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, 2014

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 þ (Do not check if smaller reporting company) Smaller reporting company o

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

As of November 10, 2014, there were 76,907,113 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, 2014 (unaudited) and December 31, 2013	2
Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013 (unaudited)	3
Consolidated Statements of Stockholders' Equity for the year ended December 31, 2013 and for the nine months ended September 30, 2014 (unaudited)	4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 (unaudited)	5
Condensed Notes to Consolidated Financial Statements as of September 30, 2014 (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
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	66
Item 3. Defaults Upon Senior Securities	67
Item 4. Mine Safety Disclosures	67
Item 5. Other Information	67
Item 6. Exhibits	68
Signatures	69

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	172,669,319		$	162,425,511
Building and improvements	1,434,757,054			1,316,608,491
Tenant origination and absorption costs	1,195,687			15,588,747
Other intangible assets	2,644,263			2,644,263
Total real estate held for investment, cost	1,611,266,323			1,497,267,012
Less accumulated depreciation and amortization	(82,986,080		)	(46,376,515		)
Total real estate held for investment, net	1,528,280,243			1,450,890,497
Real estate held for sale, net	—			20,072,662
Total real estate, net	1,528,280,243			1,470,963,159
Cash and cash equivalents	20,025,414			19,349,492
Restricted cash	28,790,337			24,978,312
Rents and other receivables	1,746,780			28,555,764
Assets related to real estate held for sale	—			467,717
Deferred financing costs and other assets, net	16,314,556			17,575,410
Total assets	$	1,595,157,330		$	1,561,889,854
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	36,061,767		$	30,372,692
Below-market leases, net	—			163,237
Notes payable:
Mortgage notes payable, net	1,061,074,015			969,989,740
Revolving credit facility	—			—
Mortgage notes payable related to real estate held for sale	—			17,340,060
Total notes payable, net	1,061,074,015			987,329,800
Distributions payable	4,507,432			4,058,452
Due to affiliates, net	2,017,067			9,322,038
Liabilities related to real estate held for sale	—			580,100
Total liabilities	1,103,660,281			1,031,826,319
Commitments and contingencies (Note 10)
Redeemable common stock	28,967,385			12,945,007
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, 76,507,922 and 74,153,580 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	765,079			741,538
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of September 30, 2014 and December 31, 2013, respectively	10			10
Additional paid-in capital	647,057,257			640,181,521
Cumulative distributions and net losses	(185,292,682		)	(123,804,541		)
Total stockholders’ equity	462,529,664			517,118,528
Total liabilities and stockholders’ equity	$	1,595,157,330		$	1,561,889,854

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,
	2014			2013			2014			2013
Revenues:
Rental income	$	44,846,735		$	25,695,593		$	130,015,288		$	62,475,020
Tenant reimbursements and other	5,370,882			3,066,250			15,106,092			7,248,032
Total revenues	50,217,617			28,761,843			145,121,380			69,723,052
Expenses:
Operating, maintenance and management	14,005,015			7,379,830			40,173,136			17,852,031
Real estate taxes and insurance	9,211,396			4,356,209			26,412,787			10,270,695
Fees to affiliates	5,603,741			9,722,514			18,233,188			18,459,436
Depreciation and amortization	15,975,228			11,796,884			53,637,688			30,292,960
Interest expense	9,095,277			7,015,217			30,292,922			15,869,427
Loss on debt extinguishment	1,047,932			—			1,939,817			—
General and administrative expenses	1,232,577			1,025,724			4,093,993			2,730,664
Acquisition costs	255,864			2,172,569			1,356,146			5,292,959
Total expenses	56,427,030			43,468,947			176,139,677			100,768,172
Loss from continuing operations	(6,209,413		)	(14,707,104		)	(31,018,297		)	(31,045,120		)
Gain on sales of real estate, net	2,871,840			—			9,944,134			—
Net loss	(3,337,573		)	(14,707,104		)	(21,074,163		)	(31,045,120		)
Loss per common share — basic and diluted	$	(0.05	)	$	(0.34	)	$	(0.28	)	$	(0.93	)
Weighted average number of common shares outstanding — basic and diluted	75,792,897			43,015,311			75,151,322			33,543,362
Distributions declared per common share	$	0.181		$	0.181		$	0.537		$	0.537

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 STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2013

AND FOR THENINE MONTHS ENDEDSEPTEMBER 30, 2014 (Unaudited)

	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, December 31, 2012	22,908,859		$	229,086		1,000	$	10	$	191,130,977		$	(39,278,923	)	$	152,081,150
Issuance of common stock	51,373,960		513,743			—	—		522,554,977			—			523,068,720
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—	—		(49,014,259		)	—			(49,014,259		)
Transfers to redeemable common stock	—		—			—	—		(10,078,483		)	—			(10,078,483		)
Redemption of common stock	(129,239	)	(1,291		)	—	—		(1,245,009		)	—			(1,246,300		)
Other offering costs to affiliates	—		—			—	—		(13,271,892		)	—			(13,271,892		)
Distributions declared	—		—			—	—		—			(28,645,761		)	(28,645,761		)
Amortization of stock-based compensation	—		—			—	—		105,210			—			105,210
Net loss for the year ended December 31, 2013	—		—			—	—		—			(55,879,857		)	(55,879,857		)
BALANCE, December 31, 2013	74,153,580		741,538			1,000	10		640,181,521			(123,804,541		)	517,118,528
Issuance of common stock	2,034,031		20,340			—	—		19,672,675			—			19,693,015
Issuance of restricted common stock to Advisor	488,281		4,883			—	—		4,995,117			—			5,000,000
Transfers to redeemable common stock, net	—		—			—	—		(16,256,258		)	—			(16,256,258		)
Redemption of common stock	(167,970	)	(1,682		)	—	—		(1,630,336		)	—			(1,632,018		)
Distributions declared	—		—			—	—		—			(40,413,978		)	(40,413,978		)
Amortization of stock-based compensation	—		—			—	—		94,538			—			94,538
Net loss for the nine months ended September 30, 2014	—		—			—	—		—			(21,074,163		)	(21,074,163		)
BALANCE, September 30, 2014	76,507,922		$	765,079		1,000	$	10	$	647,057,257		$	(185,292,682	)	$	462,529,664

See accompanying notes to consolidated financial statements.

4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2014			2013
Cash Flows from Operating Activities:
Net loss	$	(21,074,163	)	$	(31,045,120	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	53,637,688			30,292,960
Accretion of below-market leases	(163,237		)	(697,951		)
Amortization of deferred financing costs	1,115,818			691,138
Amortization of stock-based compensation	94,538			396,534
Amortization of loan premiums and discounts	(926,095		)	(676,705		)
Change in fair value of interest rate cap agreements	3,362,058			356,553
Loss on debt extinguishment	145,816			—
Gain on sales of real estate	(9,944,134		)	—
Changes in operating assets and liabilities:
Restricted cash for operating activities	549,660			(9,622,161		)
Rents and other receivables	254,153			(622,154		)
Other assets	(274,697		)	(1,822,515		)
Accounts payable and accrued liabilities	4,875,095			14,363,004
Due to affiliates, net	800,275			4,024,602
Net cash provided by operating activities	32,452,775			5,638,185
Cash Flows from Investing Activities:
Acquisition of real estate investments	(110,388,964		)	(443,322,401		)
Additions to real estate investments	(18,082,456		)	(5,326,153		)
Escrow deposits for pending real estate acquisitions	(3,120,400		)	(9,388,970		)
Restricted cash for investing activities	(3,893,968		)	(2,643,089		)
Purchase of interest rate caps	(826,284		)	(2,975,579		)
Proceeds from sales of real estate, net	29,761,182			—
Net cash used in investing activities	(106,550,890		)	(463,656,192		)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	120,583,585			260,219,000
Principal payments on mortgage notes payable	(45,913,275		)	(4,207,599		)
Borrowings from credit facility	35,000,000			40,000,000
Principal payments on credit facility	(35,000,000		)	(45,000,000		)
Proceeds from issuance of common stock	26,561,229			263,347,918
Payments of commissions on sale of common stock and related dealer manager fees	—			(25,523,439		)
Reimbursement of other offering costs to affiliates	(3,105,246		)	(6,376,331		)
Payment of deferred financing costs	(1,436,113		)	(3,427,113		)
Distributions to common stockholders	(20,284,125		)	(9,287,770		)
Redemptions of common stock	(1,632,018		)	(869,253		)
Net cash provided by financing activities	74,774,037			468,875,413
Net increase in cash and cash equivalents	675,922			10,857,406
Cash and cash equivalents, beginning of period	19,349,492			9,528,664
Cash and cash equivalents, end of period	$	20,025,414		$	20,386,070

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	26,532,866		$	14,252,681
Supplemental Disclosure of Noncash Transactions:
Increase in distributions payable	$	448,980		$	1,439,845
Assumption of mortgage notes payable to acquire real estate	$	—		$	98,229,713
Application of escrow deposits to acquire real estate	$	2,300,400		$	7,263,860
Premium on assumed mortgage notes payable	$	—		$	4,332,585
Increase in amounts receivable from transfer agent	$	—		$	(1,847,215	)
Increase in amounts payable to affiliates for other offering costs	$	—		$	1,200,152
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	19,680,873		$	7,190,607
Issuance of restricted common stock to settle liability	$	5,000,000		$	—
Increase in redeemable common stock, net	$	(16,256,258	)	$	(5,927,374	)
Increase in redeemable common stock payable	$	233,880		$	241,816

See accompanying notes to consolidated financial statements.

6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(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 (the “Advisor”), a Delaware limited liability company formed on May 1, 2009, invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 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. The Company and Advisor, as a limited partner of the Operating Partnership, entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009.

As of September 30, 2014, the Company owned 65 multifamily properties comprising a total of 16,395 apartment homes, and an additional 25,973 square feet of rentable commercial space at three properties.

Public Offering

On July 19, 2010, the Company commenced its initial public offering pursuant to a registration statement on Form S-11 filed 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 “Primary 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,” and together with the Primary Offering, the “Public Offering”) at an initial price of $9.50 per share.

On July 12, 2012, the Company’s board of directors determined an estimated value per share of the Company’s common stock as of March 31, 2012 of $10.24. 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 to the public in the Primary 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 Primary Offering price of $10.24 per share.

The Company terminated its Primary Offering on December 20, 2013, but continues to offer shares of common stock pursuant to the DRP. Through December 20, 2013, the Company sold 73,608,337 shares of common stock in the Public Offering for gross proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to the DRP for gross offering proceeds of $15,397,232.

