceed actual expenses incurred by the Advisor.

Reimbursements to the Advisor, the Dealer Manager, or their affiliates, for offering costs paid by them on behalf of the Company with respect to the Private Offering are not limited to 15% of the gross offering proceeds of the Private Offering. However, the Company will not make reimbursements of offering costs in excess of 15% of the gross offering proceeds of the Private Offering unless approval is obtained from the Company’s independent directors. The independent directors have not approved the reimbursement of such excess costs from the Private Offering. Accordingly, the Company has not accrued for the reimbursement of organization and offering costs of the Private Offering in excess of 15% of the gross offering proceeds raised in the Private Offering until such time as the reimbursement of such costs are approved by the independent directors of the Company.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code beginning with the tax year ending December 31, 2010. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including the requirement to distribute at least 90% of the Company’s 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, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year after the taxable year in which the Company initially elects to be taxed as a REIT, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will 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 is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT.

The Company recognizes, measures, presents and discloses in its accompanying consolidated financial statements any uncertain tax positions that the Company has taken or expects to take on a tax return. As of September 30, 2012 and December 31, 2011, the Company had no liabilities for uncertain tax positions that it believes should be recognized in its accompanying consolidated financial statements. The Company has not been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluation was performed for the tax years ended December 31, 2011 and 2010.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation.

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Per Share Data

Basic earnings (loss) per share attributable for all periods presented are computed by dividing net income (loss) attributable to controlling interest by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings (loss) per share are computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assumes 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 but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

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.

Recently Issued Accounting Standard

In May 2011, the FASB issued guidance that expands the existing disclosure requirements for fair value measurements, primarily for Level 3 measurements, which are measurements based on unobservable inputs such as the Company’s own data. This guidance is largely consistent with current fair value measurement principles with few exceptions that do not result in a change in general practice. The guidance was effective for the Company beginning January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations as the guidance relates only to disclosure requirements.

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

3. Real Estate

As of September 30, 2012, the Company owned 19 multifamily properties. The following table provides summary information regarding the Company's property portfolio:

								Average Occupancy as of				Average Monthly Collected Rent as of
Property Name	Location	Purchase Date	Number of Units	Contract Purchase Price		Initial Mortgage Debt		Sep 30, 2012		Dec 31, 2011		Sep 30, 2012		Dec 31, 2011
Lincoln Tower Apartments	Springfield, IL	8/11/2010	190	$	9,500,000	$	6,650,000	91.1	%	94.2	%	$	825	$	812
Park Place Condominiums	Des Moines, IA	12/22/2010	148	8,101,000		5,000,000		90.5	%	91.8	%	804		755
Arbor Pointe Apartments	Louisville, KY	5/5/2011	130	6,500,000		5,200,000		93.1	%	96.9	%	752		748
Clarion Park Apartments	Olathe, KS	6/28/2011	220	11,215,000		8,972,000		98.2	%	98.2	%	661		668
Cooper Creek Village	Louisville, KY	8/24/2011	123	10,420,000		6,773,000		93.5	%	86.2	%	953		862
Truman Farm Villas	Grandview, MO	12/22/2011	200	9,100,000		5,915,000		93.0	%	92.5	%	650		642
Prairie Walk Apartments	Kansas City, MO	12/22/2011	128	6,100,000		3,965,000		93.8	%	94.5	%	602		613
EBT Lofts	Kansas City, MO	12/30/2011	102	8,575,000		5,590,000		97.1	%	97.1	%	854		857
Windsor on the River Apartments	Cedar Rapids, IA	1/26/2012	424	33,000,000		23,500,000		90.3	%			728
Renaissance St. Andrews Apartments	Louisville, KY	2/17/2012	216	12,500,000		7,000,000		84.7	%			681
Spring Creek Apartments	Edmond, OK	3/9/2012	252	19,350,000		13,876,940		94.8	%			889
Montclair Parc Apartments	Oklahoma City, OK	4/26/2012	360	35,750,000		25,025,000		91.9	%			920
Sonoma Grande Apartments	Tulsa, OK	5/24/2012	336	32,200,000		22,540,000		94.6	%			939
Estancia Apartments	Tulsa, OK	6/29/2012	294	27,900,000		20,500,000		88.8	%			961
Montelena Apartments	Round Rock, TX	7/13/2012	232	18,350,000		12,000,000		94.4	%			858
Valley Farms Apartments	Louisville, KY	8/30/2012	160	15,100,000		—		95.6	%			854
Hilliard Park Apartments	Columbus, OH	9/11/2012	201	19,800,000		13,860,000		95.5	%			956
Sycamore Terrace Apartments	Terre Haute, IN	9/20/2012	178	16,500,000		—		98.9	%			1,007
Hilliard Summit Apartments	Columbus, OH	9/28/2012	208	24,100,000		16,800,000		97.1	%			1,055
			4,102	$	324,061,000	$	203,166,940	93.1	%	94.1	%	$	839	$	745

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Third Quarter Acquisitions

On July 13, 2012, the Company acquired a fee simple interest in the Montelena Apartments located in Round Rock, Texas (the “Montelena Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $18,350,000, exclusive of closing costs. The Montelena Property consists of 10three-story buildings and contains 232 units consisting of 28one-bedroom apartments, 108two-bedroom apartments, 72three-bedroom apartments and 24four-bedroom apartments. The apartments range in size from 700 to 1,395 square feet and average 1,050 square feet. Apartment amenities include well equipped kitchens with breakfast bars and spacious pantries, vaulted ceilings, ceiling fans, carpet and vinyl tile, washer and dryer connections, mini-blinds, patios and/or balconies, walk-in closets and central air conditioning. Property amenities include a clubhouse, a 24-hour fitness center, a swimming pool and hot tub, a business center, a movie theater, sand volleyball courts and basketball courts, fenced playground, picnic areas with barbecue and a laundry room. An acquisition fee of $369,890 was earned by the Advisor in connection with the acquisition of the Montelena Property.

On August 30, 2012, the Company acquired a fee simple interest in the Valley Farms Apartments located in Louisville, Kentucky (the “Valley Farms Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $15,100,000, exclusive of closing costs. The Valley Farms Property consists of 10two-story buildings and contains 160 units consisting of 32one-bedroom apartments, 96two-bedroom apartments and 32three-bedroom apartments. The apartments range in size from 869 to 1,303 square feet and average 1,126 square feet. Apartment amenities include full kitchen appliance packages, walk-in closets, vaulted ceilings, washer and dryer connections and private balconies. Property amenities include detached garages, a fitness center, a business center, a resort-style swimming pool and sundeck and a gas grill and barbecue area. An acquisition fee of $304,033 was earned by the Advisor in connection with the acquisition of the Valley Farms Property.

On September 11, 2012, the Company acquired 100% of the membership interests in the entity that owned a fee simple interest in the Hilliard Park Apartments located in Columbus, Ohio (the “Hilliard Park Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $19,800,000, exclusive of closing costs. The Hilliard Park Property consists of 26two-story buildings and contains 201 units consisting of 172two-bedroom apartments and 29three-bedroom apartments. The apartments range in size from 1,060 to 1,340 square feet and average 1,140 square feet. Apartment amenities include oak cabinetry in kitchens and bathrooms, vertical and horizontal blinds, attractive lighting packages, full kitchen appliance packages, washer and dryer connections, walk-in closets and patio or balcony decks. In addition, select units have full basements, attached garages and vaulted ceilings. Property amenities include a park area with gazebo, a playground, a golf putting green, a basketball court and a central mail center. An acquisition fee of $400,130 was earned by the Advisor in connection with the acquisition of the Hilliard Park Property.

On September 20, 2012, the Company acquired a fee simple interest in the Sycamore Terrace Apartments located in Terre Haute, Indiana (the “Sycamore Terrace Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $16,500,000, exclusive of closing costs. The Sycamore Terrace Property consists of 16two-story buildings and contains 178 units consisting of 58one-bedroom apartments, 90two-bedroom apartments and 30three-bedroom apartments. The apartments range in size from 984 to 1,648 square feet and average 1,238 square feet. Apartment amenities include gourmet bar kitchens, granite counter tops, vinyl plank flooring in kitchen and bathrooms, washer and dryer connections, walk-in closets, private patio or balcony decks and garden tubs. Property amenities include a multimedia recreation room, a 24-hour fitness center, a resort-style swimming pool, a poolside entertainment area with gas grill and Wi-Fi hotspots throughout clubhouse and pool area. An acquisition fee of $330,973 was earned by the Advisor in connection with the acquisition of the Sycamore Terrace Property.

On September 28, 2012, the Company acquired 100% of the membership interests in the entity that owned a fee simple interest in the Hilliard Summit Apartments located in Columbus, Ohio (the “Hilliard Summit Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $24,100,000, exclusive of closing costs. The Hilliard

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Summit Property consists of 25two-story buildings and contains 208 units consisting of 36one-bedroom apartments, 144two-bedroom apartments and 28three-bedroom apartments. The apartments range in size from 780 to 1,510 square feet and average 1,166 square feet. Apartment amenities include painted white woodwork throughout, custom birch kitchen cabinetry and bathroom vanities, fully appointed kitchens with complete appliance packages, granite-like laminate kitchen tops with backsplash, washer and dryer connections, oversized walk-in closets and private patio or balcony decks. In addition, select units have vaulted or nine-foot ceilings. Property amenities include a resort-style clubhouse, outdoor swimming pool, barbecue gazebo, outdoor lounge with fire pit, fitness center, community garden and free clubhouse Wi-Fi. An acquisition fee of $486,537 was earned by the Advisor in connection with the acquisition of the Hilliard Summit Property.

The purchase price for the Company's property portfolio was allocated as follows as of the respective closing dates of each acquisition:

Property Name	Land		Building and Improvements		Tenant Origination and Absorption Costs		Discount (Premium) on Assumed Liabilities(1)			Total Purchase Price
Lincoln Tower Apartments	$	258,600	$	8,741,736	$	499,664	$	—		$	9,500,000
Park Place Condominiums	500,000		6,876,620		724,380		—			8,101,000
Arbor Pointe Apartments	886,124		5,436,189		177,687		—			6,500,000
Clarion Park Apartments	1,470,991		9,462,094		281,915		—			11,215,000
Cooper Creek Village	593,610		9,642,180		184,210		—			10,420,000
Truman Farm Villas	842,987		8,016,384		240,629		—			9,100,000
Prairie Walk Apartments	635,887		5,249,196		214,917		—			6,100,000
EBT Lofts	460,362		7,772,320		342,318		—			8,575,000
Windsor on the River Apartments	3,381,946		28,425,125		1,192,929		—			33,000,000
Renaissance St. Andrews Apartments	838,685		11,418,911		242,404		—			12,500,000
Spring Creek Apartments	2,346,503		17,196,951		405,392		(598,846		)	19,350,000
Montclair Parc Apartments	3,325,556		31,238,849		1,185,595		—			35,750,000
Sonoma Grande Apartments	2,737,794		28,912,593		549,613		—			32,200,000
Estancia Apartments	2,544,634		26,719,064		521,564		(1,885,262		)	27,900,000
Montelena Apartments	1,860,351		16,920,747		455,160		(886,258		)	18,350,000
Valley Farms Apartments	724,771		14,114,640		260,589		—			15,100,000
Hilliard Park Apartments	1,413,437		18,079,371		307,192		—			19,800,000
Sycamore Terrace Apartments	939,537		15,216,448		344,015		—			16,500,000
Hilliard Summit Apartments	1,536,795		22,190,376		372,829		—			24,100,000
	$	27,298,570	$	291,629,794	$	8,503,002	$	(3,370,366	)	$	324,061,000

________________

(1) Loan premiums and discounts are amortized to interest expense over the remaining term of the assumed loan.

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

As of September 30, 2012 and December 31, 2011, accumulated depreciation and amortization related to the Company's consolidated real estate properties and related intangibles were as follows:

	September 30, 2012											December 31, 2011
	Land		Building and Improvements			Tenant Origination and Absorption			Total			Land		Building and Improvements			Tenant Origination and Absorption			Total
Investments in real estate	$	27,298,570	$	293,646,458		$	8,503,002		$	329,448,030		$	5,648,561	$	61,552,400		$	2,665,720		$	69,866,681
Less: Accumulated depreciation and amortization	—		(6,110,181		)	(6,477,023		)	(12,587,204		)	—		(1,300,934		)	(1,814,571		)	(3,115,505		)
Net investments in real estate and related lease intangibles	$	27,298,570	$	287,536,277		$	2,025,979		$	316,860,826		$	5,648,561	$	60,251,466		$	851,149		$	66,751,176

Depreciation and amortization expenses were $4,147,366 and $9,471,699 for the three and nine months ended September 30, 2012, and $629,085 and $1,850,038 for the three and nine months ended September 30, 2011, respectively. The increase in net loss as a result of amortization of the Company’s tenant origination and absorption costs was $1,814,862 and $4,662,452 for the three and nine months ended September 30, 2012, and $274,737 and $1,126,085 for the three and nine months ended September 30, 2011, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

As of September 30, 2012 and December 31, 2011, none of the Company's properties had above-market lease assets or below-market lease liabilities.

Operating Leases

As of September 30, 2012, the Company’s real estate portfolio comprised 4,102 residential units and was 93.1% occupied by a diverse group of tenants. For each of the three and nine months ended September 30, 2012, the Company’s real estate portfolio earned approximately 99% of its rental income from residential tenants and approximately 1% of its rental income from commercial office tenants. For the three and nine months ended September 30, 2011, the Company’s real estate portfolio earned approximately 97% and 96% of its rental income from residential tenants and approximately 3% and 4% of its rental income from commercial office tenants, respectively. The residential tenant lease terms consist of lease durations equal to twelve months or less. The commercial office tenant leases consist of lease durations varying from three to five years.

Some residential and commercial 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 and/or a letter of credit for commercial tenants. 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 cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $1,283,155 and $440,822 as of September 30, 2012 and December 31, 2011, respectively.