The business of the Company is externally managed by the Advisor pursuant to an Advisory Agreement by and among the Company, the Operating Partnership and the Advisor (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on May 3, 2015. 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. Steadfast Capital Markets Group, LLC (the “Dealer Manager”), an affiliate of the Company, served as the dealer manager for the Public Offering. The Dealer Manager was responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor,

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

along with the Dealer Manager, provides marketing, investor relations and other administrative services on the Company’s behalf.

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the 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.

2. Summary of Significant Accounting Policies

During the nine months ended September 30, 2014, the Company adopted Accounting Standards Update (“ASU”) 2014-08 (described below), which impacts the Company's reporting on discontinued operations. There have been no other significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2013. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2014.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and its 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, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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.

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These reclassifications have not changed the results of operations of prior periods. During the nine months ended September 30, 2014, the Company disposed of three apartment communities. As a result, certain assets and liabilities were classified as held for sale on the consolidated balance sheets for all periods presented.

Fair Value Measurements

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

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

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

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

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

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

Interest rate cap agreements - These derivatives did not qualify as fair value hedges and are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in deferred financing costs and other assets, net in the accompanying consolidated balance sheets.

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

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

	September 30, 2014
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	2,932,530	$	—
	December 31, 2013
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	5,462,561	$	—

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.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and the revolving line of credit 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 mortgage 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, 2014 and December 31, 2013, the fair value of the mortgage notes payable was $1,062,124,994 and $965,681,419, respectively, compared to the carrying value of $1,061,074,015 and $987,329,800, respectively. The Company has determined that its mortgage notes payable are classified as Level 3 within the fair value hierarchy.

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). Distributions were based on daily record dates and calculated at a rate of $0.001964 per share per day. Each day during the period from January 1, 2014 through September 30, 2014 was a record date for distributions.

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2014, the Company declared distributions of $0.181 and $0.537 per common share, respectively. During the three and nine months ended September 30, 2013, the Company declared distributions of $0.181 and $0.537 per common share, respectively.

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. The Company's unvested restricted common stock contain non-forfeitable rights to dividends and are considered to be participating securities in accordance with GAAP and, therefore, are included in the computation of earnings (loss) per share under the two-class method. Under the two-class method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The unvested restricted common stock are not allocated losses as the awards do not have a contractual obligation to share in the losses of the Company. The two-class method is an earnings (loss) allocation formula that determines earnings (loss) per share for each class of common shares and participating securities according to dividends declared and participation rights in undistributed earnings.

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.

RecentlyIssued Accounting Standards Updates

In April 2014, the FASB issued new guidance that limits discontinued operations reporting to disposals of components of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when any of the following occurs: (a) the component of an entity or group of components of an entity meets the criteria to be classified as held for sale; (b) the component of an entity or group of components of an entity is disposed of by sale; or (c) the component of an entity or group of components of an entity is disposed of other than by sale. This guidance also requires additional disclosures about discontinued operations and is effective for reporting periods beginning after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company early adopted the new guidance for the reporting period beginning January 1, 2014. As a result of the adoption of this guidance, properties that are classified as held for sale in the ordinary course of business on or subsequent to January 1, 2014 generally would be included in continuing operations on the Company’s consolidated statements of operations to the extent such disposals did not meet the criteria for classification as a discontinued operation described above. Additionally, any gain or loss on sale of real estate that does not meet the criteria for classification as a discontinued operation would be presented on the consolidated statements of operations below income from continuing operations and income from discontinued operations.

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede existing revenue guidance under GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance is effective for public business entities for annual periods beginning after 15 December 2016, including interim periods within that period. Early adoption is not permitted under GAAP. The Company is currently investigating the impact of this new guidance.

In August 2014, the FASB issued new guidance that requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. Until now, the requirement to perform a going concern evaluation existed only in auditing standards. The new guidance requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists. Management will be required to make this evaluation for both annual and interim reporting periods. The standard provides that substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The guidance is effective for annual periods ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The Company is currently investigating the impact of this new guidance.

3. Real Estate

As of September 30, 2014, the Company owned 65 multifamily properties, encompassing in the aggregate 16,395 apartment homes and 25,973 square feet of rentable commercial space. The total cost of the Company’s real estate portfolio was $1,607,007,557. As of September 30, 2014 and December 31, 2013, the Company’s portfolio was approximately 94.8% and 92.4% occupied and the average monthly rent was $962 and $897.

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Current Year Acquisitions

During the nine months ended September 30, 2014, the Company acquired the following properties:

						Purchase Price Allocation
Property Name	Location	Purchase Date	Units	Acquisition Fee		Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Purchase Price
Sycamore Terrace Apartments (Phase II)	Terre Haute, IN	3/5/2014	72	$	134,706	$	381,657	$	6,190,931	$	101,569	$	6,674,157
Reserve at Creekside Village	Chattanooga, TN	3/28/2014	192	465,021		1,344,233		17,178,743		352,024		18,875,000
Mapleshade Park	Dallas, TX	3/31/2014	148	498,873		3,585,171		19,131,230		608,599		23,325,000
Richland Falls	Murfreesboro, TN	5/16/2014	190	426,751		1,306,794		19,422,561		270,645		21,000,000
Oak Crossing	Fort Wayne, IN	6/3/2014	222	490,474		2,005,491		21,808,038		416,471		24,230,000
Park Shore	St. Charles, IL	9/12/2014	160	372,778		1,619,712		16,221,717		508,571		18,350,000
						$	10,243,058	$	99,953,220	$	2,257,879	$	112,454,157

As of September 30, 2014 and December 31, 2013, accumulated depreciation and amortization related to the Company's consolidated real estate properties and related intangibles were as follows:

	September 30, 2014
	Assets																Liabilities
	Land		Building and Improvements			Tenant Origination and Absorption Costs			Other Intangible Assets			Total Real Estate Held for Investment			Real Estate Held for Sale		Below-Market Leases
Investments in real estate	$	172,669,319	$	1,434,757,054		$	1,195,687		$	2,644,263		$	1,611,266,323		$	—	$	—
Less: Accumulated depreciation and amortization	—		(82,255,994		)	(528,682		)	(201,404		)	(82,986,080		)	—		—
Net investments in real estate and related lease intangibles	$	172,669,319	$	1,352,501,060		$	667,005		$	2,442,859		$	1,528,280,243		$	—	$	—

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

	December 31, 2013
	Assets																	Liabilities
	Land		Building and Improvements			Tenant Origination and Absorption Costs			Other Intangible Assets			Total Real Estate Held for Investment			Real Estate Held for Sale			Below-Market Leases
Investments in real estate	$	162,425,511	$	1,316,608,491		$	15,588,747		$	2,644,263		$	1,497,267,012		$	22,616,466		$	(1,410,728	)
Less: Accumulated depreciation and amortization	—		(39,156,143		)	(7,133,844		)	(86,528		)	(46,376,515		)	(2,543,804		)	1,247,491
Net investments in real estate and related lease intangibles	$	162,425,511	$	1,277,452,348		$	8,454,903		$	2,557,735		$	1,450,890,497		$	20,072,662		$	(163,237	)

Depreciation and amortization expenses were $15,975,228 and $53,637,688 for the three and nine months ended September 30, 2014, and $11,796,884 and $30,292,960 for the three and nine months ended September 30, 2013, respectively.

Depreciation of the Company's buildings and improvements were $15,035,916 and $43,476,249 for the three and nine months ended September 30, 2014, and $8,435,657 and $20,303,301 for the three and nine months ended September 30, 2013, respectively.

Amortization of the Company’s tenant origination and absorption costs was $901,020 and $10,046,563 for the three and nine months ended September 30, 2014, and $3,335,946 and $9,941,423 for the three and nine months ended September 30, 2013, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

Amortization of the Company’s other intangible assets was $38,292 and $114,876 for the three and nine months ended September 30, 2014, and $25,281 and $48,236 for the three and nine months ended September 30, 2013, respectively. Other intangible assets had a weighted-average amortization period as of the date of acquisition of 18.17 years.

The increase in rental income as a result of the accretion of the Company’s below-market lease intangible liabilities for the three and nine months ended September 30, 2014 was $0 and $163,237, respectively, and $271,633 and $697,951 for the three and nine months ended September 30, 2013. The Company’s below-market lease intangible liabilities had a weighted-average accretion period as of the date of acquisition of less than one year.

The future amortization of the Company’s acquired other intangible assets as of September 30, 2014 and thereafter is as follows:

October 1 through December 31, 2014	$	38,292
2015	153,168
2016	153,168
2017	153,168
2018	153,168
Thereafter	1,791,895
	$	2,442,859

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Operating Leases

As of September 30, 2014, the Company’s real estate portfolio was comprised of 16,395 apartment homes and was 97.3% leased by a diverse group of residents. For each of the three and nine months ended September 30, 2014 and 2013, 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 tenants. The residential tenant lease terms consist of lease durations equal to 12 months or less. The commercial office tenant leases consist of lease durations varying from 3.42 to 7.09 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 payable and accrued liabilities in the accompanying consolidated balance sheets and totaled $4,002,062 and $3,560,623 as of September 30, 2014 and December 31, 2013, respectively.

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial office tenants as of September 30, 2014 and thereafter is as follows:

October 1 through December 31, 2014	$	86,661
2015	347,036
2016	350,051
2017	354,433
2018	202,540
Thereafter	361,961
	$	1,702,682

As of September 30, 2014 and December 31, 2013, 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.

Current Year Property Dispositions

Lincoln Tower Apartments

On August 11, 2010, the Company, through an indirect wholly owned subsidiary, acquired Lincoln Tower Apartments, a multifamily property located in Springfield, Illinois, containing 190 apartment homes and 8,995 rentable square feet of commercial space. The purchase price of the Lincoln Tower Apartments was $9,500,000, plus closing costs. On June 27, 2014, the Company sold the Lincoln Tower Apartments for $15,887,500, resulting in a gain of $7,072,294, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Lincoln Tower Apartments was not affiliated with the Company or the Advisor.

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Arbor Pointe Apartments

On May 5, 2011, the Company, through an indirect wholly owned subsidiary, acquired Arbor Pointe Apartments, a multifamily property located in Louisville, Kentucky, containing 130 apartment homes. The purchase price of Arbor Pointe Apartments was $6,500,000, plus closing costs. On July 1, 2014, the Company sold Arbor Pointe Apartments for $8,325,000, resulting in a gain of $2,034,244, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Arbor Pointe Apartments was not affiliated with the Company or the Advisor.

Prairie Walk Apartments

On December 22, 2011, the Company, through an indirect wholly owned subsidiary, acquired Prairie Walk Apartments, a multifamily property located in Kansas City, Missouri, containing 128 apartment homes. The purchase price of Prairie Walk Apartments was $6,100,000, plus closing costs. On August 6, 2014, the Company sold Prairie Walk Apartments for $6,700,000, resulting in a gain of $837,596, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Prairie Walk Apartments was not affiliated with the Company or the Advisor.

The results of operations for the three and nine months ended September 30, 2014 and 2013 for the disposed properties were included in continuing operations on the Company's consolidated statements of operations and are as follows:

	For the Three Months Ended September 30 , 2014						For the Nine Months Ended September 30 , 2014
	Lincoln Tower		Arbor Pointe		Prairie Walk		Lincoln Tower		Arbor Pointe		Prairie Walk
Total Revenues	$	3,637	$	—	$	120,097	$	1,203,334	$	593,946	$	651,674
Total Expenses	18,623		930,173		688,132		2,580,624		1,471,384		1,154,811
Expenses Included in Total Expenses:
Selling Expenses	—		109,967		120,935		447,616		109,967		120,935
Loss on Debt Extinguishment	—		676,888		371,044		891,885		676,888		371,044
Disposition Fee	—		124,875		100,500		238,313		124,875		100,500

	For the Three Months Ended September 30 , 2013						For the Nine Months Ended September 30 , 2013
	Lincoln Tower		Arbor Pointe		Prairie Walk		Lincoln Tower		Arbor Pointe		Prairie Walk
Total Revenues	$	554,930	$	308,571	$	269,520	$	1,687,291	$	906,089	$	784,278
Total Expenses	461,194		286,170		239,006		1,465,014		831,928		699,473
Expenses Included in Total Expenses:
Selling Expenses	—		—		—		—		—		—
Loss on Debt Extinguishment	—		—		—		—		—		—
Disposition Fee	—		—		—		—		—		—

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

4. Deferred Financing Costs and Other Assets

As of September 30, 2014 and December 31, 2013, deferred financing costs and other assets, net of accumulated amortization, consisted of:

	September 30, 2014			December 31, 2013
Deferred financing costs	$	9,515,064		$	8,440,169
Less: accumulated amortization	(2,136,302		)	(1,235,886		)
	7,378,762			7,204,283
Prepaid expenses	3,315,421			3,142,924
Interest rate cap agreements	2,932,530			5,462,561
Escrow deposits for pending real estate acquisitions	1,320,000			500,000
Deposits	1,367,843			1,265,642
	$	16,314,556		$	17,575,410

5. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable secured by real property, including mortgage notes payable related to real estate held for sale, as of September 30, 2014 and December 31, 2013:

					Principal Outstanding at
	Property Name	Payment Type	Maturity Date	Interest Rate(1)	September 30, 2014		December 31, 2013
1	Lincoln Tower(2)	Principal and interest	May 1, 2019	3.66%	$	—	$	8,434,054
2	Park Place	Interest only	July 1, 2018	3.50%	4,914,445		4,938,136
3	Arbor Pointe(2)	Principal and interest	June 1, 2018	4.86%	—		5,006,199
4	Clarion Park	Principal and interest	July 1, 2018	4.58%	8,518,451		8,632,301
5	Cooper Creek	Principal and interest(3)	September 1, 2018	3.89%	6,532,478		6,624,725
6	Truman Farm Villas	Principal and interest(3)	January 1, 2019	3.78%	5,737,365		5,818,457
7	Prairie Walk(2)	Principal and interest(3)	January 1, 2019	3.74%	—		3,899,807
8	EBT Lofts	Principal and interest(3)	January 1, 2019	3.82%	5,423,339		5,499,432
9	Windsor on the River(4)(5)	Principal and interest(3)	June 1, 2024	1-Mo LIBOR + 2.09%	23,500,000		23,500,000
10	Renaissance St. Andrews	Principal and interest(3)	January 1, 2023	3.85%	8,978,151		9,084,000
11	Spring Creek(6)	Principal and interest	February 1, 2018	4.88%	13,663,094		13,912,669
12	Montclair Parc	Principal and interest	May 1, 2019	3.70%	23,948,984		24,305,671
13	Sonoma Grande	Principal and interest(7)	June 1, 2019	3.31%	22,433,838		22,540,000
14	Estancia(6)	Interest only	October 1, 2017(8)	5.94%	21,575,298		21,844,621
15	Montelena(6)	Principal and interest(9)	August 1, 2018	4.82%	12,372,936		12,614,683

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

					Principal Outstanding at
	Property Name	Payment Type	Maturity Date	Interest Rate(1)	September 30, 2014		December 31, 2013
16	Valley Farms	Principal and interest	January 1, 2020	4.25%	$	10,113,523	$	10,244,494
17	Hilliard Park	Principal and interest(3)	October 1, 2022	3.62%	13,628,480		13,818,616
18	Hilliard Summit	Principal and interest(3)	October 1, 2022	3.56%	16,516,240		16,749,262
19	Springmarc	Principal and interest(3)	November 1, 2019	3.69%	15,237,577		15,446,452
20	Ashley Oaks(5)	Principal and interest(3)	November 1, 2021	1-Mo LIBOR + 2.35%	21,392,096		21,680,010
21	Arrowhead	Principal and interest(3)	December 1, 2019	3.38%	12,382,968		12,562,000
22	The Moorings	Principal and interest(3)	December 1, 2019	3.37%	14,970,160		15,187,000
23	Forty 57	Principal and interest(10)	January 1, 2023	3.73%	38,500,000		38,500,000
24	Keystone Farms	Principal and interest(3)	January 1, 2023	3.86%	6,127,890		6,200,000
25	Riverford Crossing	Principal and interest(10)	January 1, 2023	3.78%	21,900,000		21,900,000
26	South Pointe(11)	Principal and interest(10)	October 1, 2021	5.00%	225,585		—
27	Montecito Property	Principal and interest(3)	January 1, 2020	3.47%	14,071,910		14,250,000
28	Hilliard Grand	Principal and interest	August 1, 2052	5.59%	28,887,815		29,050,224
29	The Hills at Fair Oaks	Principal and interest(10)	February 1, 2023	4.02%	24,767,000		24,767,000
30	Library Lofts	Principal and Interest	April 1, 2020	3.66%	8,985,689		9,113,640
31	Trails at Buda Ranch(5)	Principal and interest(3)	April 1, 2023	1-Mo LIBOR + 2.42%	16,899,605		17,030,000
32	Deep Deuce at Bricktown(6)	Principal and interest	April 1, 2018	5.04%	24,079,972		24,603,299
33	Deep Deuce at Bricktown — Supplemental Loan	Principal and interest	April 1, 2018	4.73%	2,748,097		2,779,688
34	Deer Valley(5)	Principal and interest(3)	May 1, 2023	1-Mo LIBOR + 2.40%	20,744,070		20,875,000
35	Grayson Ridge(5)	Principal and interest(3)	July 1, 2020	1-Mo LIBOR + 2.63%	10,688,432		10,725,000
36	Rosemont Olmos Park(5)	Principal and interest(10)	July 1, 2020	1-Mo LIBOR + 2.65%	14,667,462		15,100,000
37	Retreat at Quail North(6)	Principal and interest	January 1, 2053	4.80%	17,070,649		17,190,827
38	The Lodge at Trails Edge(6)	Principal and interest	November 1, 2020	4.47%	10,801,029		10,965,388
39	The Lodge at Trails Edge — Supplemental Loan	Principal and interest	November 1, 2020	5.75%	1,918,591		1,936,199
40	Arbors of Carrollton(6)	Principal and interest	December 1, 2020	4.83%	5,316,651		5,395,471
41	Arbors of Carrollton — Supplemental Loan	Principal and interest	December 1, 2020	4.83%	975,325		986,624
42	Waterford on the Meadow(6)	Principal and interest	December 1, 2020	4.70%	13,954,233		14,154,991
43	Waterford on the Meadow — Supplemental Loan	Principal and interest	December 1, 2020	4.78%	2,729,265		2,761,194

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

					Principal Outstanding at
	Property Name	Payment Type	Maturity Date	Interest Rate(1)	September 30, 2014		December 31, 2013
44	The Belmont(6)	Principal and interest	March 1, 2021	5.91%	$	9,347,498	$	9,498,460
45	Meritage at Steiner Ranch(5)	Principal and interest(3)	September 1, 2020	1-Mo LIBOR + 2.47%	55,500,000		55,500,000
46	Tapestry Park(5)	Principal and interest(3)	October 1, 2020	1-Mo LIBOR + 2.44%	23,100,000		23,100,000
47	Dawntree(6)	Principal and interest(12)	August 6, 2021	5.48%	15,913,169		16,022,763
48	Stuart Hall(5)	Principal and interest(3)	September 1, 2020	1-Mo LIBOR + 2.75%	12,392,761		12,407,000
49	BriceGrove Park(5)	Principal and interest(3)	October 1, 2020	1-Mo LIBOR + 2.58%	14,985,000		14,985,000
50	Cantare at Indian Lake Village(5)	Interest only	August 1, 2024	1-Mo LIBOR + 1.62%	18,850,000		—
51	Landing at Mansfield(5)	Principal and interest(3)	October 1, 2020	1-Mo LIBOR + 2.69%	22,750,000		22,750,000
52	The Heights(5)	Principal and interest(3)	October 1, 2020	1-Mo LIBOR + 2.60%	29,014,000		29,014,000
53	Villas at Huffmeister(5)	Principal and interest(3)	November 1, 2020	1-Mo LIBOR + 2.68%	25,963,000		25,963,000
54	Villas at Kingwood(5)	Principal and interest(3)	November 1, 2020	1-Mo LIBOR + 2.68%	28,105,000		28,105,000
55	Waterford Place at Riata Ranch(5)	Principal and interest(3)	November 1, 2020	1-Mo LIBOR + 2.64%	16,340,000		16,340,000
56	Carrington Place(5)	Principal and interest(10)	December 1, 2023	1-Mo LIBOR + 2.16%	22,376,000		22,376,000
57	Carrington at Champion Forest(5)	Principal and interest(10)	December 1, 2023	1-Mo LIBOR + 2.16%	22,959,000		22,959,000
58	Carrington Park(5)	Principal and interest(10)	December 1, 2023	1-Mo LIBOR + 2.16%	17,717,000		17,717,000
59	Willow Crossing(5)	Principal and interest(10)	December 1, 2023	1-Mo LIBOR + 2.20%	43,500,000		43,500,000
60	Heritage Grand at Sienna Plantation(6)	Principal and interest	January 1, 2053	4.65%	16,734,894		16,845,443
61	Audubon Park(5)	Principal and interest(10)	January 1, 2024	1-Mo LIBOR + 2.41%	11,760,000		11,760,000
62	Mallard Crossing(5)	Principal and interest(3)	January 1, 2021	1-Mo LIBOR + 2.57%	27,860,000		27,860,000
63	Renaissance at Carol Stream(5)	Principal and interest(3)	February 1, 2021	1-Mo LIBOR + 2.36%	20,440,000		—
64	Mapleshade Park(5)	Principal and interest(13)	April 1, 2021	1-Mo LIBOR + 2.15%	15,161,000		—