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial office tenants as of September 30, 2012 and thereafter is as follows:

October 1, 2012 through December 31, 2012	$	43,458
2013	131,743
2014	51,662
2015	16,252
Thereafter	—
	$	243,115

As of September 30, 2012 and December 31, 2011, no tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

4. Deferred Financing Costs and Other Assets

As of September 30, 2012 and December 31, 2011, deferred financing costs and other assets, net of accumulated amortization, consisted of:

	September 30, 2012			December 31, 2011
Deferred financing costs	$	1,725,306		$	411,650
Less: accumulated amortization	(216,766		)	(34,074		)
	1,508,540			377,576
Prepaid expenses	876,852			147,719
Interest rate cap	124,550			—
Deposits	1,077,885			947,558
	$	3,587,827		$	1,472,853

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

5. Debt

The following is a summary of notes payable secured by real property as of September 30, 2012 and December 31, 2011:

				Principal Outstanding at
Property Name	Payment Type	Maturity Date	Interest Rate(1)	September 30, 2012		December 31, 2011
Lincoln Tower Property	Principal and interest	May 1, 2019	3.66%	$	8,706,652	$	6,650,000
Park Place Property(2)	Interest only	December 22, 2013	5.25%	5,000,000		5,000,000
Arbor Pointe Property	Principal and interest	June 1, 2018	4.86%	5,106,772		5,163,262
Clarion Park Property	Principal and interest	July 1, 2018	4.58%	8,814,168		8,916,787
Cooper Creek Property	Principal and interest(3)	September 1, 2018	3.89%	6,773,000		6,773,000
Truman Farm Villas Property	Principal and interest(3)	January 1, 2019	3.78%	5,915,000		5,915,000
Prairie Walk Property	Principal and interest(3)	January 1, 2019	3.74%	3,965,000		3,965,000
EBT Lofts Property	Principal and interest(3)	January 1, 2019	3.82%	5,590,000		5,590,000
Windsor on the River Property	Interest only	May 1, 2042	Variable(4)(5)	23,500,000
Renaissance Property	Interest only	March 1, 2013	LIBOR + 4.55%	7,000,000
Spring Creek Property(6)	Principal and interest	February 1, 2018	4.88%	14,315,882
Montclair Parc Property	Principal and interest	May 1, 2019	3.70%	24,879,922
Sonoma Grande Property	Principal and interest(7)	June 1, 2019	3.31%	22,540,000
Estancia Property(8)(9)	Interest only	October 1, 2017	5.94%	22,293,493
Montelena Property(10)	Principal and interest(11)	August 1, 2018	4.82%	12,854,387
Hilliard Park Property	Principal and interest(3)	October 1, 2022	3.62%	13,860,000
Hilliard Summit Property	Principal and interest(3)	October 1, 2022	3.56%	16,800,000
				$	207,914,276	$	47,973,049

_____________________________

(1) Except as otherwise noted, interest on the notes accrues at a fixed rate per annum.

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

(2) The Company has the option to extend the maturity date for up to two successive periods of 12 months each, subject to customary and market rate extension provisions.

(3) A monthly payment of interest only is due and payable for twelve months from the loan date, after which, a monthly payment of principal and interest is due and payable until the maturity date.

(4) The loan was originally funded with proceeds from the issuance of Iowa Finance Authority Variable Rate Demand Multifamily Housing Revenue Bonds (Windsor on the River, LLC Project), Series 2007A in the original aggregate principal amount of $24,000,000 (the “Bonds”) pursuant to an Indenture of Trust dated May 1, 2007 (the “Indenture”) by and between the issuer and The Bank of New York Mellon Trust Company, N.A. (the “Bond Trustee”), as trustee for the holders of the Bonds. Pursuant to the loan documents, the Company is required to pay, or cause to be paid, to the Bond Trustee on each date on which any payment of the principal of, premium, if any, or interest on the Bonds is due (whether on an interest payment date, at maturity or upon redemption or acceleration), an amount which, together with the funds held by the Bond Trustee in a bond fund, will be sufficient to enable the Bond Trustee to pay the principal of, premium, if any, and interest on the Bonds due on such date. The loan will bear interest at a rate equal to the interest rate borne from time to time by the Bonds, calculated on the same basis and to be paid by the Company at the same time as interest on the Bonds is calculated and paid from time to time. Interest on the Bonds is calculated by the remarketing agent and is equal to the interest rate per annum, which in the professional judgment of the remarketing agent having due regard for prevailing market conditions, would be the minimum interest rate necessary to cause the sale of the Bonds on the first day of an interest period at a price equal to 100% of the principal amount of the Bonds plus accrued interest. The Bonds currently bear interest at a weekly rate.

(5) The Company entered into an interest rate cap, which limits the SIFMA portion of the interest rate to 3% through January 31, 2017 and 5% through January 31, 2019.

(6) The principal balance at September 30, 2012 includes the unamortized portion of the debt premium of $541,861. During the three and nine months ended September 30, 2012, the Company recorded amortization of debt premiums of $25,357 and $56,985 as an offset to interest expense in the accompanying consolidated statements of operations.

(7) A monthly payment of interest only is due and payable through June 1, 2014, after which, a monthly payment of principal and interest is due and payable until the maturity date.

(8) The principal balance at September 30, 2012 includes the unamortized portion of the debt premium of $1,793,493. During the three and nine months ended September 30, 2012, the Company recorded amortization of debt premiums of $89,774 and $91,769 as an offset to interest expense in the accompanying consolidated statements of operations.

(9) The Company has the option to extend the maturity date to October 1, 2018, subject to customary and market rate extension provisions.

(10) The principal balance at September 30, 2012 includes the unamortized portion of the debt premium of $854,388. During the three and nine months ended September 30, 2012, the Company recorded amortization of debt premiums of $31,870 and $31,870 as an offset to interest expense in the accompanying consolidated statements of operations.

(11) A monthly payment of interest only is due and payable through August 1, 2013, after which, a monthly payment of principal and interest is due and payable until the maturity date.

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

The following is a summary of the Company's aggregate maturities as of September 30, 2012:

			Remainder of 2012		Maturities During the Years Ending December 31,
Contractual Obligation	Total				2013		2014		2015		2016		Thereafter
Principal payments on outstanding debt obligations(1)	$	207,914,276	$	544,913	$	14,310,501	$	3,156,893	$	3,483,760	$	3,583,437	$	182,834,772

_____________________________

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts include the amortization of the debt premiums associated with certain notes payable.

The Company’s notes payable contain customary financial and non-financial debt covenants. As of September 30, 2012 and December 31, 2011, the Company was in compliance with all financial debt covenants.

Interest expense of $555,264 and $135,317 was payable as of September 30, 2012 and December 31, 2011, respectively, which is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

Letter of Credit

In connection with the acquisition of the Windsor on the River Apartments, PNC Bank, National Association (the “Credit Provider”) issued a Letter of Credit to the Bond Trustee up to an aggregate of $23,789,727. The purpose of the Letter of Credit is to provide the Bond Trustee with funds for the payment of principal of and interest on the Bonds and the purchase price of Bonds that have been tendered pursuant to the tender provisions of the Indenture to the extent remarketing proceeds or other funds are not available for such purposes. The Letter of Credit will expire on January 25, 2017. Pursuant to a Reimbursement and Credit Agreement (the “Reimbursement Agreement”) by and between the Company, the Credit Provider and the Bond Trustee, the Company will reimburse the Credit Provider for all amounts paid by the Credit Provider to the Bond Trustee pursuant to a draw on the Letter of Credit on the day that the Credit Provider pays such amounts to the Bond Trustee. Interest on any amounts due under the Reimbursement Agreement will accrue from the date such amounts become due and payable until paid in full at a rate per annum equal to a fluctuating rate established by the Reimbursement Agreement plus 3.00%, subject to certain exceptions.

The Company paid a nonrefundable fee in connection with the origination of the Letter of Credit in the amount of $118,950. In addition, the Company will pay the Credit Provider an annual fee based upon a fixed percentage of the Letter of Credit Amount (the “Facility Fee”). The Facility Fee will be: (1) for the period commencing on the closing date and ending on the day immediately preceding the first anniversary of the closing date, 2.00% per annum; (2) for the period commencing on the first anniversary of the closing date and ending on the day immediately preceding the third anniversary of the closing date, 2.25% per annum; and (3) for the period commencing on the third anniversary of the closing date and thereafter, 2.50% per annum.

6. Stockholders’ Equity

General

Under the Company’s Second 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 designated as preferred stock with a par value of $0.01 per share.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(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 Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The 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. As of September 30, 2012, the Company had issued 18,069,378 shares of common stock in its Private Offering and Public Offering for offering proceeds of $152,467,229, net of offering costs of $26,787,466. These offering costs primarily consist of selling commissions and dealer manager fees. As of September 30, 2012, the Company also had issued 246,033 shares of common stock pursuant to the DRP for total proceeds of $2,337,249. Offering proceeds include $978,566 and $505,951 of amounts receivable from the Company’s transfer agent as of September 30, 2012 and December 31, 2011, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets.

During the nine months ended September 30, 2012, 7,500 shares of restricted common stock were granted to the Company's independent directors pursuant to the Company's independent directors' compensation plan at a fair value of $9.10 per share in connection with their re-election to the board of directors at the Company's annual meeting. During the year ended December 31, 2011, the Company granted 7,500 shares of restricted common stock to its independent directors pursuant to the Company's independent directors' compensation plan at a fair value of $9.10 per share in connection with their re-election to the board of directors at the Company's annual meeting and 5,000 shares of restricted common stock to one of its then independent directors at a fair value of $9.10 per share in connection with her initial election to the board of directors. During 2010, the Company granted 15,000 shares of restricted common stock to its independent directors pursuant to the Company's independent directors' compensation plan at a fair value of $8.55 per share in connection with the Company raising $2,000,000 in the Private Offering. 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 his or her death or disability, or (2) a change in control of the Company.

Included in general and administrative expenses is $30,622 and $50,005 for the three and nine months ended September 30, 2012 and $27,464 and $43,496 for the three and nine months ended September 30, 2011, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the restricted common stock is 1.69 years as of September 30, 2012.

For each of the three and nine months ended September 30, 2012, the Company issued zero shares of restricted common stock, in lieu of cash compensation, and therefore $0 of compensation expense is included in general and administrative expenses for independent director compensation of common stock in lieu of cash compensation. For the three and nine months ended September 30, 2011, the Company issued 893 and 2,679 shares, respectively, of common stock to an independent director as compensation, in lieu of cash compensation, at a weighted average fair value of $9.10 per share. Included in general and administrative expenses is $8,125 and $24,375 of compensation expense for independent director compensation of common stock in lieu of cash compensation for the three and nine months ended September 30, 2011, respectively.

Convertible Stock

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

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

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, the 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, 2012 and December 31, 2011, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors has approved the DRP through which common stockholders may 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 are issued pursuant to the DRP at a price of $9.73 per share or 95% of the new offering price of $10.24 per share. The Company’s board of directors may, in its sole discretion, from time to time, change this price based upon changes in the Company’s estimated value per share, the then current price of shares of the Company’s common stock in the Public Offering and other factors that the Company’s board of directors deems relevant.

No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may terminate the DRP at its discretion at any time upon ten days notice to the Company’s stockholders. Following any termination of the DRP, all subsequent distributions to stockholders will be made in cash.

Share Repurchase Plan and Redeemable Common Stock

There is no market for the Company’s common stock and, as a result, there is risk that a stockholder may not be able to sell his or her shares of the Company’s stock at a time or price acceptable to the stockholder. To allow stockholders to receive liquidity for their shares of common stock in limited circumstances, the Company’s board of directors has approved a share repurchase plan.

Unless shares of common stock are being redeemed in connection with a stockholder’s death or disability, the Company may not redeem shares of common stock pursuant to the share repurchase plan until such shares have been outstanding for one year. In addition, the Company has limited the number of shares that may be redeemed pursuant to the share repurchase plan during any calendar year to: (1) 5% of the weighted-average number of shares outstanding during the prior calendar year and

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

(2) those that can be funded from the net proceeds the Company received from the sale of shares under the DRP during the prior calendar year plus such additional funds as may be reserved for that purpose by the Company’s board of directors.

Under the share repurchase plan, prior to the completion of the Offering Stage (as defined below), the purchase price for shares repurchased by the Company under the plan will be as follows:

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

_____________________________

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

(2) The purchase price per share for shares redeemed 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.

During the offering the shares will be redeemed at, or at a discount to, the purchase price. The purchase price per share for shares repurchased pursuant to the share repurchase plan will be 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.

Notwithstanding the foregoing, following the completion of the Offering Stage, shares of the Company’s common stock will be repurchased at a price equal to a price based upon the Company’s most recently established estimated value per share, which the Company will publicly disclose every six months beginning no later than six months following the completion of the Offering Stage based on periodic valuations by independent third party appraisers and qualified independent valuation experts selected by the Advisor. The “Offering Stage” will be considered complete on the first date that the Company is no longer publicly offering equity securities that are not listed on a national securities exchange, whether through the Public Offering or follow-on public equity offerings, provided the Company has not filed a registration statement for a follow-on public equity offering as of such date.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase plan at any time upon 30 days' notice if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase plan is in the best interest of the Company’s stockholders. The share repurchase plan will terminate if the shares of the Company’s common stock are listed on a national securities exchange. During the three and nine months ended September 30, 2012, the Company redeemed a total of 9,387 and 40,275 shares with a total redemption value of $88,012 and $380,732 and received requests for the redemption of 8,458 and 21,101 shares with a total redemption value of $81,012 and $206,145, respectively.

Pursuant to the share repurchase plan, for the three and nine months ended September 30, 2012, the Company reclassified $828,319 and $1,735,741, respectively, and for the three and nine months ended September 30, 2011, the Company reclassified $156,006 and $318,701, respectively, from permanent equity to temporary equity, which is included as redeemable common

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

stock on the accompanying consolidated balance sheets. The redeemable common stock balance at any given time will consist of (1) DRP proceeds from the prior year plus (2) DRP proceeds from the current year through the current period less (3) actual current year redemptions paid or pending redemption.