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

					Principal Outstanding at
	Property Name	Payment Type	Maturity Date	Interest Rate(1)	September 30, 2014		December 31, 2013
65	Richland Falls	Principal and interest(10)	May 16, 2017(8)	Variable(14)	$	13,800,000	$	—
66	Oak Crossing(5)	Interest only	July 1, 2024	1-Mo LIBOR + 1.63%	15,762,000		—
67	Park Shore(5)	Interest only	October 1, 2021	1-Mo LIBOR + 1.87%	12,845,000		—
					$	1,061,074,015	$	987,329,800

_____________________________

(1) Except as otherwise noted, interest on the notes accrues at a fixed rate per annum. At September 30, 2014, the weighted-average interest rate of the Company's fixed rate debt and variable rate debt was 4.30% and 2.52%, respectively. The weighted-average interest rate of the Company's blended fixed and variable rates was 3.33% at September 30, 2014.

(2) The Lincoln Tower Apartments, Arbor Pointe Apartments, and Prairie Walk Apartments were sold on June 27, 2014, July 1, 2014 and August 6, 2014, respectively, and the mortgage notes payable were repaid in full on the same day with proceeds from the sale. Upon the early extinguishment of the Lincoln Tower, Arbor Pointe, and Prairie Walk mortgage notes payable, a loss on debt extinguishment of $891,885, $676,888, and $371,044, respectively, was recorded on the consolidated statements of operations, including an expense of the net deferred financing costs of $95,658, $27,063, and $23,095, respectively.

(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) On May 9, 2014, the Company refinanced the existing mortgage loan secured by the Windsor on the River property with the proceeds of a new mortgage loan in the aggregate principal amount of $23,500,000. The proceeds from the new loan were used to redeem the assumed obligations for tax exempt bonds issued by the Iowa Finance Authority in the amount of $23,500,000. In connection with the refinancing, the Company’s obligations under the existing letter of credit were terminated.

(5) See Note 11 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company's variable rate loans.

(6) The following table summarizes the debt premiums and discounts as of September 30, 2014, including the unamortized portion included in the principal balance as well as amounts amortized as an offset to interest expense in the accompanying consolidated statements of operations:

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Property Name	Unamortized Portion of Debt Premium (Discount) as of September 30, 2014			Amortization of Debt Premium (Discount) During the
				Three Months Ended September 30,					Nine Months Ended September 30,
				2014			2013		2014			2013
Spring Creek	$	339,006		$	25,357		$	25,357	$	76,070		$	76,071
Estancia	1,075,298			89,774			89,774		269,323			269,322
Montelena	561,652			36,592			36,592		109,776			109,776
Deep Deuce at Bricktown	1,099,787			78,798			78,799		236,395			160,986
Retreat at Quail North	460,943			3,009			1,817		9,026			3,376
The Lodge at Trails Edge	97,130			3,968			3,968		11,904			4,718
Arbors of Carrollton	153,786			6,235			6,235		18,704			6,235
Waterford on the Meadow	311,095			12,612			12,612		37,836			12,612
The Belmont	603,089			23,556			17,224		70,669			17,224
Dawntree	745,524			31,746			16,385		95,239			16,385
Heritage Grand at Sienna Plantation	(451,814		)	(2,949		)	—		(8,847		)	—
	$	4,995,496		$	308,698		$	288,763	$	926,095		$	676,705

(7) A monthly payment of interest only was 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 Company has the option to extend the maturity date for 12 months from the original maturity date, subject to customary and market rate extension provisions.

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

(10) A monthly payment of interest only is due and payable for 24 months from the loan date, after which, a monthly payment of principal and interest is due and payable until the maturity date.

(11) On September 11, 2014, the Company obtained a loan from Farmers & Merchants Bank of Long Beach in an amount up to a maximum principal balance of $9,720,000 to finance a portion of the development and construction of an additional 96 apartment units at the Southpointe Property, which was acquired by the Company on December 28, 2012.

(12) A monthly payment of interest only was due and payable through August 6, 2014, after which, a monthly payment of principal and interest is due and payable until the maturity date.

(13) A monthly payment of interest only is due and payable for 36 months from the loan date, after which, a monthly payment of principal and interest is due and payable until the maturity date.

(14) The Company has the option to select the interest rate at the end of each LIBOR interest period (as defined in the note agreement) from the following options: (1) 0.85% plus the highest of (A) the Prime Rate (as defined in the note agreement), (B) the sum of the Federal Funds Rate (as defined in the note agreement) plus 0.50%, and (C) daily LIBOR plus 1.0% (the “Base Rate Option”) or (2) LIBOR plus 1.85% (the “LIBOR Option”). If the LIBOR Option is

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

selected by the Company, the Company may select either the one-month LIBOR, three-month LIBOR or six-month LIBOR. The margin rate under each option may be reduced by 20 basis points if the property achieves occupancy in excess of 90% for 90 consecutive days. As of September 30, 2014, the Company had elected the LIBOR Option using one-month LIBOR.

Revolving Credit Facility

The Company entered into a revolving line of credit pursuant to a Loan Agreement with PNC Bank, N.A. (“PNC Bank”) to borrow up to $20,000,000. Each advance under the facility is due within 180 days from the date of the advance. On July 18, 2014, the Company and PNC Bank amended the Loan Agreement to, among other things, increase the potential borrowing limit from $20,000,000 to $35,000,000. The amended and restated credit facility consists of a Tranche A and a Tranche B, and provides certain security threfor. The maximum amount that may be borrowed under Tranche A and Tranche B are $20,000,000 and $15,000,000, respectively. The amended and restated credit facility has a maturity date of July 17, 2016, subject to extension.

For each advance, the Company had the option to select the interest rate from the following options: (1) 2.0% plus the highest of (A) the Prime Rate (as defined in the Loan Agreement), (B) the sum of the Federal Funds Rate (as defined in the Loan Agreement) plus 0.50%, and (C) daily LIBOR plus 1.0% or (2) LIBOR plus 3.0%. For each advance wherein one of the LIBOR options was selected by the Company, the Company could select either the one-month LIBOR, three-month LIBOR or six-month LIBOR. For each advance under the amended and restated credit facility, the Company has the option to select the interest rate from the following options: (1) Base Rate Option (as defined in the Loan Agreement) plus (i) with respect to Tranche A, 0.75% and (ii) with respect to Tranche B, 2.0%; or (2) LIBOR Option, which is a rate per annum fixed for the LIBOR Interest Period (as defined in the Loan Agreement) equal to the sum of LIBOR plus (i) with respect to Tranche A, 1.6% and (ii) with respect to Tranche B, 3.0%.

As of September 30, 2014, $0 was outstanding under the credit facility.

The following is a summary of the Company's aggregate maturities as of September 30, 2014:

			Remainder of 2014		Maturities During the Years Ending December 31,
Contractual Obligation	Total				2015		2016		2017		2018		Thereafter
Principal payments on outstanding debt obligations(1)	$	1,056,078,519	$	3,469,617	$	14,606,257	$	17,122,487	$	51,989,163	$	83,457,292	$	885,433,703

_____________________________

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude 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, 2014 and December 31, 2013, the Company was in compliance with all financial debt covenants.

For the three and nine months ended September 30, 2014, the Company incurred interest expense of $9,095,277 and $30,292,922. Interest expense for the three and nine months ended September 30, 2014 includes amortization of deferred financing costs of $356,430 and $1,115,818, amortization of loan premiums of $308,698 and $926,095, and net unrealized losses from the change in fair value of interest rate cap agreements of $46,544 and $3,362,058, respectively.

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

For the three and nine months ended September 30, 2013, the Company incurred interest expense of $7,015,217 and $15,869,427. Interest expense for the three and nine months ended September 30, 2013 includes amortization of deferred financing costs of $295,391 and $691,138, amortization of loan premiums of $288,763 and $676,705, and net unrealized losses from the change in fair value of interest rate cap agreements of $730,408 and $356,553, respectively.

Interest expense of $2,748,240 and $2,539,966 was payable as of September 30, 2014 and December 31, 2013, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6. Stockholders’ Equity

General

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

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, 2014, the Company had issued 76,269,612 shares of common stock in a private offering and its subsequent Public Offering for offering proceeds of $675,079,343, net of offering costs of $95,845,468, including 3,610,976 shares of common stock pursuant to the ongoing DRP for total proceeds of $35,077,970. Offering costs primarily consist of selling commissions and dealer manager fees. Offering proceeds include $0 and $26,549,087 of amounts receivable from the Company’s transfer agent as of September 30, 2014 and December 31, 2013, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets. The Company terminated its Public Offering on December 20, 2013, but continues to offer shares pursuant to the DRP.

During both the nine months ended September 30, 2014 and the year ended December 31, 2013, the Company granted 10,000 shares of restricted stock to its independent directors at a weighted average fair value of $10.24 as compensation for services in connection with their re-election to the board of directors at the Company’s annual meeting. 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 $50,186 and $94,538 for the three and nine months ended September 30, 2014 and $45,238 and $83,034 for the three and nine months ended September 30, 2013, respectively, for compensation expense related to the issuance of restricted common stock to the independent directors. The weighted average remaining term of the restricted common stock is 1.50 years as of September 30, 2014.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

On November 15, 2012, the Company entered into a Stock Purchase Plan (the “Plan”) with Ella Shaw Neyland, the Company's President and a member of the Company's board of directors, whereby Ms. Neyland agreed to invest $5,530 for 600 shares of common stock pursuant to the Public Offering on the first day of each fiscal quarter. The purchase of shares of the Company’s common stock by Ms. Neyland pursuant to the Plan commenced on January 1, 2013 and terminated on November 15, 2013. The shares were purchased pursuant to the Plan at a price of $9.216 per share, reflecting the elimination of selling commissions and the dealer manager fee in connection with such sales.

On June 11, 2014, the Company entered into a restricted stock agreement with the Advisor whereby the Company issued to the Advisor 488,281.25 restricted shares of the Company’s common stock at a fair market value of $10.24 per share to pay certain deferred fees due to the Advisor in the aggregate amount of $5,000,000 that were to be paid upon certain Company performance metrics. The shares of restricted stock vest and become non-forfeitable upon the earliest to occur of (i) 50% at December 31, 2015 and 50% at December 31, 2016, (ii) certain liquidity events of the Company, (iii) the Company’s cumulative modified funds from operations exceed the lesser of (a) the cumulative amount of distributions paid to the Company’s stockholders or (b) an amount that is equal to a 7.0% cumulative, non-compounded annual return on the Company’s stockholders’ invested capital, or (iv) the Company’s termination of, or failure to renew, the Advisory Agreement other than for “cause” (as defined in the Advisory Agreement). The shares of restricted stock shall be forfeited if the Advisor is terminated for any reason other than (iv) above.

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 aggregate 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) subject to specified conditions, the Company lists the common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed by the Company (other than for “cause” as defined in the Advisory Agreement). A “listing” will also be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (1) the Company’s “enterprise value” (as defined in the Charter) plus the aggregate value of distributions paid to date on the outstanding shares of common stock exceeds (2) the aggregate purchase price paid by the stockholders for those shares plus an aggregate 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. As of September 30, 2014 and December 31, 2013, no shares of the Company’s preferred stock were issued and outstanding.

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

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 most recent 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 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 (see Note 13).

Share Repurchase Plan and Redeemable Common Stock

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

The purchase price for shares repurchased under the Company’s share repurchase 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 Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

________________

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

(2) For purposes of the share repurchase plan, the “Estimated Value per Share” will equal the purchase price until the day the Company publicly discloses, subsequent to completion of the offering stage, a new Estimated Value per Share. The Estimated Value per Share is determined by the board of directors, based on periodic valuations by independent third-party appraisers and qualified independent valuation experts selected by the Advisor.

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

(4) 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.

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

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.

Repurchases of shares of the Company’s common stock will be made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date. During the three and nine months ended September 30, 2014, the Company redeemed a total of 80,042 and 167,970 shares with a total redemption value of $776,102 and $1,632,018 and received requests for the redemption of 48,927 and 186,533 shares with a total redemption value of $484,154 and $1,830,449, respectively. During the three and nine months ended September 30, 2013, the Company redeemed a total of 30,251 and 90,843 shares with a total redemption value of $286,561 and $869,253 and received requests for the redemption of 56,342 and 122,527 shares with a total redemption value of $519,959 and $1,167,466, respectively.

As of September 30, 2014, the Company had 69,455 shares of outstanding and unfulfilled redemption requests and recorded $682,516 in accounts payable and accrued liabilities on the accompanying consolidated balance sheet related to these unfulfilled redemption requests. The Company redeemed 63,583 of the outstanding redemption requests as of September 30, 2014 totaling $621,748 on the October 31, 2014 redemption date.

The Company cannot guarantee that the amounts allocated for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of its common stock for which repurchase requests have been submitted in any quarter, priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the requesting stockholder may (1) withdraw the request for repurchase or (2) ask that the Company honor the request in a future quarter, if any, when such repurchases can be made pursuant to the limitations of the share repurchase plan and when sufficient funds are available. Such pending requests will be honored among all requests for redemptions in any given redemption period as follows: first, pro rata as to redemptions sought upon a stockholder’s death or disability; and, next, pro rata as to other redemption requests.

The Company is not obligated to repurchase shares of its common stock under the share repurchase plan. The Company presently intends to limit the number of shares to be repurchased in any calendar year to those that could be funded from the net proceeds from the sale of shares pursuant to the DRP, and in no event shall redemptions under the share repurchase plan exceed 5% of the weighted average number of shares of the Company’s common stock outstanding during the prior calendar year. There is no fee in connection with a repurchase of shares of the Company’s common stock. See Note 13 for current information about the DRP.

The aggregate amount of repurchases under the Company’s share repurchase plan is not expected to exceed the aggregate proceeds received from the sale of shares pursuant to the DRP. However, if this amount is not sufficient to fund repurchase requests, subject to the 5% limitation outlined above, the Company’s board of directors may, in its sole discretion, choose to use other sources of funds to repurchase shares of the Company’s common stock. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets.

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

In addition, 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 to the Company’s stockholders 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. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase plan (see Note 13).

Pursuant to the share repurchase plan, for the three and nine months ended September 30, 2014, the Company reclassified $5,966,982 and $16,256,258, net of $776,102 and $1,632,018 of fulfilled redemption requests, and for the three and nine months ended September 30, 2013, the Company reclassified $2,854,875 and $6,174,002, net of $286,561 and $869,253 of fulfilled redemption requests, respectively, from permanent equity to temporary equity, which is included as redeemable common 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. In order to provide additional available funds to pay distributions, under certain circumstances the Company’s obligation to pay certain fees due to the Advisor from the Company pursuant to the Advisory Agreement was deferred up to an aggregate amount of $5,000,000. On June 11, 2014, the Company issued $5,000,000 in restricted shares of common stock to the Advisor, subject to certain vesting requirements, as disclosed above, to settle the previously deferred fees due to the Advisor. As of September 30, 2014 and December 31, 2013, $0 and $5,000,000, respectively, of fees had been deferred pursuant to the Advisory Agreement.

Distributions Declared

Distributions declared (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.

Distributions declared for the three and nine months ended September 30, 2014 were $13,785,040 and $40,413,978, including $6,763,224 and $19,934,690, or 695,090 and 2,048,786 shares of common stock, respectively, attributable to the DRP.

Distributions declared for the three and nine months ended September 30, 2013 were $7,736,858 and $17,918,222, including $3,517,153 and $7,913,859, or 361,475 and 813,346 shares of common stock, respectively, attributable to the DRP.

As of September 30, 2014 and December 31, 2013, $4,507,432 and $4,058,452 in distributions declared were payable, which included $2,217,388 and $1,963,570 of distributions reinvested pursuant to the DRP, respectively.

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Distributions Paid

For the three and nine months ended September 30, 2014, the Company paid cash distributions of $6,993,862 and $20,284,125, which related to distributions declared for each day in the period from June 1, 2014 through August 31, 2014 and December 1, 2013 through August 31, 2014, respectively. Additionally, for the three and nine months ended September 30, 2014, 693,100 and 2,022,701 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $6,743,864 and $19,680,873, respectively. For the three and nine months ended September 30, 2014, the Company paid total distributions of $13,737,726 and $39,964,998.

For the three and nine months ended September 30, 2013, the Company paid cash distributions of $3,884,480 and $9,287,770, which related to distributions declared for each day in the period from June 1, 2013 through August 31, 2013 and December 1, 2012 through August 31, 2013, respectively. Additionally, for the three and nine months ended September 30, 2013, 322,845 and 739,014 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $3,141,286 and $7,190,607, respectively. For the three and nine months ended September 30, 2013, the Company paid total distributions of $7,025,766 and $16,478,377.

7. Earnings (Loss) Per Share

The following table presents a reconciliation of net loss attributable to common stockholders and shares used in calculating basic and diluted earnings (loss) per share, or EPS, for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net loss attributable to the Company	$	(3,337,573	)	$	(14,707,104	)	$	(21,074,163	)	$	(31,045,120	)
Less: dividends declared on participating securities	91,681			—			110,811			—
Net loss attributable to common stockholders	(3,429,254		)	(14,707,104		)	(21,184,974		)	(31,045,120		)
Weighted average common shares outstanding - basic and diluted	75,792,897			43,015,311			75,151,322			33,543,362
Loss per common share - basic and diluted	$	(0.05	)	$	(0.34	)	$	(0.28	)	$	(0.93	)

As of September 30, 2014, the Company excluded 488,281.25 of unvested restricted common shares outstanding from the calculation of diluted loss per common share as the effect would have been antidilutive.

8. 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 investment of funds in real estate and real estate-related investments, the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments) and the Public Offering that terminated on December 20, 2013. 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.

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2014 and 2013 and amounts outstanding to the Advisor and its affiliates as of September 30, 2014 and December 31, 2013 are as follows:

	Incurred For the				Incurred For the
	Three Months Ended September 30,				Nine Months Ended September 30,				Payable as of
	2014		2013		2014		2013		September 30, 2014		December 31, 2013
Consolidated Statements of Operations:
Expensed
Investment management fees(1)(6)	$	3,353,069	$	1,938,575	$	9,844,858	$	4,693,441	$	14,487	$	4,530,042
Acquisition fees(1)(7)	372,778		6,685,425		2,869,680		11,109,354		589,000		648,422
Acquisition expenses(2)	115,172		961,309		526,321		3,137,320		—		—
Property management
Fees(1)	1,484,356		856,214		4,301,762		2,076,074		500,443		416,581
Reimbursement of onsite personnel(3)	4,687,564		2,422,532		13,261,284		5,711,505		836,121		568,851
Other fees(1)	393,538		242,300		1,216,888		580,567		54,307		45,220
Other operating expenses(4)	204,653		272,592		687,456		719,349		16,358		7,676
Disposition fees(5)	225,375		—		463,688		—		—		—
Consolidated Balance Sheets:
Capitalized to real estate
Construction management fees	486,405		111,758		1,056,147		111,758		6,351		—
Additional paid-in-capital
Other offering costs reimbursement	—		2,354,814		—		7,576,484		—		3,105,246
Selling commissions	—		7,698,530		—		16,276,716		—		—
Dealer management fees	—		4,392,019		—		9,246,723		—		—
	$	11,322,910	$	27,936,068	$	34,228,084	$	61,239,291	$	2,017,067	$	9,322,038

_____________________________

(1) Included in fees to affiliates in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013.

(2) Included in acquisition costs in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013.

(3) Included in operating, maintenance and management expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013.

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

(4) Included in general and administrative expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013.

(5) Included in gain on sale of real estate, net in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013.