Distributions

The Company’s long-term policy is to pay distributions from cash flow from operations. However, the Company expects to have insufficient cash flow from operations available for distribution until it makes substantial investments. In order to provide additional available funds to pay distributions, under certain circumstances the Company’s obligation to pay all fees due to the Advisor from the Company pursuant to the Advisory Agreement will be deferred up to an aggregate amount of $5,000,000 during the Offering Stage. If, during any calendar quarter during the Offering Stage, the distributions paid by the Company exceed funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts, plus (1) any acquisition expenses and acquisition fees expensed that are related to any property, loan or other investment acquired or expected to be acquired, and (2) any non-operating, non-cash charges incurred, such as impairments of property or loans, any other than temporary impairments of marketable securities, or other similar charges, for the quarter, which is defined in the Advisory Agreement as “Adjusted Funds From Operations,” the payment of fees the Company is obligated to pay the Advisor will be deferred in an amount equal to the amount by which distributions paid to stockholders for the quarter exceed Adjusted Funds From Operations for such quarter up to an amount equal to a 7.0% cumulative non-compounded annual return on stockholders’ invested capital, pro-rated for such quarter. As of September 30, 2012 and December 31, 2011, $1,507,426 and $680,359, respectively, of fees had been deferred pursuant to the Advisory Agreement.

For purposes of calculating the amount of fees that may be deferred pursuant to the Advisory Agreement, the amount of distributions paid during a fiscal quarter shall include the value of shares of the Company’s common stock distributed pursuant to the DRP. Additionally, for purposes of calculating the difference between Adjusted Funds From Operations and the amount of distributions paid during a measurement period, if Adjusted Funds From Operations during such period is negative, Adjusted Funds From Operations shall be deemed to be zero.

The Company is only obligated to pay the Advisor its deferred fees if and to the extent that cumulative Adjusted Funds From Operations for the period beginning on the date of the commencement of the Private Offering through the date of any such payment exceed the lesser of (1) the cumulative amount of any distributions paid to stockholders as of the date of such payment or (2) distributions (including the value of shares issued pursuant to the distribution reinvestment plan) equal to a 7.0% cumulative, non-compounded, annual return on invested capital for the period from the commencement of the Public Offering through the date of such payment. The Company’s obligation to pay the deferred fees will survive the termination of the Advisory Agreement and will continue to be subject to the repayment conditions above. The Company will not pay interest on the deferred fees if and when such fees are paid to the Advisor.

Distributions Declared

Distributions declared to date (1) accrue daily to 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 $0.001964 per share per day, 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. Prior to September 10, 2012, distributions were calculated at a rate of $0.001917 per share of common stock, which was equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.00 per share of common stock. Stockholders may elect to receive cash distributions or purchase additional shares through the DRP.

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Distributions declared for the three and nine months ended September 30, 2012 were $2,422,753 and $4,925,474, including $1,024,222 and $2,063,297, or 107,813 shares and 217,189 shares, respectively, of common stock attributable to the DRP.

Distributions declared for the three and nine months ended September 30, 2011 were $442,789 and $987,837, including $174,707 and $382,323, or 18,390 shares and 40,244 shares, respectively, of common stock attributable to the DRP.

As of September 30, 2012 and December 31, 2011, $1,010,158 and $254,592 distributions declared were payable, which included $426,920 and $101,440 of distributions reinvested pursuant to the DRP, respectively.

Distributions Paid

For the three and nine months ended September 30, 2012, the Company paid cash distributions of $1,133,942 and $2,432,092, which related to distributions declared for each day in the period from June 1, 2012 through August 31, 2012 and December 1, 2011 through August 31, 2012, respectively. Additionally, for the three and nine months ended September 30, 2012, 87,414 and 182,929 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $830,430 and $1,737,817, respectively. For the three and nine months ended September 30, 2012, the Company paid total distributions of $1,964,372 and $4,169,909.

For the three and nine months ended September 30, 2011, the Company paid cash distributions of $238,089 and $546,871, which related to distributions declared for each day in the period from June 1, 2011 through August 31, 2011 and December 1, 2010 through August 31, 2011, respectively. Additionally, for the three and nine months ended September 30, 2011, 16,422 and 35,982 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $156,007 and $341,829, respectively. For the three and nine months ended September 30, 2011, the Company paid total distributions of $394,096 and $888,700.

7. Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager with respect to the Public Offering. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and 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 also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, and 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. As discussed in Note 6, in certain circumstances, the Company’s obligation to pay some or all of the fees due to the Advisor pursuant to the Advisory Agreement will be deferred up to an aggregate amount of $5,000,000.

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2012 and 2011 are as follows:

	Incurred For the				Incurred For the
	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	536,703	$	81,123	$	1,106,158	$	161,493
Acquisition fees(1)	1,891,563		212,526		5,141,503		575,209
Acquisition expenses(2)	233,819		39,512		667,078		174,572
Property management
Fees(1)	270,683		62,049		589,551		131,680
Reimbursement of onsite personnel(3)	863,593		199,034		1,814,238		414,112
Other fees(1)	91,444		—		91,444		—
Other operating expenses(4)	263,498		—		1,211,683		—
Consolidated Balance Sheets:
Additional paid-in-capital
Other offering costs reimbursement	4,513,646		477,870		7,483,880		969,427
Selling commissions	4,707,202		550,681		8,052,738		1,084,953
Dealer management fees	2,772,002		306,058		4,678,637		619,080
	$	16,144,153	$	1,928,853	$	30,836,910	$	4,130,526

_____________________________

(1) Included in fees to affiliates in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011.

(2) Included in other acquisition costs in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011.

(4) Included in general and administrative expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011.

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Amounts attributable to the Advisor and its affiliates paid during the three and nine months ended September 30, 2012 and 2011 are as follows:

	Paid During the				Paid During the
	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Consolidated Statements of Operations:
Expensed
Investment management fees	$	159,173	$	44,604	$	159,173	$	44,604
Acquisition fees	2,112,928		443,627		5,285,039		666,269
Acquisition expenses	224,876		62,372		739,198		197,618
Property management
Fees	194,969		54,636		462,757		115,139
Reimbursement of onsite personnel	863,898		202,923		1,744,333		393,792
Other fees	75,799		—		75,799		—
Other operating expenses	116,160		—		1,252,102		—
Consolidated Balance Sheets:
Additional paid-in-capital
Other offering costs reimbursement	4,534,656		486,415		7,563,697		976,643
Selling commissions	4,707,202		550,681		8,052,738		1,084,953
Dealer management fees	2,772,002		306,058		4,678,637		619,080
Due to (from) affiliates
Due from Advisor	—		—		—		(53,353		)
	$	15,761,663	$	2,151,316	$	30,013,473	$	4,044,745

30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Amounts outstanding to the Advisor and its affiliates as of September 30, 2012 and December 31, 2011 are as follows:

	Payable as of
	September 30, 2012		December 31, 2011
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	1,193,209	$	246,224
Acquisition fees(2)	538,403		681,939
Acquisition expenses	35,807		107,927
Property management
Fees	150,996		24,202
Reimbursement of onsite personnel	116,218		46,313
Other fees	15,645		—
Other operating expenses	147,338		187,757
Consolidated Balance Sheets:
Additional paid-in-capital
Other offering costs reimbursement	11,886		91,703
Due to affiliates, net	$	2,209,502	$	1,386,065

_____________________________

(1) Investment management fees earned by the Advisor totaling $969,023 and $246,224 were deferred as of September 30, 2012 and December 31, 2011, respectively, pursuant to the terms of the Advisory Agreement. The remaining investment management fees of $224,186 and $0 were due and payable and are included in due to affiliates in the accompanying consolidated balance sheets at September 30, 2012 and December 31, 2011, respectively.

(2) Acquisition fees earned by the Advisor totaling $538,403 and $434,135 were deferred as of September 30, 2012 and December 31, 2011, respectively, pursuant to the terms of the Advisory Agreement. The remaining acquisition fees of $0 and $247,804 were due and payable and are included in due to affiliates in the accompanying consolidated balance sheets at September 30, 2012 and December 31, 2011, respectively.

Organizational and Offering Costs

Organization and offering costs (other than selling commissions and dealer manager fees) of the Company are initially being paid by the Advisor or its affiliates on behalf of the Company. These organization and other offering costs include all expenses to be paid by the Company in connection with the Public Offering and Private Offering, including legal, accounting, printing, mailing and filing fees, charges of the Company’s transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services in connection with the Public Offering and the Private Offering. Any reimbursement of expenses paid to the Advisor will not exceed actual expenses incurred by the Advisor. Organization costs include all expenses incurred by the Company in connection with the formation of the Company, including, but not limited to, legal fees and other costs to incorporate 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, 2012

(unaudited)

Pursuant to the Advisory Agreement, the Company is obligated to reimburse the Advisor or its affiliates, as applicable, for organization and offering costs paid by them on behalf of the Company in connection with the Public Offering, provided that the Advisor is obligated to reimburse the Company to the extent selling commissions, dealer manager fees and organization and offering costs incurred by the Company in the Public Offering exceed 15% of gross offering proceeds raised in the completed Public Offering.

Reimbursements to the Advisor or its affiliates for offering costs paid by them on behalf of the Company with respect to the Private Offering is not limited to 15% of the gross offering proceeds of the Private Offering. However, the Company will not make reimbursements of organization and offering costs in excess of 15% of the gross offering proceeds of the Private Offering unless approval is obtained from the independent directors of the Company. The independent directors have not approved the reimbursement of excess cost of the Private Offering. Accordingly, the Company has not accrued for the reimbursement of organization and offering costs of the Private Offering in excess of the 15% of gross offering proceeds raised through the Private Offering.

The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through September 30, 2012 is as follows:

	Amount			Percentage of Gross Offering Proceeds
Gross offering proceeds:	$	179,254,695		100.00	%
O&O limitation	15		%
Total O&O costs available to be paid/reimbursed	$	26,888,204		15.00	%
O&O expenses recorded
Sales commissions paid	$	10,664,061		5.95	%
Broker dealer fees paid	6,193,059			3.45	%
Private offering costs reimbursements	423,707			0.24	%
Public offering costs reimbursements	9,506,639			5.30	%
Organizational costs reimbursements	100,738			0.06	%
Total O&O costs recorded by the Company	$	26,888,204		15.00	%

The Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology costs associated with the Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross proceeds of the Public Offering, as required by the FINRA rules.

32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

As of September 30, 2012 and December 31, 2011, the Advisor had incurred $33,245,845 and $14,100,576, respectively, of organizational and offering costs on behalf of the Company, of which $6,357,641 and $7,427,627, respectively, have been deferred as of the applicable date, as follows:

	Incurred through December 31, 2011		Amounts Recognized		Amounts Deferred as of December 31, 2011		Incurred for the Nine Months Ended September 30, 2012		Amounts Recognized		Amounts Deferred as of September 30, 2012		Amounts Recognized Through September 30, 2012
Organizational expenses	$	100,738	$	100,738	$	—	$	—	$	—	$	—	$	100,738
Private Offering costs	2,301,719		876,649		1,425,070		—		—		1,425,070		876,649
Public Offering costs	11,698,119		5,695,562		6,002,557		19,145,269		20,215,255		4,932,571		25,910,817
	$	14,100,576	$	6,672,949	$	7,427,627	$	19,145,269	$	20,215,255	$	6,357,641	$	26,888,204

Organization costs are expensed as incurred. From inception through September 30, 2012, the Company incurred $100,738 of organizational costs on the Company's behalf, of which $100,738 was reimbursed to the Advisor. No organizational costs were incurred or recognized during the three and nine months ended September 30, 2012 and 2011.

Offering costs, including selling commissions and dealer manager fees, are deferred and charged to stockholders’ equity as such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds. For each of the three and nine months ended September 30, 2012 and 2011, the Advisor did not incur any costs, nor did the Company reimburse the Advisor for any costs related to the Private Offering. From inception through September 30, 2012, the Advisor had incurred total offering costs related to the Private Offering of $2,301,719, of which $1,425,070 is deferred and remains potentially reimbursable to the Advisor, subject to the approval of the independent directors.

For the three and nine months ended September 30, 2012, the Advisor incurred $9,364,416 and $19,145,269, and the Company reimbursed the Advisor $11,992,850 and $20,215,255, respectively, of offering costs related to the Public Offering. For the three and nine months ended September 30, 2011, the Advisor incurred $1,721,853 and $4,198,028, and the Company reimbursed the Advisor $1,334,607 and $2,673,459, respectively, of offering costs related to the Public Offering. The Advisor has incurred total offering costs related to the Public Offering of $30,843,388 from inception through September 30, 2012, of which $4,932,571 is deferred and remains potentially reimbursable, subject to the 15% limitation described above and the approval of the independent directors.

The Company has reimbursed the Advisor $26,888,204 for organization and offering costs incurred from inception through September 30, 2012, including reimbursements of organization costs of $100,738, reimbursements of Private Offering costs of $876,649 and reimbursements of Public Offering costs of $25,910,817. The Company accrued $11,886 and $91,703 for the reimbursement of offering costs in the financial statements as of September 30, 2012 and December 31, 2011, respectively.

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. Such fee will be calculated including acquisition fees, acquisition expenses and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. During the three months ended September 30, 2012 and the year ended December 31, 2011, the distributions the Company paid exceeded the Company’s Adjusted Funds From Operations for each period; therefore,

33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

in accordance with the Advisory Agreement, $969,023 and $246,224 of investment management fees the Company was obligated to pay the Advisor had been deferred as of September 30, 2012 and December 31, 2011, respectively.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the purchase price in connection with the acquisition or origination of any type of real property or real estate-related asset acquired directly by the Company or (2) the Company’s allocable portion of the purchase price in connection with the acquisition or origination of any type of real property or real estate-related asset acquired through a joint venture, including any acquisition and origination expenses and any debt attributable to such investments. Acquisition fees of $0 and $247,804 were due and payable and included in due to affiliates in the accompanying balance sheets at September 30, 2012 and December 31, 2011, respectively. During the three months ended September 30, 2012 and the year ended December 31, 2011, the distributions the Company paid exceeded the Company’s Adjusted Funds From Operations for each period; therefore, in accordance with the Advisory Agreement, $538,403 and $434,135 of acquisition fees the Company was obligated to pay the Advisor had been deferred as of September 30, 2012 and December 31, 2011, respectively.

In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor 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. For the three and nine months ended September 30, 2012, the Advisor incurred $233,819 and $667,078 of direct acquisition costs and the Company paid $305,034 and $1,027,496 of acquisition costs to third parties.

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% 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% 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 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.