(6) Investment management fees earned by the Advisor totaling $0 and $4,351,578 were deferred as of September 30, 2014 and December 31, 2013, respectively, pursuant to the terms of the Advisory Agreement. The remaining investment management fees of $14,487 and $178,464 were due and payable and are included in due to affiliates in the accompanying consolidated balance sheets at September 30, 2014 and December 31, 2013, respectively.

(7) Acquisition fees earned by the Advisor totaling $0 and $648,422 were deferred as of September 30, 2014 and December 31, 2013, respectively, pursuant to the terms of the Advisory Agreement. The remaining acquisition fees of $589,000 and $0 were due and payable and are included in due to affiliates in the accompanying consolidated balance sheets at September 30, 2014 and December 31, 2013, respectively.

Organization and Offering Costs

The Company terminated the Public Offering on December 20, 2013. Prior to the termination of the Public Offering, organization and offering costs (other than selling commissions and dealer manager fees) of the Company were initially 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 the prior 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. Reimbursement of expenses paid to the Advisor did not exceed the actual expenses incurred by the Advisor. Organization costs included 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.

Included in organization and offering costs are payments made to Crossroads Capital Advisors, LLC (“Crossroads”), an affiliate of the Sponsor, for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations and advice for the development of marketing materials and ongoing communications with investors; assisting in public relations activities and the administration of the DRP and share redemption plan; and providing advice as to our real estate portfolio and property operations.

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 exceeded 15% of gross offering proceeds raised in the completed Public Offering.

Organization costs are expensed as incurred. From inception through September 30, 2014, 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, 2014 and 2013.

30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

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, 2014, no amounts were reimbursed to the Advisor as the Public Offering terminated on December 20, 2013. For the three and nine months ended September 30, 2013, the Company reimbursed the Advisor $11,376,548 and $18,654,559, respectively, of offering costs related to the Public Offering, including $522,597 and $849,597 of amounts paid to Crossroads for certain offering services provided.

The Company has reimbursed the Advisor $95,946,206 for organization and offering costs incurred from inception through September 30, 2014, including reimbursements of organization costs of $100,738, reimbursements of private offering costs of $2,301,719 and reimbursements of Public Offering costs of $93,543,749. The Company accrued $0 and $3,105,246 for the reimbursement of offering costs in the financial statements as of September 30, 2014 and December 31, 2013, 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 is 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. The cost of real properties and real estate-related assets that have been sold by the Company during the applicable month is excluded from the fee.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the cost of investment, as defined in the Advisory Agreement, in connection with the 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.

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

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6% 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 (other than EBT Lofts, Library Lofts and Stuart Hall, which are managed by an unaffiliated third-party management company). The

31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

property management fee payable with respect to each property under the Property Management Agreements (each a “Property Management Agreement”) ranges from 2.5% to 3.75% 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. The Property Manager also receives an oversight fee of 1% of gross revenues at certain of the properties at which it does not serve as a property manager. Generally, each Property Management Agreement has an initial one year term and will continue thereafter on a month-to-month basis unless either party gives a 60 day 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.

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

Construction Management Fees

The Company has entered into Construction Management Agreements with Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with planned capital improvements and renovation for certain of the Company's properties. The construction management fee payable with respect to each property under the Construction Management Agreements (each a “Construction Management Agreement”) ranges from 8.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement has a term equal to the planned renovation timeline unless either party gives a 30 day prior notice of its desire to terminate the Construction Management Agreement.

Other Operating Expense Reimbursement

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

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified. For purposes of determining the 2%/25% Limitation 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

32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

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).

At September 30, 2014, the Company's allocable share of the Advisor's overhead expenses did not exceed the 2%/25% Limitation test.

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 up to 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. In connection with the sales of the Lincoln Tower Apartments, Arbor Pointe Apartments and Prairie Walk Apartments (see Note 3), the Company recorded a disposition fee of $225,375 and $463,688 during the three and nine months ended September 30, 2014 and is included in gain on sales of real estate, net on the consolidated statements of operations.

Selling Commissions and Dealer Manager Fees

Pursuant to the terms of the Dealer Manager Agreement, the Company paid 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 was paid in connection with volume discounts and certain other categories of sales. No sales commission or dealer manager fee are paid with respect to shares of common stock issued pursuant to the DRP. The Dealer Manager reallowed 100% of sales commissions earned to participating broker-dealers. The Dealer Manager was also able to reallow to any participating broker-dealer a portion of the dealer manager fee that was attributable to that participating broker-dealer for certain marketing costs of that participating broker-dealer. The Company did not pay any selling commissions or dealer manager fees to the Dealer Manager for the three and nine months ended September 30, 2014 because the Public Offering terminated on December 20, 2013.

Restricted Stock Agreement

On June 11, 2014, the Company entered into a restricted stock agreement with the Advisor whereby the Company issued to the Advisor 488,281.25 restricted shares of the Company’s common stock at a fair market value of $10.24 per share to replace certain performance-based fee requirements due to the Advisor in the aggregate amount of $5,000,000. The shares of restricted stock vest and become non-forfeitable upon the earliest to occur of (i) 50% at December 31, 2015 and 50% at December 31, 2016, (ii) certain liquidity events of the Company, (iii) the Company’s cumulative modified funds from operations exceed the lesser of (a) the cumulative amount of distributions paid to the Company’s stockholders or (b) an amount that is equal to a 7.0% cumulative, non-compounded annual return on the Company’s stockholders’ invested capital, or (iv) the Company’s termination of, or failure to renew, the Advisory Agreement other than for “cause” (as defined in the Advisory Agreement). The shares of restricted stock shall be forfeited if the Advisor is terminated for any reason other than (iv) above.

33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

9. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of September 30, 2014 and December 31, 2013, 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. The Company recorded stock-based compensation expense of $50,186 and $94,538 for the three and nine months ended September 30, 2014 and $45,238 and $83,034 for the three and nine months ended September 30, 2013, respectively.

10. Commitments and Contingencies

Economic Dependency

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

Concentration of Credit Risk

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

Environmental

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

34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

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.

11. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. As of September 30, 2014, the Company had 26 interest rate cap agreements with notional amounts totaling $566,336,000. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2014:

			Effective Date	Maturity Date	Notional Amount			Variable Rate		Cap Rate		Fair Value as of
Property	Type	Purpose					Based on					Sep 30, 2014		Dec 31, 2013
Ashley Oaks	Cap	Cap Floating Rate	10/24/2011	11/1/2016	$	21,712,000	One-Month LIBOR	0.16	%	5.00	%	$	2,956	$	19,729
Trails at Buda Ranch	Cap	Cap Floating Rate	3/28/2013	4/1/2018	17,030,000		One-Month LIBOR	0.16	%	2.00	%	205,544		335,483
Deer Valley	Cap	Cap Floating Rate	4/30/2013	5/1/2018	20,875,000		One-Month LIBOR	0.16	%	2.00	%	269,956		439,064
Grayson Ridge	Cap	Cap Floating Rate	6/26/2013	7/1/2017	10,725,000		One-Month LIBOR	0.16	%	2.00	%	64,431		115,262
Rosemont at Olmos Park	Cap	Cap Floating Rate	6/20/2013	7/1/2017	15,100,000		One-Month LIBOR	0.16	%	2.00	%	88,634		164,538
Meritage at Steiner Ranch	Cap	Cap Floating Rate	8/6/2013	9/1/2017	55,500,000		One-Month LIBOR	0.16	%	2.00	%	412,395		715,411
Tapestry Park	Cap	Cap Floating Rate	9/23/2013	10/1/2017	23,100,000		One-Month LIBOR	0.16	%	3.56	%	50,498		154,735
Stuart Hall	Cap	Cap Floating Rate	8/27/2013	9/1/2017	12,407,000		One-Month LIBOR	0.16	%	3.50	%	19,314		62,083
BriceGrove Park	Cap	Cap Floating Rate	9/24/2013	10/1/2017	14,985,000		One-Month LIBOR	0.16	%	3.42	%	41,053		110,612
Landing at Mansfield	Cap	Cap Floating Rate	9/27/2013	10/1/2017	22,750,000		One-Month LIBOR	0.16	%	2.50	%	125,793		251,548
The Heights	Cap	Cap Floating Rate	9/30/2013	10/1/2017	29,014,000		One-Month LIBOR	0.16	%	2.50	%	155,763		312,618

35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

			Effective Date	Maturity Date	Notional Amount			Variable Rate		Cap Rate		Fair Value as of
Property	Type	Purpose					Based on					Sep 30, 2014		Dec 31, 2013
Villas at Huffmeister	Cap	Cap Floating Rate	10/10/2013	11/1/2017	$	25,963,000	One-Month LIBOR	0.16	%	2.50	%	$	154,294	$	303,798
Villas at Kingwood	Cap	Cap Floating Rate	10/10/2013	11/1/2017	28,105,000		One-Month LIBOR	0.16	%	2.50	%	167,024		328,862
Waterford Place at Riata Ranch	Cap	Cap Floating Rate	10/10/2013	11/1/2017	16,340,000		One-Month LIBOR	0.16	%	2.50	%	97,101		191,198
Carrington Place	Cap	Cap Floating Rate	11/7/2013	11/30/2014	22,376,000		One-Month LIBOR	0.16	%	2.00	%	128,184		302,878
				11/30/2015						2.50	%
				11/30/2016						3.25	%
				12/1/2018						4.10	%
Carrington at Champion Forest	Cap	Cap Floating Rate	11/7/2013	11/30/2014	22,959,000		One-Month LIBOR	0.16	%	2.00	%	131,523		310,770
				11/30/2015						2.50	%
				11/30/2016						3.25	%
				12/1/2018						4.10	%
Carrington Park	Cap	Cap Floating Rate	11/7/2013	11/30/2014	17,717,000		One-Month LIBOR	0.16	%	2.00	%	101,494		239,815
				11/30/2015						2.50	%
				11/30/2016						3.25	%
				12/1/2018						4.10	%
Willow Crossing	Cap	Cap Floating Rate	11/20/2013	11/30/2014	43,500,000		One-Month LIBOR	0.16	%	2.00	%	132,203		448,006
				11/30/2015						2.50	%
				11/30/2016						3.25	%
				12/1/2018						4.65	%
Audubon Park	Cap	Cap Floating Rate	12/27/2013	12/31/2014	11,760,000		One-Month LIBOR	0.16	%	2.00	%	40,279		184,362
				12/31/2015						2.75	%
				12/31/2016						3.50	%
				12/31/2017						4.25	%
				1/1/2019						4.75	%
Mallard Crossing	Cap	Cap Floating Rate	12/27/2013	12/31/2014	27,860,000		One-Month LIBOR	0.16	%	2.00	%	109,681		350,479
				12/31/2015						2.50	%
				12/31/2016						3.00	%
				1/1/2018						3.40	%