Property Management Fees and Expenses

The Company has entered into Property Management Agreements 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 except the EBT Lofts, which is managed by an unaffiliated third-party management company, and Sycamore Terrace, which is currently jointly managed by the Property Manager and an unaffiliated third-party management company. The property management fee payable with respect to each property under the Property Management Agreements (each a “Property Management Agreement”) ranges from 3.0% to 3.5% 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 Company’s board of directors, including a majority of the independent directors. In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager for benefit administration and training services. 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 prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time without cause or upon an uncured breach of the Property Management Agreement upon 30 days prior written notice to the Property Manager. For the three and nine months ended September 30, 2012, the Company incurred $270,683 and $589,551, respectively, of property management fees, of which $194,969 and $462,757 was paid to the Property Manager. For the three

34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

and nine months ended September 30, 2011, the Company incurred $62,049 and $131,680, respectively, of property management fees, of which $54,636 and $115,139 was paid to the Property Manager. Property management fees totaling $150,996 and $24,202 were payable to the Property Manager at September 30, 2012 and December 31, 2011, respectively. Additionally, for the three and nine months ended September 30, 2012, the Company incurred $91,444 and $91,444, respectively, of other fees, of which $75,799 and $75,799 was paid to the Property Manager. The Company did not incur other fees in connection with the Property Management Agreements during the three and nine months ended September 30, 2011. Other fees totaling $15,645 and $0 were payable to the Property Manager at September 30, 2012 and December 31, 2011, respectively.

In addition, the Company reimburses the Property Manager for the salaries and related benefits of on-site property management employees. For the three and nine months ended September 30, 2012, the Company incurred $863,593 and $1,814,238 of salaries and related benefits of on-site property management employees, of which $863,898 and $1,744,333 was paid to the Property Manager. For the three and nine months ended September 30, 2011, the Company incurred $199,034 and $414,112 of salaries and related benefits of on-site property management employees, of which $202,923 and $393,792 was paid to the Property Manager. Property management expenses totaling $116,218 and $46,313 were payable to the Property Manager at September 30, 2012 and December 31, 2011, respectively.

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 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. For purposes of determining the 2%/25% Limitation amount, “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 and investment management fees, 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); (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).

35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

On May 25, 2011, the Company entered into an Operating Expense Reimbursement and Guaranty Agreement (the “Reimbursement Agreement”), which was subsequently amended on December 21, 2011. Pursuant to the Reimbursement Agreement, if, on the earlier of (1) the termination date of the Advisory Agreement and (2) June 30, 2012 (in each case, such date the “Determination Date”), the Company’s total operating expenses as of March 31, 2011 exceeded the 2%/25% Limitation, measured for the Company’s entire operating history through June 30, 2012, then the Advisor would be required to reimburse the Company for such excess amount (the amount of any such reimbursement the “Determination Date Payment”). As of June 30, 2012, the Company's total operating expenses as of March 31, 2011 did not exceed the 2%/25% Limitation; therefore, no amount was due from the Advisor. In connection with the Reimbursement Agreement, the Advisor agreed to pay all of the operating expenses of the Company beginning April 1, 2011, until such time as the Company’s cumulative operating expenses are below the cumulative 2%/25% Limitation. As of September 30, 2012, the Company's cumulative operating expenses were below the cumulative 2%/25% Limitation.

The general and administrative expenses recognized by the Company and incurred by the Advisor on behalf of the Company, which are inclusive of total operating expenses for the three and nine months ended September 30, 2012 and 2011, were as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Period from May 4, 2009 (Inception) to September 30, 2012
	2012		2011		2012		2011
General and administrative expenses recognized by the Company	$	730,332	$	32,398	$	2,094,725	$	570,834	$	3,962,986
General and administrative expenses incurred by the Advisor on behalf of the Company (and not recognized by the Company)	—		400,815		—		400,815		1,123,107
Allocable share of Advisor's overhead incurred on behalf of the Company (and not recognized by the Company)	—		276,578		—		436,699		1,448,803
	$	730,332	$	709,791	$	2,094,725	$	1,408,348	$	6,534,896

For the three and nine months ended September 30, 2012, the Advisor and its affiliates incurred $263,498 and $1,211,683 of the Company's operating expenses, including the allocable share of Advisor's overhead expenses of $212,315 and $711,412, none of which were in excess of the 2%/25% Limitation. For the three and nine months ended September 30, 2011, the Advisor and its affiliates incurred $677,393 and $837,514 of the Company’s operating expenses in excess of the 2%/25% Limitation, consisting of general and administrative expenses of $400,815 and $400,815, respectively, and the Company's allocable share of Advisor's overhead expenses reimbursable by the Company of $276,578 and $436,699, respectively. From inception through September 30, 2012, the Advisor and its affiliates incurred operating expenses in excess of the 2%/25% Limitation on behalf of the Company of $2,571,910. These excess amounts have not been recognized by the Company nor are the amounts included in due to affiliates, net, on the accompanying consolidated balance sheets as the independent directors have not approved, nor have they been requested to approve, the reimbursement of such amounts in excess of the 2%/25% Limitation pursuant to the Reimbursement Agreement.

36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

Disposition Fee

If the Advisor or its affiliates provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a property or real estate-related asset, the Company will pay the Advisor or its affiliates 1.5% of the sales price of each property or real estate-related asset sold. 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 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% of the contract sales price. As of September 30, 2012, the Company had not sold or otherwise disposed of property or real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of September 30, 2012.

Selling Commissions and Dealer Manager Fees

The Company pays the Dealer Manager up to 6.5% and 3.5% of the gross offering proceeds from the primary offering as selling commissions and dealer manager fees, respectively. A reduced sales commission and dealer manager fee is paid in connection with volume discounts and certain other categories of sales. No sales commission or dealer manager fee is paid with respect to shares of common stock issued pursuant to the DRP. The Dealer Manager reallows 100% of sales commissions earned to participating broker-dealers. The Dealer Manager may also reallow to any participating broker-dealer a portion of the dealer manager fee that is attributable to that participating broker-dealer to defray the marketing costs of that participating broker-dealer. The Dealer Manager will negotiate the reallowance of the dealer manager fee on a case-by-case basis with each participating broker-dealer subject to various factors associated with the cost of the marketing program. For the three and nine months ended September 30, 2012, the Company paid selling commissions of $4,707,202 and $8,052,738 and dealer manager fees of $2,772,002 and $4,678,637, respectively. For the three and nine months ended September 30, 2011, the Company paid selling commissions of $550,681 and $1,084,953 and dealer manager fees of $306,058 and $619,080, respectively.

8. 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 such plan as of September 30, 2012 and December 31, 2011, 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 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 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 the Private Offering. 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-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on 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.

37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

On April 15, 2010, after raising $2,000,000 in gross offering proceeds in the Private Offering, the Company granted each of the then three independent directors 5,000 shares of restricted common stock. On August 11, 2011, the Company granted each of the then three independent directors 2,500 shares of restricted common stock upon re-election to the Company's board of directors. On October 23, 2011, one of the independent directors resigned from the Company's board of directors and, by so doing, forfeited 4,375 shares of unvested restricted common stock. On October 24, 2011, the Company granted a newly elected independent director 5,000 shares of restricted common stock. On August 8, 2012, the Company granted each of the then three independent directors 2,500 shares of restricted stock upon re-election to the Company's board of directors. In addition to the shares granted under the independent directors’ compensation plan, one of the independent directors had elected to receive 50% of director compensation in stock through December 31, 2011. The Company recorded stock-based compensation expense of $30,622 and $50,005 for the three and nine months ended September 30, 2012 and $35,589 and $67,871 for the three and nine months ended September 30, 2011, respectively.

9. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common and preferred stock available for issue; 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 Louisville, Kentucky, Kansas City, Missouri, Columbus, Ohio and Tulsa, Oklahoma apartment markets. Any adverse economic or real estate developments in these markets, or the greater midwest region of the United States, 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.

38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

10. 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 swaps and caps are used to accomplish this objective. As of September 30, 2012, the Company had one interest rate cap with a notional amount of $23,500,000. The following table provides the terms of the Company's interest rate derivative instruments that were in effect at September 30, 2012:

Type	Purpose	Effective Date	Maturity Date	Notional Amount		Based on	Variable Rate		Fixed Rate
Cap	Cap Floating Rate	2/9/2012	2/1/2019	$	23,500,000	SIFMA Municipal Swap Index	0.19	%	3.00	%

The interest rate cap is not designated, nor does it qualify as, a cash flow hedge. Accordingly, the Company records any changes in the fair value of the interest rate cap in interest expense. The change in the fair value of the interest rate cap agreement for the three and nine months ended September 30, 2012 resulted in an unrealized loss of $65,987 and $171,320, respectively, which is included in interest expense in the accompanying consolidated statements of operations.

11. Pro Forma Information (unaudited)

The following table summarizes, on an unaudited basis, the consolidated pro forma results of operations of the Company for the three and nine months ended September 30, 2012 and 2011. The Company acquired five properties during the three months ended September 30, 2012 and eleven properties during the nine months ended September 30, 2012. These properties contributed $942,250 of revenues and $396,061 of net loss, including $556,909 of depreciation and amortization, to the Company's results of operations from the date of acquisition to September 30, 2012. The following unaudited pro forma information for the three and nine months ended September 30, 2012 and 2011 has been provided to give effect to the acquisitions of the properties as if they had occurred on January 1, 2011. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had these acquisitions occurred on this date, nor does it purport to predict the results of operations for future periods.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	9,735,241		$	9,519,817		$	29,205,722		$	28,559,451
Net loss	$	(1,635,664	)	$	(4,861,231	)	$	(4,906,991	)	$	(14,583,693	)
Basic and diluted net loss per common share	$	(0.09	)	$	(0.27	)	$	(0.27	)	$	(0.80	)

The pro forma information reflects adjustments for actual revenues and expenses of the properties acquired during the three and nine months ended September 30, 2012 for the respective period prior to acquisition by the Company. Net loss has been adjusted as follows: (1) interest expense has been adjusted to reflect the additional interest expense that would have been charged had the Company acquired the properties on January 1, 2011 under the same financing arrangements as existed as of the acquisition date; (2) depreciation and amortization has been adjusted based on the Company’s basis in the properties; and (3) transaction costs have been adjusted for the acquisition of the properties.

39

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

12. Subsequent Events

Distributions Paid

On October 1, 2012, the Company paid distributions of $1,010,158, which related to distributions declared for each day in the period from September 1, 2012 through September 30, 2012 and consisted of cash distributions paid in the amount of $583,238 and $426,920 in shares issued pursuant to the DRP.

On November 1, 2012, the Company paid distributions of $1,159,824, which related to distributions declared for each day in the period from October 1, 2012 through October 31, 2012 and consisted of cash distributions paid in the amount of $668,480 and $491,344 in shares issued pursuant to the DRP.

Status of the Offering

The Company commenced its Public Offering on July 19, 2010. As of November 9, 2012, the Company had sold 19,615,752 shares of common stock in the Public Offering for gross proceeds of $195,510,641, including 340,889 shares of common stock issued pursuant to the DRP for gross offering proceeds of $3,260,026. Total shares sold as of November 9, 2012 in the Private Offering and Public Offering were 20,236,629 shares representing gross proceeds of $201,203,928, including 340,889 shares of common stock issued pursuant to the DRP for gross offering proceeds of $3,260,026.

Acquisition of the Vantage at San Marcos Apartments

On October 19, 2012, the Company acquired a fee simple interest in the Vantage at San Marcos Apartments located in San Marcos, Texas, through a wholly-owned subsidiary of the Operating Partnership, SIR SM Apartments, LLC (“SIR SM Apartments”), for an aggregate purchase price of $21,850,000. The Company subsequently initiated the process to rename the Vantage at San Marcos Apartments to Springmarc Apartments (the “Springmarc Property”). The Company financed the payment of the purchase price for the Springmarc Property with proceeds from the Public Offering. The Springmarc Property consists of 12three-story buildings and contains 240 units consisting of 96one-bedroom apartments, 96two-bedroom apartments and 48three-bedroom apartments. The apartments range in size from 597 to 1,150 square feet and average 880 square feet. Apartment amenities include laminate wood floors, well equipped kitchens, patio or balcony decks with individual storage, washer and dryer connections and ceiling fans. Property amenities include an internet cafe, an executive business center, a 24-hour fitness center, a resort-style swimming pool and premium carport parking. An acquisition fee of approximately $440,000 was earned by the Advisor in connection with the acquisition of the Springmarc Property.

On October 30, 2012, SIR SM Apartments obtained mortgage financing on the Springmarc Property in the aggregate principal amount of $15,470,000 from PNC Bank, National Association (“PNC”) subject to the Federal Home Loan Mortgage Corporation (Freddie Mac) Multifamily Seller/Servicer Guide (the “Springmarc Loan,). The Springmarc Loan has a maturity date of November 1, 2019. SIR SM Apartments paid a loan origination fee of $123,760 to PNC in connection with the Springmarc Loan. Interest on the outstanding principal balance of the Springmarc Loan accrues at a fixed rate of 3.69% per annum. In connection with the Springmarc Loan, the Company has absolutely, unconditionally and irrevocably guaranteed to PNC the full and prompt payment and performance when due of all amounts, obligations and liabilities for which SIR SM Apartments is personally liable under the Springmarc Loan.

An Increase in the Number of Directors Serving on the Company's Board of Directors and Changes to the Company's Audit and Investment Committees

On September 17, 2012, the Company's board of directors increased the authorized number of directors constituting the board of directors from five to seven, effective as of October 1, 2012. In order to fill the vacancies on the board of directors created by the increase in the authorized number of directors, the Company's board of directors elected Dr. Kerry Dean Vandell

40

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(unaudited)

and Mr. Ned Brines to serve as independent directors on the Company's board of directors. Dr. Vandell and Mr. Brines will each serve as a director until the Company's next annual meeting of stockholders and until each of their successors is elected and duly qualified. The Company's board of directors also appointed Dr. Vandell to serve as a member of the audit committee, effective October 1, 2012, in order to fill the vacancy on the audit committee created by Ms. Neyland’s resignation from the audit committee (discussed below). Dr. Vandell will also serve as the chairman of the audit committee and has been designated as the audit committee’s financial expert. The Company's board of directors appointed Mr. Brines to serve as a member of the investment committee effective October 1, 2012.

Grant of Restricted Stock

Pursuant to the Company's independent directors’ compensation plan, the Company granted 5,000 shares of restricted common stock to each of Dr. Vandell and Mr. Brines on October 1, 2012 in connection with each of their initial elections to the Company's board of directors.

Changes to the Company's Management and the Management of Advisor

On September 17, 2012, the Company's board of directors appointed Ella Shaw Neyland as the Company's President, effective as of October 1, 2012. Upon assuming her role as President, Ms. Neyland is no longer considered an independent director under the Charter. As a result, Ms. Neyland resigned from the Company's audit committee, effective October 1, 2012, but Ms. Neyland continues to serve as a member of the Company's board of directors as a non-independent director. The Company's board of directors appointed Ms. Neyland to serve as a member of the investment committee, effective as of October 1, 2012.

Rodney F. Emery, the Company's Chief Executive Officer and President, resigned from the office of President, effective October 1, 2012, to allow Ms. Neyland to assume the role of President. Mr. Emery remains Chief Executive Officer.

On September 17, 2012, Ms. Neyland was also appointed as President of Advisor, effective as of October 1, 2012.

41

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.

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 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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:

• the fact that we have a limited operating history as we commenced operations on August 11, 2010;

• the fact that we have had a net loss for each quarterly and annual period since inception;

• our ability to raise proceeds in our continuous public offering of common stock;

• our ability to effectively deploy the proceeds raised in our public offering of common stock;

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

• our ability to continue to successfully identify and acquire real estate and real estate-related assets on terms that are favorable to us;

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

• 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;

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

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

42

PART I — FINANCIAL INFORMATION (continued)

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

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 Part II - Item 1A. Risk Factors in this Quarterly Report on Form 10-Q and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 29, 2012.

Overview

We are a Maryland corporation formed in May 2009 that commenced operations on August 11, 2010. We are dependent upon proceeds received from our continuous public offering of common stock and from any indebtedness that we may incur to conduct our proposed investment activities as described below. The capital required to purchase our investments will be obtained from our securities offerings and from any indebtedness that we may incur in connection with the investment or thereafter. We have initially been capitalized with $202,007; $200,007 of which was contributed by our sponsor, Steadfast REIT Investments, LLC, on June 12, 2009 in exchange for 22,223 shares of our common stock, and $1,000 of which was contributed by Steadfast Income Advisor, LLC, which we refer to as our “advisor,” on July 10, 2009 in exchange for 1,000 shares of our convertible stock. In addition, our advisor has invested $1,000 in our operating partnership in exchange for limited partnership interests.

On October 13, 2009, we commenced a private offering of up to $94,000,000 in shares of our common stock at a purchase price of $9.40 per share (with discounts available for certain categories of purchasers), which we refer to as the “private offering.” We offered shares of our common stock for sale in the private offering pursuant to a confidential private placement memorandum and only to persons that were “accredited investors,” as that term is defined under the Securities Act of 1933, as amended, or the Securities Act, and Regulation D promulgated thereunder. On or about July 9, 2010, we terminated our private offering, at which time we had raised gross proceeds of $5,844,325 from the sale of 637,279 shares of our common stock.

On July 23, 2009, we filed a registration statement on Form S-11 with the SEC to offer a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share, which we refer to as our “initial public offering.” We also registered up to 15,789,474 shares of common stock for sale pursuant to our distribution reinvestment plan at an initial price of $9.50 per share. The SEC declared our registration statement effective on July 9, 2010 and we commenced the initial public offering on July 19, 2010. We may reallocate the shares registered for the initial public offering and those shares registered pursuant to the distribution reinvestment plan. As of September 30, 2012, we had sold 17,678,132 shares of common stock in our initial public offering for gross offering proceeds of $175,747,619, including 246,033 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $2,337,249.

On July 12, 2012, our board of directors determined an estimated value per share of our common stock of $10.24 as of March 31, 2012. In determining an estimated value per share of our common stock, our board of directors relied upon information provided in a report prepared by our advisor as well as its experience with, and knowledge about, the real estate portfolio of 11 multifamily properties that we owned as of March 31, 2012. As a result of the determination of our estimated value per share as of March 31, 2012, effective September 10, 2012, the offering price of our shares of common stock in our ongoing public offering increased from a price of $10.00 per share to $10.24 per share. Additionally, effective September 10, 2012, the price of shares of our common stock issued pursuant to our distribution reinvestment plan increased from a price of $9.50 per share to a price of $9.73 per share, or 95% of the new offering price. Effective September 10, 2012, our board of directors increased the amount of distributions paid on each share of our common stock from $0.001917 per share per day to $0.001964 per share per day, which, if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate

43

PART I — FINANCIAL INFORMATION (continued)

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

based on the new offering price of $10.24 per share. For additional information on the methodology used by our board of directors to determine our estimated value per share of our common stock, see our Current Report on Form 8-K filed with the SEC on July 13, 2012. See also “Risk Factors — Our board of directors determined an estimated value per share of $10.24 for our shares of common stock as of March 31, 2012. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock or in making an investment decision” in Part II – Item 1A of this Quarterly Report on Form 10-Q.

Our board of directors may again, in its sole discretion, change the price at which we offer shares to the public in the initial public offering or to our stockholders pursuant to the distribution reinvestment plan to reflect future changes in our estimated value per share and other factors that our board of directors deems relevant.

We intend to use substantially all of the net proceeds from our initial public offering to invest in a diverse portfolio of real estate and real estate-related assets, primarily in the multifamily sector. In addition to our focus on multifamily properties, we may also selectively invest in other types of commercial properties and real estate-related assets. We will experience a relative increase in liquidity as additional subscriptions for shares of our common stock are received and a relative decrease in liquidity as offering proceeds are used to acquire and operate our assets.

As of September 30, 2012, we owned 19 multifamily properties located within the greater midwest and southern geographic regions. Our property portfolio consists of an aggregate of 4,102 multifamily units. The Lincoln Tower Apartments also includes approximately 9,000 square feet of commercial office space. The cost of our real estate portfolio was $324,061,000, exclusive of closing costs. At September 30, 2012, our portfolio was approximately 96.3% leased.

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. The dealer manager for our initial public offering is Steadfast Capital Markets Group, LLC, an affiliate of our advisor, which we refer to as the “dealer manager.”

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. As we accept subscriptions for shares of our common stock, we transfer substantially all of the net proceeds of our offering to our operating partnership as a capital contribution. 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 have elected to be taxed as a REIT for federal income tax purposes beginning with the taxable year ending 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 after the taxable year in which we initially elect to be taxed as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates and will 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.

44

PART I — FINANCIAL INFORMATION (continued)

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

Third Quarter Real Estate Acquisitions

On July 13, 2012, we acquired a fee simple interest in the Montelena Apartments located in Round Rock, Texas, for an aggregate purchase price of approximately $18,350,000, exclusive of closing costs. We financed the payment of the purchase price for the Montelena Apartments with (1) proceeds from our initial public offering and (2) the assumption of a secured loan in the aggregate principal amount of $12,000,000 from a financial institution.

On August 30, 2012, we acquired a fee simple interest in the Valley Farms Apartments located in Louisville, Kentucky, for an aggregate purchase price of approximately $15,100,000, exclusive of closing costs. We financed the payment of the purchase price for the Valley Farms Apartments with proceeds from our initial public offering.

On September 11, 2012, we acquired 100% of the membership interests in the entity that owned a fee simple interest in the Hilliard Park Apartments located in Columbus, Ohio, for an aggregate purchase price of approximately $19,800,000, exclusive of closing costs. We financed the payment of the purchase price for the Hilliard Park Apartments with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $13,860,000 from a financial institution.

On September 20, 2012, we acquired a fee simple interest in the Sycamore Terrace Apartments located in Terre Haute, Indiana, for an aggregate purchase price of approximately $16,500,000, exclusive of closing costs. We financed the payment of the purchase price for the Sycamore Terrace Apartments with proceeds from our initial public offering.

On September 28, 2012, we acquired 100% of the membership interests in the entity that owned a fee simple interest in the Hilliard Summit Apartments located in Columbus, Ohio, for an aggregate purchase price of approximately $24,100,000, exclusive of closing costs. We financed the payment of the purchase price for the Hilliard Summit Apartments with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $16,800,000 from a financial institution.

Recent Real Estate Acquisition

On October 19, 2012, we acquired a fee simple interest in the Vantage at San Marcos Apartments, or the Springmarc property, located in San Marcos, Texas for an aggregate purchase price of approximately $21,850,000, exclusive of closing costs. We financed the payment of the purchase price for the Springmarc property with proceeds from our initial public offering.

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, 2011 filed with the SEC. There have been no significant changes to our accounting policies during 2012.

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with our initial public offering and our private offering, including legal, accounting, printing, mailing and filing fees, charges of our transfer agent, expenses related to our organization, data processing fees, advertising and sales literature costs, transfer agent costs, bona fide out-of-pocket due diligence costs and amounts to reimburse our advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services.

45

PART I — FINANCIAL INFORMATION (continued)

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

After the termination of our initial public offering, our advisor will reimburse us to the extent total organization and offering expenses plus sales commissions and dealer manager fees borne by us in connection with the initial public offering exceed 15% of the gross proceeds raised in our initial public offering. We may also reimburse costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology costs associated with our initial public offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross proceeds of our initial public offering, as required by the rules of the Financial Industry Regulatory Authority, Inc., or FINRA.

We are obligated to reimburse our advisor, the dealer manager, or their affiliates, as applicable, for organization and offering costs paid by them on our behalf, provided that the advisor would be obligated to reimburse us to the extent selling commissions, dealer manager fees and organization and offering costs incurred by us in our initial public offering exceed 15% of the gross offering proceeds of our completed initial public offering. Any reimbursement of expense paid to our advisor will not exceed actual expenses incurred by our advisor.

Reimbursements to our advisor or its affiliates for organization and offering costs paid by them on our behalf with respect to our private offering is not limited to 15% of the gross offering proceeds of the private offering. However, we will not make reimbursements of organization and offering costs in excess of 15% of the gross offering proceeds of the private offering unless approval is obtained from our independent directors. The independent directors have not approved the reimbursement of excess private offering costs. Accordingly, we have not accrued for the reimbursement of organization and offering costs of the private offering in excess of the 15% of gross offering proceeds raised in our private offering.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such beginning with the taxable year ending December 31, 2010. 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 after the taxable year in which we initially elect to be taxed as a REIT, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will 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 is 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 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, 2012 and December 31, 2011, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for the tax years ended December 31, 2011 and 2010.

Distributions

As described below, our board of directors has 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. During the early stages of our operations, we may declare distributions in excess of our funds 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.

46

PART I — FINANCIAL INFORMATION (continued)

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

In order to provide additional available funds for us to pay distributions, under certain circumstances our obligation to pay all fees due to our advisor pursuant to the advisory agreement by and among us, our operating partnership and our advisor will be deferred up to an aggregate amount of $5 million during our offering stage (defined below). If, during any calendar quarter during our offering stage, the distributions we pay exceed our funds from operations, or FFO (as defined by the National Association of Real Estate Investment Trusts, or NAREIT), plus (1) any acquisition expenses and acquisition fees expensed by us that are related to any property, loan or other investment acquired or expected to be acquired by us and (2) any non-operating, non-cash charges incurred by us, such as impairments of property or loans, any other than temporary impairments of marketable securities, or other similar charges, for the quarter, which is defined in the advisory agreement as “adjusted funds from operations,” the payment of fees we are obligated to pay our advisor will be deferred in an amount equal to the amount by which the distributions paid to our stockholders for the quarter exceed our adjusted funds from operations up to an amount equal to a 7.0% cumulative non-compounded annual return on stockholders’ invested capital, prorated for such quarter. For purposes of this calculation, if our adjusted funds from operations is negative, adjusted funds from operations shall be deemed to be zero. As of September 30, 2012, we had deferred $1,507,426 in fees payable to our advisor pursuant to the terms of the advisory agreement. We deferred $283,752 during the three months ended September 30, 2012 as adjusted funds from operations did not exceed the total distributions paid for the quarter.

We are only obligated to pay our advisor for these deferred fees if and to the extent that our cumulative adjusted funds from operations for the period beginning on the date of the commencement of our private offering through the date of any such payment exceed the lesser of (1) the cumulative amount of any distributions paid to our stockholders as of the date of such payment or (2) an amount that is equal to a 7.0% cumulative, non-compounded, annual return on invested capital for our stockholders for the period from the commencement of our initial public offering through the date of such payment. Our obligation to pay the deferred fees will survive the termination of the advisory agreement and will continue to be subject to the repayment conditions above. We will not pay interest on the deferred fees if and when such fees are paid to our advisor.

The “offering stage” will be considered complete on the first date that we are no longer offering equity securities that are not listed on a national securities exchange, whether through our public offering or follow-on public equity offerings, provided we have not filed a registration statement for a follow-on public equity offering as of such date. “Adjusted funds from operations” is equivalent to modified funds from operations described herein. See “—Funds from Operations and Modified Funds from Operations.”

We accrue the probable and estimable amount of deferred fees and the deferred fees continue to accrue until the fees are either paid or it becomes remote that the fees will be paid to our advisor. We anticipate that any deferred fees will ultimately be paid and therefore will be accrued when incurred.

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 $0.001964 per share per day, 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. Prior to September 10, 2012, distributions were calculated at a rate of $0.001917 per share of common stock, which was equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.00 per share of common stock. We made our first monthly distribution payment in September 2010.

The distributions paid during each of the last five fiscal quarters ended September 30, 2012, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:

	Three Months Ended
	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011
Distributions paid in cash	$	1,133,942	$	784,467	$	513,683	$	340,601	$	238,089
Distributions reinvested	830,430		555,490		351,897		220,518		156,007
Total distributions	$	1,964,372	$	1,339,957	$	865,580	$	561,119	$	394,096

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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 ended September 30, 2012 our net loss was $4,963,149 and $13,136,256, we had negative FFO of $815,783 and $3,664,557 and net cash used in operations of $1,091,774 and $954,358. As of September 30, 2012, we have funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with proceeds of our public offering. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Over the long-term, we expect that a percentage of 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. In addition, future distributions declared and paid may exceed cash flow from operations.

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.

With respect to our commercial properties, we include in our leases future provisions designed to protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. We believe that shorter term lease contracts on commercial properties lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire.

As of September 30, 2012, we had not entered into any 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 will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Liquidity and Capital Resources

If we raise substantially less funds in our initial public offering than the maximum offering amount, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us would be more likely to fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a public REIT, regardless of whether we are able to raise substantial funds in our initial public offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

We use, and intend to use in the future, secured and unsecured borrowings for the acquisition of properties. Once we have fully invested the proceeds of our initial public offering, we expect that our overall borrowings will be 65% or less of the cost of our investments, although we expect to exceed this level during our offering stage in order to enable us to quickly build a diversified portfolio. Under our Second 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

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PART I — FINANCIAL INFORMATION (continued)

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

assets, though we may exceed this limit under certain circumstances. As of September 30, 2012, our borrowings were not in excess of 300% of the value of our net assets.

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 and the dealer manager for our initial public offering. During our organization and offering stage, these payments include payments to the dealer manager for sales commissions and the dealer manager fee and payments to our advisor for reimbursement of certain organization and offering expenses. However, our advisor has agreed to reimburse us following the termination of our initial public offering to the extent that sales commissions, the dealer manager fee and other organization and offering expenses incurred by us exceed 15% of the gross offering proceeds of our completed initial public offering. During our operating stage, we expect to make payments to our advisor in connection with the acquisition of investments, the management of our assets and costs incurred by our advisor in providing services to us.

Our principal demand for funds will be to acquire properties and real estate-related assets, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, 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 cash balances;

• sales of shares of common stock in our public offering;

• various forms of secured financing;

• equity capital from joint venture partners;

• proceeds from our operating partnership’s private placements, if any;

• proceeds from our distribution reinvestment plan; and

• cash from operations.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, proceeds from our initial public offering, our ability to raise equity capital from joint venture partners, our ability to obtain various forms of secured financing and proceeds from our operating partnership’s private placements, if any, 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 additional secured and unsecured financings. We may also conduct additional public or private offerings. We expect these resources to be adequate to fund our operating activities, debt service and distributions, which we presently anticipate will grow over time, and will be sufficient to fund our ongoing acquisition activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments. On October 22, 2012, we entered into a revolving line of credit facility with PNC Bank, National Association for an amount up to $5,000,000, all of which remains available. As of September 30, 2012, we had not identified any additional sources for these types of financings; however, we continue to evaluate possible sources of capital, including, without limitation, entering into additional credit facilities. There can be no assurance that we will be able to obtain any such financings on favorable terms, if at all.

Our advisor may, but is not required to, establish working capital reserves from offering proceeds out of cash flow generated by our investments or out of proceeds from the sale of our investments. We do not anticipate establishing a general working capital reserve; however, we may establish capital reserves with respect to particular investments. We also may, but are not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. Our lenders also may require working capital reserves.

To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain limitations described in our charter, we may incur indebtedness in connection with the acquisition of any real estate asset, refinance the

49

PART I — FINANCIAL INFORMATION (continued)

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

debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

Cash Flows Used in Operating Activities

We commenced real estate operations with the acquisition of our first multifamily property on August 11, 2010. As of September 30, 2012, we owned 19 multifamily properties. During the nine months ended September 30, 2012, net cash used in operating activities was $954,358 compared to net cash used in operating activities of $591,675 for the nine months ended September 30, 2011. The increase in net cash used in operating activities is primarily due to increased cash reserves for property taxes, interest and insurance associated with the 14 additional multifamily properties acquired subsequent to the third quarter of 2011. We expect cash used in operating activities to increase in future periods as a result of the acquisition fees and expenses incurred for anticipated future acquisitions of real estate and real estate-related investments. However, we expect to generate cash flows from operations as we expand our property portfolio and stabilize its operations.

Cash Flows Used in Investing Activities

Our cash used in investing activities will vary based on how quickly we raise funds in our ongoing initial public offering and how quickly we invest those funds towards acquisitions of real estate and real-estate related investments. During the nine months ended September 30, 2012, net cash used in investing activities was $187,091,246 compared to net cash used in investing activities of $28,511,684 during the nine months ended September 30, 2011. The increase in net cash used in investing activities was primarily due to the acquisition of 11 multifamily properties during the nine months ended September 30, 2012, compared to three property acquisitions during the nine months ended September 30, 2011.

Cash Flows from Financing Activities

Our cash flows from financing activities consist primarily of proceeds from our ongoing initial public offering, net of distributions paid to our stockholders, and the issuance of notes payable. During the nine months ended September 30, 2012, net cash provided by financing activities was $196,830,385 compared to net cash provided by financing activities of $35,285,982 during the nine months ended September 30, 2011. Net cash provided by financing activities during the nine months ended September 30, 2012 consisted of the following:

• $114,082,320 of cash provided by offering proceeds related to our initial public offering, net of (1) payments of commissions on sales of common stock and related dealer manager fees in the amount of $12,731,375 and (2) the reimbursement of other offering costs to affiliates in the amount of $7,563,697;

• $85,560,889 of proceeds from the issuance or assumption of notes payable, net of deferred financing costs in the amount of $1,313,656 and principal payments of $7,126,455;

• $380,732 of cash paid for the redemption of common stock; and

• $2,432,092 of net cash distributions, after giving effect to distributions reinvested by stockholders of $1,737,817.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt as a means of providing additional funds for the acquisition of our properties and our real estate-related assets. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. We expect that our borrowings will be approximately 60% – 65% of the cost of our real properties (before deducting depreciation and amortization) plus the value of our other investments, after we have invested substantially all of the net offering proceeds. In order to facilitate investments in the early stages of our operations, we expect to temporarily borrow in excess of our long-term targeted debt level. Under 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. 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. We do not intend to

50

PART I — FINANCIAL INFORMATION (continued)

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

exceed our charter’s leverage limit except in the early stages of our operations when the costs of our investments are most likely to substantially exceed our net offering proceeds. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2012, 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 and the dealer manager. During our organization and offering stage, these payments will include payments to the dealer manager for selling commissions and dealer manager fees and payments to the dealer manager and our advisor for reimbursement of certain organization and other offering expenses. However, our advisor has agreed to reimburse us to the extent that selling commissions, dealer manager fees and organization and other offering expenses incurred by us exceed 15% of our gross offering proceeds. During our acquisition and development stage, we expect to make payments to our advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets and costs incurred by our advisor in providing services to us.

As of September 30, 2012, we had notes payable in the principal amount of $207,914,276. The following is a summary of our contractual obligations as of September 30, 2012:

					Payments Due During the Years Ending December 31,
Contractual Obligation	Total		Remainder of 2012		2013		2014		2015		2016		Thereafter
Interest payments on outstanding debt obligations(1)	$	47,658,664	$	2,135,653	$	8,037,575	$	7,634,948	$	7,582,013	$	7,490,015	$	14,778,460
Principal payments on outstanding debt obligations(2)	$	207,914,276	$	544,913	$	14,310,501	$	3,156,893	$	3,483,760	$	3,583,437	$	182,834,772

_____________________________

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2012. We incurred interest expense of $1,800,346 and $3,887,837 during the three and nine months ended September 30, 2012, including amortization of deferred financing costs totaling $79,132 and $182,692, respectively.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts include the amortization of the debt premiums associated with certain notes payable.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2012 and 2011. The ability to compare one period to another is significantly affected by acquisitions completed and dispositions made during those periods. As of September 30, 2012, we owned 19 multifamily properties compared to owning only five multifamily properties at September 30, 2011. The increase in our property portfolio is the primary cause of the increases in operating income and expenses, as further discussed below.

Our results of operations for the three and nine months ended September 30, 2012 are not indicative of those expected in future periods. We have not yet invested all of the proceeds from our ongoing initial public offering received to date and expect to continue to raise additional capital, increase our borrowings and make future acquisitions, which would have a significant impact on our future results of operations. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

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 loss, see “—Net Operating 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)

Consolidated Results of Operations for the Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

The following table summarizes the consolidated results of operations for the three months ended September 30, 2012 and 2011:

	For the Three Months Ended September 30,
	2012			2011			Change $			Change %
Total revenues	$	8,617,549		$	1,777,486		$	6,840,063		385	%
Operating expenses	2,547,385			654,231			1,893,154			289	%
Real estate taxes and insurance	1,026,023			321,444			704,579			219	%
Fees to affiliates	2,790,393			355,698			2,434,695			684	%
Depreciation and amortization	4,147,366			629,085			3,518,281			559	%
Interest expense	1,800,346			375,346			1,425,000			380	%
General and administrative expenses	730,332			32,398			697,934			2,154	%
Other acquisition costs	538,853			140,241			398,612			284	%
Net loss	$	(4,963,149	)	$	(730,957	)	$	(4,232,192	)	579	%
NOI(1)	$	4,682,014		$	739,762		$	3,942,252		533	%
FFO(2)	$	(815,783	)	$	(101,872	)	$	(713,911	)	(701	)%
MFFO(2)	$	1,680,620		$	250,895		$	1,429,725		570	%

________________

(1) 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 loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate 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 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 Investment Program Association 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 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 loss, see “—Funds From Operations and Modified Funds From Operations.”

52

PART I — FINANCIAL INFORMATION (continued)

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

Net loss

For the three months ended September 30, 2012, we had a net loss of $4,963,149 compared to a net loss of $730,957 for the three months ended September 30, 2011. The increase in net loss of $4,232,192 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $1,893,154, the increase in fees to affiliates of $2,434,695, the increase in depreciation and amortization expense of $3,518,281, the increase in interest expense of $1,425,000 and the increase in other acquisition costs of $398,612, partially offset by the increase in total revenues of $6,840,063. The increase in these expenses was due primarily to the increase in our property portfolio from five properties at September 30, 2011 to 19 properties at September 30, 2012.

Total revenues

Rental income and tenant reimbursements for the three months ended September 30, 2012 were $8,617,549 compared to $1,777,486 for the three months ended September 30, 2011. The increase of $6,840,063 was primarily due to the fact that we owned 19 multifamily properties as of September 30, 2012 compared to five multifamily properties as of September 30, 2011. Additionally, our total units increased by 3,291 from 811 at September 30, 2011 to 4,102 at September 30, 2012. We expect rental income and tenant reimbursements to increase in future periods as a result of anticipated future acquisitions of real estate.

Operating expenses

Operating, maintenance and management expenses for the three months ended September 30, 2012 were $2,547,385 compared to $654,231 for the three months ended September 30, 2011. The increase of $1,893,154 was primarily due to the fact that we operated 19 multifamily properties as of September 30, 2012 compared to five multifamily properties as of September 30, 2011. We expect that these amounts will increase in future periods as a result of anticipated future acquisitions of real estate but will decrease as a percentage of total revenues.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the three months ended September 30, 2012 were $1,026,023 compared to $321,444 for the three months ended September 30, 2011. The increase of $704,579 was due to the acquisition of 14 multifamily properties since September 30, 2011 and the continuing operation of the properties owned as of September 30, 2011. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

Fees to affiliates

Fees to affiliates for the three months ended September 30, 2012 were $2,790,393 compared to $355,698 for the three months ended September 30, 2011. The increase of $2,434,695 was primarily due to acquisition fees earned by our advisor in connection with the acquisition of five multifamily properties, which totaled $1,891,563 for the three months ended September 30, 2012, compared to acquisition fees of $212,526 for the three months ended September 30, 2011. Additionally, the property management and investment management fees paid to our affiliated property manager and our advisor increased for the three months ended September 30, 2012 as a result of the growth of our property portfolio. We expect fees to affiliates to increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

Depreciation and amortization

Depreciation and amortization expenses for the three months ended September 30, 2012 were $4,147,366 compared to $629,085 for the three months ended September 30, 2011. The increase of $3,518,281 was primarily due to the net increase in depreciable and amortizable assets of $260,090,343 since September 30, 2011. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

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PART I — FINANCIAL INFORMATION (continued)

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

Interest expense

Interest expense for the three months ended September 30, 2012 was $1,800,346 compared to $375,346 for the three months ended September 30, 2011. The increase of $1,425,000 was primarily due to the net increase in the notes payable balance of $175,358,231 since September 30, 2011 due to financing incurred in connection with the acquisition of 14 multifamily properties since September 30, 2011. Included in interest expense is the amortization of deferred financing costs of $79,132 and $11,023 for the three months ended September 30, 2012 and 2011. Also included in interest expense is the unrealized loss on derivative instruments of $65,987 and $0 for the three months ended September 30, 2012 and 2011. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expense

General and administrative expenses for the three months ended September 30, 2012 were $730,332 compared to $32,398 for the three months ended September 30, 2011. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $697,934 was primarily due to increases in legal, audit and other professional fees incurred in connection with the growth of our property portfolio. We expect general and administrative expenses incurred by our advisor to increase in future periods as we acquire additional real estate and real estate-related investments but to decrease as a percentage of total revenue.

Other acquisition costs

Other acquisition costs for the three months ended September 30, 2012 were $538,853 compared to $140,241 for the three months ended September 30, 2011. The increase in acquisition costs related primarily to our acquisition of five multifamily properties during the third quarter of 2012 compared to the acquisition of one multifamily property during the third quarter of 2011. We expect acquisition costs to increase in future periods as we acquire additional real estate and real estate-related investments but to decrease as a percentage of total revenues.

54

PART I — FINANCIAL INFORMATION (continued)

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

Consolidated Results of Operations for the Nine Months Ended September 30, 2012 Compared to the Nine Months Ended

September 30, 2011

The following table summarizes the consolidated results of operations for the nine months ended September 30, 2012 and 2011:

	For the Nine Months Ended September 30,
	2012			2011			Change $			Change %
Total revenues	$	18,465,004		$	3,733,032		$	14,731,972		395	%
Operating expenses	5,364,639			1,333,249			4,031,390			302	%
Real estate taxes and insurance	2,159,130			533,137			1,625,993			305	%
Fees to affiliates	6,928,656			868,382			6,060,274			698	%
Depreciation and amortization	9,471,699			1,850,038			7,621,661			412	%
Interest expense	3,887,837			759,431			3,128,406			412	%
General and administrative expenses	2,094,725			570,834			1,523,891			267	%
Other acquisition costs	1,694,574			478,432			1,216,142			254	%
Net loss	$	(13,136,256	)	$	(2,660,471	)	$	(10,475,785	)	394	%
NOI(1)	$	10,260,240		$	1,734,966		$	8,525,274		491	%
FFO(2)	$	(3,664,557	)	$	(810,433	)	$	(2,854,124	)	(352	)%
MFFO(2)	$	3,342,840		$	243,208		$	3,099,632		1,274	%

________________

(1) 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 loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate 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 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 MFFO, as defined by the Investment Program Association 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 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 loss, see “—Funds From Operations and Modified Funds From Operations.”

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PART I — FINANCIAL INFORMATION (continued)

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

Net loss

For the nine months ended September 30, 2012, we had a net loss of $13,136,256 compared to a net loss of $2,660,471 for the nine months ended September 30, 2011. The increase in net loss of $10,475,785 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $4,031,390, the increase in fees to affiliates of $6,060,274, the increase in depreciation and amortization expense of $7,621,661, the increase in interest expense of $3,128,406, the increase in general and administrative expenses of $1,523,891 and the increase in other acquisition costs of $1,216,142, partially offset by the increase in total revenues of $14,731,972. The increase in these expenses was due primarily to the increase in our property portfolio from five properties at September 30, 2011 to 19 properties at September 30, 2012.

Total revenues

Rental income and tenant reimbursements for the nine months ended September 30, 2012 were $18,465,004 compared to $3,733,032 for the nine months ended September 30, 2011. The increase of $14,731,972 was primarily due to the fact that we owned 19 multifamily properties as of September 30, 2012 compared to five multifamily properties as of September 30, 2011. Additionally, our total units increased by 3,291 from 811 at September 30, 2011 to 4,102 at September 30, 2012. We expect rental income and tenant reimbursements to increase in future periods as a result of anticipated future acquisitions of real estate.

Operating expenses

Operating, maintenance and management expenses for the nine months ended September 30, 2012 were $5,364,639 compared to $1,333,249 for the nine months ended September 30, 2011. The increase of $4,031,390 was primarily due to the fact that we operated 19 multifamily properties as of September 30, 2012 compared to five multifamily properties as of September 30, 2011. We expect that these amounts will increase in future periods as a result of anticipated future acquisitions of real estate but will decrease as a percentage of total revenues.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the nine months ended September 30, 2012 were $2,159,130 compared to $533,137 for the nine months ended September 30, 2011. The increase of $1,625,993 was due to the acquisition of 14 multifamily properties since September 30, 2011 and the continuing operation of the properties owned as of September 30, 2011. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

Fees to affiliates

Fees to affiliates for the nine months ended September 30, 2012 were $6,928,656 compared to $868,382 for the nine months ended September 30, 2011. The increase of $6,060,274 was primarily due to acquisition fees earned by our advisor in connection with the acquisition of 11 multifamily properties that totaled $5,141,503 for the nine months ended September 30, 2012, compared to acquisition fees earned by our advisor in connection with the acquisition of three multifamily properties that totaled $575,209 for the nine months ended September 30, 2011. Additionally, the property management and investment management fees payable to our affiliated property manager and advisor increased for the nine months ended September 30, 2012 as a result of the growth of our property portfolio. We expect fees to affiliates to increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

Depreciation and amortization

Depreciation and amortization expenses for the nine months ended September 30, 2012 were $9,471,699 compared to $1,850,038 for the nine months ended September 30, 2011. The increase of $7,621,661 was primarily due to the net increase in depreciable and amortizable assets of $260,090,343 since September 30, 2011. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

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PART I — FINANCIAL INFORMATION (continued)

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

Interest expense

Interest expense for the nine months ended September 30, 2012 was $3,887,837 compared to $759,431 for the nine months ended September 30, 2011. The increase of $3,128,406 was primarily due to the net increases in the notes payable balance of $175,358,231 since September 30, 2011 due to financing incurred in connection with the acquisition of 14 multifamily properties since September 30, 2011. Included in interest expense is the amortization of deferred financing costs of $182,692 and $19,489 for the nine months ended September 30, 2012 and 2011. Also included in interest expense is the unrealized loss on derivative instruments of $171,320 and $0 for the nine months ended September 30, 2012 and 2011. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expense

General and administrative expenses for the nine months ended September 30, 2012 were $2,094,725 compared to $570,834 for the nine months ended September 30, 2011. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $1,523,891 was primarily due to increases in legal, audit and other professional fees incurred in connection with the growth of our property portfolio. We expect general and administrative expenses incurred by our advisor to increase in future periods as we acquire additional real estate and real estate-related investments but to decrease as a percentage of total revenue.

Other acquisition costs

Other acquisition costs for the nine months ended September 30, 2012 were $1,694,574 compared to $478,432 for the nine months ended September 30, 2011. The increase in acquisition costs related primarily to our acquisition of 11 multifamily properties during the first nine months of 2012 compared to three acquisitions of multifamily properties during the first nine months of 2011. We expect acquisition costs to increase in future periods as we acquire additional real estate and real estate-related investments but to decrease as a percentage of total revenues.

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PART I — FINANCIAL INFORMATION (continued)

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

Property Operations for the Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at July 1, 2011. A “non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2011. Our same store properties for the third quarter of 2011 and 2012 were the Lincoln Tower Apartments, the Park Place Condominiums, the Arbor Pointe Apartments and the Clarion Park Apartments, collectively referred to as the “same-store properties.”

The following table presents the same-store and non-same-store results from operations for the three months ended September 30, 2012 and 2011:

	For the Three Months Ended September 30,
	2012		2011			Change $			Change %
Same-store properties:
Revenues	$	1,656,793	$	1,641,788		$	15,005		1	%
Operating expenses	906,023		861,932			44,091			5	%
Net operating income	750,770		779,856			(29,086		)	(4	)%
Non-same-store properties:
Net operating income	3,931,244		(40,094		)	3,971,338
Total net operating income(1)	$	4,682,014	$	739,762		$	3,942,252

________________

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

Net Operating Income

Same-store net operating income for the three months ended September 30, 2012 was $750,770 compared to $779,856 for the three months ended September 30, 2011. The 4%decrease in same-store net operating income was primarily due to the 1%increase in same-store rental revenues and the 5%increase in same-store operating expenses over the comparable prior year period.

Revenues

Same-store revenues for the three months ended September 30, 2012 were $1,656,793 compared to $1,641,788 for the three months ended September 30, 2011. The 1%increase in same-store revenues was primarily due to the market rent increases at the same-store properties, partially offset by occupancy decreases at the Park Place Condominiums as a result of certain renovation projects currently in progress.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2012 were $906,023 compared to $861,932 for the three months ended September 30, 2011. The 5%increase in same-store operating expenses was primarily due to increased personnel costs at the Clarion Park Apartments during the three months ended September 30, 2012 as well as certain additional training and benefit administration fees incurred at the same store properties during the three months ended September 30, 2012 that were not incurred during three months ended September 30, 2011.

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PART I — FINANCIAL INFORMATION (continued)

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

Net Operating Income

Net Operating Income, or 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 of the property owner, (2) acquisition costs of the property owner, (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 the property owner. The cost of funds is eliminated from net income (loss) because it is specific to the particular financing capabilities and constraints of the owner. 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 and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

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.

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 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 (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “Management's Discussion and Analysis of Financial Condition and Results of Operations” regarding the components of net income (loss) 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 loss for the three and nine months ended September 30, 2012 and 2011 computed in accordance with GAAP:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(4,963,149	)	$	(730,957	)	$	(13,136,256	)	$	(2,660,471	)
Fees to affiliates(1)	2,428,266			293,649			6,247,661			736,702
Depreciation and amortization	4,147,366			629,085			9,471,699			1,850,038
Interest expense	1,800,346			375,346			3,887,837			759,431
General and administrative expenses	730,332			32,398			2,094,725			570,834
Acquisition costs	538,853			140,241			1,694,574			478,432
Net operating income	$	4,682,014		$	739,762		$	10,260,240		$	1,734,966

________________

(1) Fees to affiliates for the three and nine months ended September 30, 2012 excludes property management fees of $270,683 and $589,551 and other fees of $91,444 and $91,444, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2011 excludes property management fees of $62,049 and $131,680 that are 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 a measure known as funds from operations, or 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 (loss) 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 February 2004, or the White Paper. The White Paper defines FFO as net income (loss) 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 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

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PART I — FINANCIAL INFORMATION (continued)

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

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. 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. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until 2015. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association, or 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 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 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,

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PART I — FINANCIAL INFORMATION (continued)

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

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. In calculating MFFO, we exclude acquisition related expenses, 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. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. 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 proceeds from our initial public offering 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, operational earnings or cash flow, 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 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, 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

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PART I — FINANCIAL INFORMATION (continued)

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

alternative to net income (loss) or income (loss) 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 has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no regular net asset value determination during the offering stage and for a period thereafter. 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 ended September 30, 2012 and 2011:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Reconciliation of net loss to MFFO:	2012			2011			2012			2011
Net loss	$	(4,963,149	)	$	(730,957	)	$	(13,136,256	)	$	(2,660,471	)
Depreciation of real estate assets	2,332,504			354,348			4,809,247			723,953
Amortization of lease-related costs	1,814,862			274,737			4,662,452			1,126,085
FFO	(815,783		)	(101,872		)	(3,664,557		)	(810,433		)
Acquisition fees and expenses(1)	2,430,416			352,767			6,836,077			1,053,641
Unrealized loss on derivative instruments	65,987			—			171,320			—
MFFO	$	1,680,620		$	250,895		$	3,342,840		$	243,208

________________

(1) By excluding expensed acquisition costs, 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 fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are 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. 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 properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. In the event that proceeds from our initial public offering 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 the advisor from other sources, including debt, operational earnings or cash flow, 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 its stockholders.

Pursuant to the terms of our advisory agreement, because MFFO did not exceed distributions paid during the three months ended September 30, 2012, we deferred $283,752 of acquisition and investment management fees earned during the three months ended September 30, 2012. Acquisition fees and investment management fees of $0 and $224,186, respectively, are due and payable as of September 30, 2012 and are included in due to affiliates, net, in the accompanying consolidated balance sheet.

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PART I — FINANCIAL INFORMATION (continued)

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

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, 2012, 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 conditions, 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, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 7 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.

Item 3. Qualitative and Quantitative Disclosure 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 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, 2012, the fair value of our fixed rate debt was $179,269,005 and the carrying value of our fixed rate debt was $177,414,276. 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, 2012. 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. At September 30, 2012, we were exposed to market risks related to fluctuations in interest rates on $30,500,000 of variable rate debt outstanding. Based on interest rates as of September 30, 2012, if interest rates were 100 basis points higher during the 12 months ending September 30, 2013, interest expense on our variable rate debt would increase by $273,458 and if interest rates were 100 basis points lower during the 12 months ending September 30, 2013, interest expense on the variable rate debt would decrease by $52,741.

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PART I — FINANCIAL INFORMATION (continued)

At September 30, 2012, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.20% and 2.86%, respectively. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2012 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2012 where applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, our management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based upon and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ending September 30, 2012 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

The following risk factors supplement the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2011.

Our board ofdirectors determined an estimated value per share of $10.24 for our shares of common stock as of March 31, 2012. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock or in making an investment decision.

On July 12, 2012, our board of directors determined an estimated value per share of $10.24 for our common stock as of March 31, 2012. We disclose in our filings with the SEC the methodology used to determine the estimated value per share and numerous limitations related to the estimated value per share. Please see our filings with the SEC for a detailed description of the estimated per share valuation methodology and limitations.

Our board of directors' objective in determining the estimated value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with our advisor. However, the market for commercial real estate can fluctuate quickly and substantially and values are expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount.

As with any valuation methodology, the methodologies used to determine the estimated value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated value per share, which could be significantly different from the estimated value per share determined by our board of directors. The estimated value per share does not represent the fair value of our assets less liabilities in accordance with U.S. GAAP. The estimated value per share is not a representation or indication that: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company; shares of our common stock would trade at the estimated value per share on a national securities exchange; a third party would offer the estimated value per share in an arms-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the value per share would be acceptable to FINRA, or under the Employee Retirement Income Security Act, or ERISA, with respect to their respective requirements.

If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and your overall return may be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, our organizational documents permit us to pay distributions from any source. For the year ended December 31, 2011 and the nine months ended September 30, 2012, all distributions paid to our stockholders were funded from offering proceeds from our public offering. To the extent we fund distributions from the net proceeds of this offering, we will have less funds available for investment in real properties and real estate-related assets than if our distributions came solely from cash flow from operations and your overall return may be reduced. We expect to have little, if any, cash flow from operations available for distribution until we make substantial investments. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that

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PART II—OTHER INFORMATION (continued)

we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we expect to look to third party borrowings to fund our distributions, but we may determine to use net proceeds of this offering when borrowings are not available or if our board of directors determines it is appropriate to do so. We have not established a limit on the amount of proceeds we may use from this offering to fund distributions. All distributions to date have been paid with offering proceeds.

We may also fund such distributions from advances from our advisor or sponsor or the deferral by our advisor of fees payable under the advisory agreement. Our obligation to pay all fees due to the advisor from us pursuant to the advisory agreement will be deferred during our offering stage to provide additional funds to support the payment of distributions to our stockholders to the extent that the distributions we pay during any calendar quarter exceed our adjusted funds from operations (as defined in our advisory agreement) for such calendar quarter up to an amount equal to a 7.0% cumulative non-compounded annual return on stockholders invested capital, pro-rated for such quarter. The amount of fees that may be deferred is limited to an aggregate amount of $5 million. To the extent we pay distributions at an annualized rate lower than 7.0%, the amount of fees that are required to be deferred by our advisor could decrease. If we pay distributions at an annualized rate that is greater than 7.0%, our advisor is not required to defer fees for the amount equal to the amount paid in excess of a 7.0% annualized distributions. In each case, the amount of fees that are required to be deferred by our advisor may decrease which would reduce the funds we have available for investments.

In addition, if the aggregate amount of cash we distribute to stockholders in any given year exceeds the amount of our earnings and profits generated during the year, the excess amount will either be (1) a return of capital or (2) a gain from the sale or exchange of property to the extent that a stockholder’s basis in our common stock equals or is reduced to zero as the result of our current or prior year distributions.

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

During the three and nine months ended September 30, 2012, we did not sell any equity securities that were not registered under the Securities Act of 1933, or the Securities Act.

On July 9, 2010, our Registration Statement on Form S-11 (File No. 333-160748), registering a public offering of up to $1,650,000,000 in shares of our common stock, was declared effective under the Securities Act. We commenced our initial public offering on July 19, 2010. We are offering up to 150,000,000 shares of our common stock to the public in our primary offering and up to 15,789,474 shares of our common stock pursuant to our distribution reinvestment plan. Steadfast Capital Markets Group, LLC, an affiliate of our advisor, is serving as the dealer manager for our initial public offering. As of September 30, 2012, we had sold 18,315,411 shares of our common stock, including 246,033 shares issued pursuant to the distribution reinvestment plan, for gross offering proceeds of $181,591,944 in the private offering and public offering.

As a result of our determination of our estimated value per share as of March 31, 2012, effective September 10, 2012, the offering price of shares of our common stock in our public offering increased from a price of $10.00 per share to $10.24 per share and the purchase price for shares issued pursuant to our distribution reinvestment plan increased from a price of $9.50 per share to $9.73 per share.

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PART II—OTHER INFORMATION (continued)

From inception through September 30, 2012, we had incurred selling commissions, dealer manager fees and organization and other offering costs in our public offering in the amounts set forth below. The dealer manager reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker-dealers.

Type of Expense Amount	Amount			Estimated/ Actual	Percentage of Offering Proceeds
Selling commissions and dealer manager fees	$	16,404,178		Actual	9.46	%
Other organization and offering costs	9,607,377			Actual	5.54	%
Total expenses	$	26,011,555
Total public offering proceeds (excluding DRP proceeds)	$	173,410,370		Actual	100.00	%
Percentage of public offering proceeds used to pay for organization and offering costs	15		%	Actual	15.00	%

From the commencement of our initial public offering through September 30, 2012, the net offering proceeds to us, after deducting the total expenses incurred as described above, were $149,736,064 including net offering proceeds from our distribution reinvestment plan of $2,337,249. For the period from inception through September 30, 2012, the ratio of the cost of raising capital was approximately 15%.

We intend to use substantially all of the net proceeds from our initial public offering to invest in and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. In addition to our focus on multifamily properties, we may also selectively invest in other types of commercial properties. We may also acquire or originate mortgage, bridge and other real estate loans and equity securities of other real estate companies. As of September 30, 2012, we had used approximately $120,894,060 in offering proceeds to partially fund the acquisition of 19 multifamily properties.

During the three and nine months ended September 30, 2012, we fulfilled redemption requests and redeemed shares of our common stock pursuant to our share repurchase plan as follows:

	Total Number of Shares Requested to be Redeemed(1)		Total Number of Shares Redeemed	Average Price Paid per Share(2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2012	—		22,874	$	9.25	(3)
February 2012	1,500		—	—		(3)
March 2012	3,273		—	—		(3)
April 2012(4)	(2,630	)	14	9.35		(3)
May 2012	9,000		8,000	10.00		(3)
June 2012	1,500		—	—		(3)
July 2012	4,758		9,387	9.38		(3)
August 2012	3,700		—	—		(3)
September 2012	—		—	—		(3)
	21,101		40,275

________________

(1) We generally redeem shares on the last business day of the month following the end of each fiscal quarter in which requests were received.

(2) Pursuant to the plan, as amended, we currently redeem shares at prices determined as follows:

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PART II—OTHER INFORMATION (continued)

• 92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;

• 95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;

• 97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and

• 100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.

Notwithstanding the above, the redemption price for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” will initially be the amount paid to acquire the shares from us. Furthermore, once we establish an estimated value per share of common stock, the redemption price per share for all stockholders will be equal to our most recently established estimated value per share, as determined by our advisor or another firm chosen for that purpose. As a result of the determination of our estimated value per share as of March 31, 2012, effective September 10, 2012, the offering price of our shares of common stock in our ongoing public offering will increase from the current price of $10.00 per share to $10.24 per share. We do not currently intend to establish an estimated value per share again until six months following the completion of our offering stage (and every six months thereafter). However, our board of directors may determine to update our estimated value per share before such time in its sole discretion. We will consider our offering stage complete on the first date that we are no longer publicly offering equity securities that are not listed on a national securities exchange, whether through our current public offering or follow-on public equity offerings, provided we have not filed a registration statement for a follow-on public equity offering as of such date (for purposes of this definition, we do not consider "public equity offerings" to include offerings on behalf of selling stockholders or offerings related to a distribution reinvestment plan, employee benefit plan or the redemption of interestes in our operating partnership.

(3) The number of shares that may be redeemed pursuant to the share repurchase plan during any calendar year is limited to: (1) 5% of the weighted-average number of shares outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year plus such additional funds as may be reserved for that purpose by our board of directors.

(4) At the request of a stockholder, we reversed the redemption of 4,758 shares that were redeemed in January 2012. Such reversals of redemptions are not expected to recur in future periods.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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PART II—OTHER INFORMATION (continued)

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 List 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.

3.1 Second Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (filed as Exhibit 3.1 to Pre- Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-160748) and incorporated herein by reference).

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

4.1 Form of Subscription Agreement (included as Appendix B to prospectus, incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-(No. 333-160748)).

4.2 Steadfast Income REIT, Inc. Distribution Reinvestment Plan (included as Appendix C to prospectus, incorporated by reference to Exhibit 4.2 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160748)).

10.1 Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 8, 2012, by and between Steadfast Asset Holdings, Inc. and Gary L. Schottenstein and Clean Title, Inc., doing business as Hummel Title Agency, in its capacity as escrow holder (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed October 4, 2012)

10.2 Assignment and Assumption of Purchase Agreement, dated as of September 11, 2012, by and between Steadfast Asset Holdings, Inc. and SIR Hilliard Park, LLC (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed October 4, 2012)

10.3 Membership Interests Assignment and Assumption, made and entered into effective as of September 11, 2012, by and between Gary L. Schottenstein and SIR Hilliard Park, LLC (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed October 4, 2012)

10.4 Property Management Agreement, made and entered into as of September 11, 2012, by and between Steadfast Management Company, Inc. and Hilliard Park Partners, L.L.C. (incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed October 4, 2012)

10.5 Multifamily Note, effective as of September 28, 2012, by Hilliard Park Partners, L.L.C. in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.5 to the Company's Form 8-K filed October 4, 2012)

10.6 Multifamily Loan and Security Agreement, made as of September 28, 2012, by and between Hilliard Park Partners, L.L.C. and PNC Bank, National Association (incorporated by reference to Exhibit 10.6 to the Company's Form 8-K filed October 4, 2012)

10.7 Open-End Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of September 28, 2012, by Hilliard Park Partners, L.L.C. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Company's Form 8-K filed October 4, 2012)

10.8 Guaranty of Non-Recourse Obligations, dated as of September 28, 2012, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.8 to the Company's Form 8-K filed October 4, 2012)

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PART II—OTHER INFORMATION (continued)

10.9 Environmental Indemnity Agreement, dated as of September 28, 2012, by Hilliard Park Partners, L.L.C. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Company's Form 8-K filed October 4, 2012)

10.10 Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 8, 2012, by and between HMSREG, LLC, CSL HillMeadows, LTD., Steadfast Asset Holdings, Inc., and Clean Title, Inc., doing business as Hummel Title Agency, in its capacity as escrow holder (incorporated by reference to Exhibit 10.10 to the Company's Form 8-K filed October 4, 2012)

10.11 Assignment and Assumption of Purchase Agreement, dated as of September 28, 2012, by and between Steadfast Asset Holdings, Inc. and SIR Hilliard Summit, LLC (incorporated by reference to Exhibit 10.11 to the Company's Form 8-K filed October 4, 2012)

10.12 Membership Interests Assignment and Assumption, made and entered into effective as of September 28, 2012, by and between HMSREG, LLC, CSL Hill Meadows, LTD., and SIR Hilliard Summit, LLC (incorporated by reference to Exhibit 10.12 to the Company's Form 8-K filed October 4, 2012)

10.13 Property Management Agreement, made and entered into as of September 28, 2012, by and between Steadfast Management Company, Inc. and Hilliard Meadows Apartments, LLC (incorporated by reference to Exhibit 10.13 to the Company's Form 8-K filed October 4, 2012)

10.14 Multifamily Note, effective as of September 28, 2012, by Hilliard Meadows Apartments, LLC in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Company's Form 8-K filed October 4, 2012)

10.15 Multifamily Loan and Security Agreement, made as of September 28, 2012, by and between Hilliard Meadows Apartments, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.15 to the Company's Form 8-K filed October 4, 2012)

10.16 Open-End Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of September 28, 2012, by Hilliard Meadows Apartments, LLC to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.16 to the Company's Form 8-K filed October 4, 2012)

10.17 Guaranty of Non-Recourse Obligations, dated as of September 28, 2012, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.17 to the Company's Form 8-K filed October 4, 2012)

10.18 Environmental Indemnity Agreement, dated as of September 28, 2012, by Hilliard Meadows Apartments, LLC to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.18 to the Company's Form 8-K filed October 4, 2012)

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document (Furnished herewith)

101.SCH XBRL Schema Document (Furnished herewith)

101.CAL XBRL Calculation Linkbase Document (Furnished herewith)

101.LAB XBRL Labels Linkbase Document (Furnished herewith)

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PART II—OTHER INFORMATION (continued)

101.PRE XBRL Presentation Linkbase Document (Furnished herewith)

101.DEF XBRL Definition Linkbase Document (Furnished herewith)

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 13, 2012	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Date:	November 13, 2012	By:	/s/ Kevin J. Keating
			Kevin J. Keating
			Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

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 List 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.

3.1 Second Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (filed as Exhibit 3.1 to Pre- Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-160748) and incorporated herein by reference).

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

4.1 Form of Subscription Agreement (included as Appendix B to prospectus, incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-(No. 333-160748)).

4.2 Steadfast Income REIT, Inc. Distribution Reinvestment Plan (included as Appendix C to prospectus, incorporated by reference to Exhibit 4.2 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160748)).

10.1 Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 8, 2012, by and between Steadfast Asset Holdings, Inc. and Gary L. Schottenstein and Clean Title, Inc., doing business as Hummel Title Agency, in its capacity as escrow holder (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed October 4, 2012)

10.2 Assignment and Assumption of Purchase Agreement, dated as of September 11, 2012, by and between Steadfast Asset Holdings, Inc. and SIR Hilliard Park, LLC (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed October 4, 2012)

10.3 Membership Interests Assignment and Assumption, made and entered into effective as of September 11, 2012, by and between Gary L. Schottenstein and SIR Hilliard Park, LLC (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed October 4, 2012)

10.4 Property Management Agreement, made and entered into as of September 11, 2012, by and between Steadfast Management Company, Inc. and Hilliard Park Partners, L.L.C. (incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed October 4, 2012)

10.5 Multifamily Note, effective as of September 28, 2012, by Hilliard Park Partners, L.L.C. in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.5 to the Company's Form 8-K filed October 4, 2012)

10.6 Multifamily Loan and Security Agreement, made as of September 28, 2012, by and between Hilliard Park Partners, L.L.C. and PNC Bank, National Association (incorporated by reference to Exhibit 10.6 to the Company's Form 8-K filed October 4, 2012)

10.7 Open-End Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of September 28, 2012, by Hilliard Park Partners, L.L.C. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Company's Form 8-K filed October 4, 2012)

10.8 Guaranty of Non-Recourse Obligations, dated as of September 28, 2012, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.8 to the Company's Form 8-K filed October 4, 2012)

10.9 Environmental Indemnity Agreement, dated as of September 28, 2012, by Hilliard Park Partners, L.L.C. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Company's Form 8-K filed October 4, 2012)

10.10 Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 8, 2012, by and between HMSREG, LLC, CSL HillMeadows, LTD., Steadfast Asset Holdings, Inc., and Clean Title, Inc., doing business as Hummel Title Agency, in its capacity as escrow holder (incorporated by reference to Exhibit 10.10 to the Company's Form 8-K filed October 4, 2012)

10.11 Assignment and Assumption of Purchase Agreement, dated as of September 28, 2012, by and between Steadfast Asset Holdings, Inc. and SIR Hilliard Summit, LLC (incorporated by reference to Exhibit 10.11 to the Company's Form 8-K filed October 4, 2012)

10.12 Membership Interests Assignment and Assumption, made and entered into effective as of September 28, 2012, by and between HMSREG, LLC, CSL Hill Meadows, LTD., and SIR Hilliard Summit, LLC (incorporated by reference to Exhibit 10.12 to the Company's Form 8-K filed October 4, 2012)

10.13 Property Management Agreement, made and entered into as of September 28, 2012, by and between Steadfast Management Company, Inc. and Hilliard Meadows Apartments, LLC (incorporated by reference to Exhibit 10.13 to the Company's Form 8-K filed October 4, 2012)

10.14 Multifamily Note, effective as of September 28, 2012, by Hilliard Meadows Apartments, LLC in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Company's Form 8-K filed October 4, 2012)

10.15 Multifamily Loan and Security Agreement, made as of September 28, 2012, by and between Hilliard Meadows Apartments, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.15 to the Company's Form 8-K filed October 4, 2012)

10.16 Open-End Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of September 28, 2012, by Hilliard Meadows Apartments, LLC to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.16 to the Company's Form 8-K filed October 4, 2012)

10.17 Guaranty of Non-Recourse Obligations, dated as of September 28, 2012, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.17 to the Company's Form 8-K filed October 4, 2012)

10.18 Environmental Indemnity Agreement, dated as of September 28, 2012, by Hilliard Meadows Apartments, LLC to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.18 to the Company's Form 8-K filed October 4, 2012)

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document (Furnished herewith)

101.SCH XBRL Schema Document (Furnished herewith)

101.CAL XBRL Calculation Linkbase Document (Furnished herewith)

101.LAB XBRL Labels Linkbase Document (Furnished herewith)

101.PRE XBRL Presentation Linkbase Document (Furnished herewith)

101.DEF XBRL Definition Linkbase Document (Furnished herewith)