36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

			Effective Date	Maturity Date	Notional Amount			Variable Rate		Cap Rate		Fair Value as of
Property	Type	Purpose					Based on					Sep 30, 2014		Dec 31, 2013
Renaissance at Carol Stream	Cap	Cap Floating Rate	1/9/2014	1/31/2015	$	20,440,000	One-Month LIBOR	0.16	%	2.00	%	$	74,947	$	—
				1/31/2016						2.50	%
				1/31/2017						3.00	%
				2/1/2018						3.64	%
Mapleshade Park	Cap	Cap Floating Rate	3/31/2014	3/31/2015	15,161,000		One-Month LIBOR	0.16	%	2.50	%	12,929		—
				3/31/2016						3.00	%
				4/1/2017						3.57	%
Windsor on the River(1)	Cap	Cap Floating Rate	5/9/2014	5/31/2015	23,500,000		One-Month LIBOR	0.16	%	2.00	%	96,655		121,310
				5/31/2016						2.50	%
				5/31/2017						3.00	%
				6/1/2018						3.86	%
Oak Crossing	Cap	Cap Floating Rate	6/3/2014	5/31/2015	15,762,000		One-Month LIBOR	0.16	%	2.00	%	96,785		—
				5/31/2016						2.50	%
				5/31/2017						3.00	%
				6/3/2018						3.50	%
Cantare at Indian Lake Village	Cap	Cap Floating Rate	7/9/2014	7/31/2015	18,850,000		One-Month LIBOR	0.16	%	2.00	%	112,727		—
				7/31/2016						2.50	%
				7/31/2017						3.00	%
				8/1/2018						3.50	%
Park Shore	Cap	Cap Floating Rate	9/12/2014	9/30/2015	12,845,000		One-Month LIBOR	0.16	%	2.00	%	40,367		—
				9/30/2016						2.50	%
				10/1/2017						3.00	%
					$	566,336,000						$	2,932,530	$	5,462,561

________________

(1) As of December 31, 2013, the Company had an interest rate cap agreement at the Windsor on the River property with a fair value of $121,310. The interest rate cap had a notional amount of $23,500,000, an effective date of February 9, 2012 and a scheduled maturity date of February 1, 2019. The interest rate cap was based on the SIFMA Municipal Swap Index, with a variable rate of 0.06% and a fixed rate of 3.00%. Simultaneously with the refinancing of the mortgage loan payable on May 9, 2014 (see Note 5), the interest rate cap was terminated and replaced with a new interest rate cap agreement, the terms of which are disclosed in the above table.

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2014 resulted in an unrealized loss of $46,544 and $3,362,058, respectively, which is included in interest expense in the accompanying consolidated statements of operations. The fair value of the interest rate caps of $2,932,530 as of September 30, 2014 is included in deferred financing costs and other assets, net on the accompanying consolidated balance sheets.

37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

12. Pro Forma Information

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, 2014 and 2013. The Company acquired one property during the three months ended September 30, 2014 and six properties during the nine months ended September 30, 2014. These properties contributed $4,086,140 of revenues and $2,346,090 of net loss, including $2,852,735 of depreciation and amortization, to the Company's results of operations from the date of acquisition to September 30, 2014. The following unaudited pro forma information for the three and nine months ended September 30, 2014 and 2013 has been provided to give effect to the acquisitions of the properties as if they had occurred on January 1, 2013. 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,
	2014			2013			2014			2013
Revenues	$	50,638,601		$	29,292,400		$	151,915,804		$	87,877,200
Net loss	$	(3,482,180	)	$	(15,041,097	)	$	(19,062,061	)	$	(45,123,920	)
Basic and diluted net loss per common share	$	(0.05	)	$	(0.20	)	$	(0.25	)	$	(0.59	)

The pro forma information reflects adjustments for actual revenues and expenses of the properties acquired during the three and nine months ended September 30, 2014 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, 2013 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.

13. Subsequent Events

Distributions Paid

On October 1, 2014, the Company paid distributions of $4,507,432, which related to distributions declared for each day in the period from September 1, 2014 through September 30, 2014 and consisted of cash distributions paid in the amount of $2,290,044 and $2,217,388 in shares issued pursuant to the DRP.

On November 3, 2014, the Company paid distributions of $4,672,489, which related to distributions declared for each day in the period from October 1, 2014 through October 31, 2014 and consisted of cash distributions paid in the amount of $2,385,891 and $2,286,598 in shares issued pursuant to the DRP.

Redemption

On October 31, 2014, the Company redeemed 63,583 shares of its common stock for a total redemption value of $621,748, or $9.78 per share, pursuant to the Company's share repurchase plan.

38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

Distribution Reinvestment Plan

On January 3, 2014, the Company filed a Form S-3 with the SEC to offer up to 12,000,000 shares of common stock to existing shareholders pursuant to the DRP. From January 3, 2014 through November 10, 2014, the Company had sold 2,054,073 shares of its common stock pursuant to the DRP for gross offering proceeds of $19,986,127.

Engagement of Financial Advisors to Evaluate Strategic Alternatives

On October 21, 2014, the Company announced that it retained Goldman, Sachs & Co. as its financial advisor to assist in evaluating potential strategic alternatives for a liquidity event for the Company. There is no set timetable for completion of the board of directors’ review of strategic alternatives and there can be no assurances that the review process will result in any transaction being announced or completed.

Suspension of Distribution Reinvestment Plan

On October 21, 2014, in connection with the Company’s exploration of strategic alternatives, the Company’s board of directors elected to suspend its distribution reinvestment plan. As a result, all distributions paid following the November distribution payment date will be paid in cash and not reinvested in shares of the Company’s common stock. The Company’s board of directors may in the future reinstate the distribution reinvestment plan, although there is no assurance as to if or when this will happen.

Suspension of Share Repurchase Plan

On October 21, 2014, the Company’s board of directors elected to suspend the Company’s share repurchase plan, effective November 20, 2014. As a result, the Company will not process redemption requests received after such date. The Company’s board of directors may in the future reinstate the share repurchase plan, although there is no assurance as to if or when this will happen.

39

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, or the Securities Act, 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;

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

• our ability to successfully dispose of real estate on terms that are favorable to us;

• risks inherent in the real estate business, including tenant defaults, tenant vacancies, 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.

40

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 the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014.

Overview

We were formed on May 4, 2009, as a Maryland corporation that has elected to qualify as a real estate investment trust, or REIT. As described in more detail below, we own and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States.

On July 19, 2010, we commenced our initial public offering of up to a maximum of 150,000,000 shares of common stock at an initial price of $10.00 per share (subject to certain discounts) and up to 15,789,474 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $9.50 per share. 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. As a result of the determination of the estimated value per share of our common stock as of March 31, 2012, effective September 10, 2012, the offering price of our common stock in our 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 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 of $10.24 per share.

On December 20, 2013, we terminated our ongoing public offering. Upon termination of our public offering, we had sold 73,608,337 shares of common stock for gross proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $15,397,232. On January 3, 2014, we registered with the SEC to offer up to 12,000,000 shares of common stock to existing stockholders pursuant to our distribution reinvestment plan. Our board of directors may, in its sole discretion, change the price at which we offer shares of common stock 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.

As of September 30, 2014, we owned 65 multifamily properties located within the greater midwest and southern geographic regions of the United States. Our property portfolio consists of an aggregate of 16,395 apartment homes and 25,973 square feet of rentable commercial space. The acquisition cost of our real estate portfolio was $1,607,007,557, exclusive of closing costs. At September 30, 2014, our portfolio was approximately 97.3% 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. 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.

41

PART I — FINANCIAL INFORMATION (continued)

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

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

We 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 are not subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we 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.  

Evaluation of Strategic Alternatives

On October 21, 2014, we announced that we have retained Goldman, Sachs & Co. as our financial advisor to assist in evaluating potential strategic alternatives for a liquidity event. There is no set timetable for completion of our board of directors’ review of strategic alternatives and there can be no assurances that the review process will result in any transaction being announced or completed. In connection with our exploration of strategic alternatives, our board of directors elected to suspend our distribution reinvestment plan. As a result, all distributions paid following the November distribution payment date will be paid in cash and not reinvested in shares of our common stock. Additionally our board of directors elected to suspend our share repurchase plan, effective November 20, 2014. As a result, we will not process redemption requests received after such date. Our board of directors may in the future reinstate our distribution reinvestment plan and share repurchase plan, although there is no assurance as to if or when this will happen.

42

PART I — FINANCIAL INFORMATION (continued)

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

Our Real Estate Portfolio

As of September 30, 2014, we owned the 65 multifamily properties listed below:

							Mortgage Debt Outstanding at September 30, 2014		Average Occupancy as of				Average Monthly Rent(1) as of
	Property Name	Location	Purchase Date	Number of Units	Contract Purchase Price				Sep 30, 2014		Dec 31, 2013		Sep 30, 2014		Dec 31, 2013
1	Park Place Condominiums	Des Moines, IA	12/22/2010	151	$	8,323,400	$	4,914,445	82.8	%	92.7	%	$	826	$	867
2	Clarion Park Apartments	Olathe, KS	6/28/2011	220	11,215,000		8,518,451		95.9	%	97.3	%	743		701
3	Cooper Creek Village	Louisville, KY	8/24/2011	123	10,420,000		6,532,478		95.1	%	91.9	%	932		753
4	Truman Farm Villas	Grandview, MO	12/22/2011	200	9,100,000		5,737,365		95.5	%	94.5	%	682		676
5	EBT Lofts	Kansas City, MO	12/30/2011	102	8,575,000		5,423,339		97.1	%	98.0	%	916		882
6	Windsor on the River Apartments	Cedar Rapids, IA	1/26/2012	424	33,000,000		23,500,000		92.0	%	92.0	%	708		680
7	Renaissance St. Andrews Apartments	Louisville, KY	2/17/2012	216	12,500,000		8,978,151		94.9	%	93.5	%	649		642
8	Spring Creek of Edmond	Edmond, OK	3/9/2012	252	19,350,000		13,663,094		98.0	%	96.4	%	868		865
9	Montclair Parc Apartments	Oklahoma City, OK	4/26/2012	360	35,750,000		23,948,984		95.0	%	88.6	%	875		918
10	Sonoma Grande Apartments	Tulsa, OK	5/24/2012	336	32,200,000		22,433,838		95.8	%	91.4	%	951		932
11	Estancia Apartments	Tulsa, OK	6/29/2012	294	27,900,000		21,575,298		94.6	%	90.5	%	947		898
12	Montelena Apartments	Round Rock, TX	7/13/2012	232	18,350,000		12,372,936		95.7	%	89.7	%	958		860
13	Valley Farms Apartments	Louisville, KY	8/30/2012	160	15,100,000		10,113,523		96.3	%	93.8	%	860		790
14	Hilliard Park Apartments	Columbus, OH	9/11/2012	201	19,800,000		13,628,480		95.0	%	94.0	%	1,006		947
15	Sycamore Terrace Apartments	Terre Haute, IN	9/20/2012 & 3/5/2014	250	23,174,157		—		97.2	%	96.6	%	1,099		1,033
16	Hilliard Summit Apartments	Columbus, OH	9/28/2012	208	24,100,000		16,516,240		96.2	%	92.3	%	1,074		1,098
17	Springmarc Apartments	San Marcos, TX	10/19/2012	240	21,850,000		15,237,577		94.6	%	96.7	%	920		883
18	Renaissance at St. Andrews Condominiums	Louisville, KY	10/31/2012	29	1,375,000		—		100.0	%	96.6	%	672		674
19	Ashley Oaks Apartments	San Antonio, TX	11/29/2012	462	30,790,000		21,392,096		92.4	%	80.7	%	785		716
20	Arrowhead Apartments	Palatine, IL	11/30/2012	200	16,750,000		12,382,968		95.5	%	91.5	%	1,022		941
21	The Moorings Apartments	Roselle, IL	11/30/2012	216	20,250,000		14,970,160		95.8	%	94.4	%	1,026		995
22	Forty 57 Apartments	Lexington, KY	12/20/2012	436	52,500,000		38,500,000		95.9	%	95.2	%	862		840

43

PART I — FINANCIAL INFORMATION (continued)

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

							Mortgage Debt Outstanding at September 30, 2014		Average Occupancy as of				Average Monthly Rent(1) as of
	Property Name	Location	Purchase Date	Number of Units	Contract Purchase Price				Sep 30, 2014		Dec 31, 2013		Sep 30, 2014		Dec 31, 2013
23	Keystone Farms Apartments	Nashville, TN	12/28/2012	90	$	8,400,000	$	6,127,890	98.9	%	98.9	%	$	1,013	$	1,001
24	Riverford Crossing Apartments	Frankfort, KY	12/28/2012	300	30,000,000		21,900,000		97.0	%	90.0	%	813		760
25	South Pointe at Valley Farms	Louisville, KY	12/28/2012	32	5,275,000		225,585		96.9	%	100.0	%	1,019		1,029
26	Montecito Apartments	Austin, TX	12/31/2012	268	19,000,000		14,071,910		95.9	%	98.1	%	850		831
27	Hilliard Grand Apartments	Dublin, OH	12/31/2012	314	40,500,000		28,887,815		98.1	%	88.5	%	1,249		1,182
28	The Hills at Fair Oaks	Fair Oaks Ranch, TX	1/31/2013	288	34,560,000		24,767,000		96.5	%	90.6	%	986		921
29	Library Lofts East	Kansas City, MO	2/28/2013	118	12,750,000		8,985,689		94.9	%	97.5	%	922		885
30	The Trails at Buda Ranch	Buda, TX	3/28/2013	264	23,000,000		16,899,605		93.9	%	89.8	%	989		862
31	Deep Deuce at Bricktown	Oklahoma City, OK	3/28/2013	294	38,220,000		26,828,069		92.5	%	84.7	%	1,266		1,138
32	Deer Valley Apartments	Lake Bluff, IL	4/30/2013	224	28,600,000		20,744,070		94.6	%	91.1	%	1,256		1,160
33	Grayson Ridge	North Richland Hills, TX	5/31/2013	240	14,300,000		10,688,432		97.1	%	95.8	%	739		671
34	Rosemont at Olmos Park	San Antonio, TX	5/31/2013	144	22,050,000		14,667,462		89.6	%	87.5	%	1,219		1,196
35	Retreat at Quail North	Oklahoma City, OK	6/12/2013	240	25,250,000		17,070,649		93.3	%	90.0	%	980		954
36	The Lodge at Trails Edge	Indianapolis, IN	6/18/2013	268	18,400,000		12,719,620		97.0	%	97.8	%	716		691
37	Arbors at Carrollton	Carrollton, TX	7/3/2013	131	8,800,000		6,291,976		97.7	%	94.7	%	825		768
38	Waterford on the Meadow	Plano, TX	7/3/2013	350	23,100,000		16,683,498		94.9	%	91.7	%	815		802
39	The Belmont	Grand Prairie, TX	7/26/2013	260	12,100,000		9,347,498		95.4	%	93.1	%	725		684
40	Meritage at Steiner Ranch	Austin, TX	8/6/2013	502	80,000,000		55,500,000		91.8	%	84.5	%	1,366		1,361
41	Tapestry Park Apartments	Birmingham, AL	8/13/2013	223	32,400,000		23,100,000		98.2	%	97.8	%	1,258		1,183
42	Dawntree Apartments	Carrollton, TX	8/15/2013	400	24,000,000		15,913,169		97.8	%	96.3	%	764		711
43	Stuart Hall Lofts	Kansas City, MO	8/27/2013	115	16,850,000		12,392,761		99.1	%	93.9	%	1,215		1,134
44	BriceGrove Park Apartments	Canal Winchester, OH	8/29/2013	240	20,100,000		14,985,000		92.5	%	90.0	%	835		864
45	Retreat at Hamburg Place	Lexington, KY	9/5/2013	150	16,300,000		—		95.3	%	94.0	%	936		913
46	Cantare at Indian Lake Village	Hendersonville, TN	9/24/2013	206	29,000,000		18,850,000		97.6	%	96.6	%	1,057		1,037
47	Landing at Mansfield	Mansfield, TX	9/27/2013	336	30,900,000		22,750,000		96.1	%	93.8	%	912		877

44

PART I — FINANCIAL INFORMATION (continued)

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

							Mortgage Debt Outstanding at September 30, 2014		Average Occupancy as of				Average Monthly Rent(1) as of
	Property Name	Location	Purchase Date	Number of Units	Contract Purchase Price				Sep 30, 2014		Dec 31, 2013		Sep 30, 2014		Dec 31, 2013
48	The Heights Apartments	Houston, TX	9/30/2013	504	$	37,000,000	$	29,014,000	96.6	%	94.4	%	$	917	$	862
49	Villas at Huffmeister	Houston, TX	10/10/2013	294	37,600,000		25,963,000		93.5	%	95.2	%	1,127		1,128
50	Villas at Kingwood	Kingwood, TX	10/10/2013	330	40,150,000		28,105,000		96.1	%	91.2	%	1,139		1,050
51	Waterford Place at Riata Ranch	Cypress, TX	10/10/2013	228	23,400,000		16,340,000		96.9	%	94.3	%	1,068		1,024
52	Carrington Place	Houston, TX	11/7/2013	324	32,900,000		22,376,000		89.8	%	91.7	%	902		981
53	Carrington at Champion Forest	Houston, TX	11/7/2013	284	33,000,000		22,959,000		95.8	%	93.0	%	1,045		1,024
54	Carrington Park	Cypress, TX	11/7/2013	232	25,150,000		17,717,000		94.0	%	91.8	%	1,051		1,016
55	Willow Crossing	Elk Grove, IL	11/20/2013	579	58,000,000		43,500,000		90.0	%	95.5	%	964		950
56	Echo at Katy Ranch	Katy, TX	12/19/2013	260	35,100,000		—		90.8	%	65.8	%	1,281		1,349
57	Heritage Grand at Sienna Plantation	Missouri City, TX	12/20/2013	240	27,000,000		16,734,894		92.1	%	93.8	%	1,227		1,175
58	Audubon Park	Nashville, TN	12/27/2013	256	16,750,000		11,760,000		92.2	%	92.2	%	827		823
59	Mallard Crossing	Cincinnati, OH	12/27/2013	350	39,800,000		27,860,000		92.6	%	87.4	%	1,016		1,016
60	Renaissance at Carol Stream	Carol Stream, IL	12/31/2013	293	29,150,000		20,440,000		95.6	%	95.9	%	940		966
61	Reserve at Creekside	Chattanooga, TN	3/28/2014	192	18,875,000		—		92.2	%	—	%	961		—
62	Mapleshade Park	Dallas, TX	3/31/2014	148	23,325,000		15,161,000		98.0	%	—	%	1,451		—
63	Richland Falls	Murfreesboro, TN	5/16/2014	190	21,000,000		13,800,000		99.5	%	—	%	920		—
64	Oak Crossing	Fort Wayne, IN	6/3/2014	222	24,230,000		15,762,000		95.5	%	—	%	975		—
65	Park Shore	St. Charles, IL	9/12/2014	160	18,350,000		12,845,000		97.5	%	—	%	701		—
				16,395	$	1,607,007,557	$	1,061,074,015	94.8	%	92.4	%	$	962	$	897

________________

(1) Average monthly rent is based upon the effective rental income after considering the effect of vacancies and concessions.

45

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

Park Shore Apartments

On September 12, 2014, we acquired a fee simple interest in Park Shore Apartments located in St. Charles, Illinois, for an aggregate purchase price of approximately $18,350,000, exclusive of closing costs. We financed the payment of the purchase price for Park Shore Apartments with (1) net sales proceeds from the disposition of Lincoln Tower Apartments, Arbor Pointe Apartments and Prairie Walk Apartments and (2) the proceeds of a secured loan in the aggregate principal amount of $12,845,000 from a financial institution. Park Shore Apartments consists of 20two-story buildings and contains 160 units consisting of onestudio apartment, 67one-bedroom apartments, 68two-bedroom apartments and 24three-bedroom apartments. The apartments range in size from 520 to 1,150 square feet and average 767 square feet.

Third Quarter Real Estate Dispositions

Arbor Pointe Apartments

On May 5, 2011, we acquired the Arbor Pointe Apartments located in Louisville, Kentucky for a total purchase price of $6,500,000 excluding closing costs. On July 1, 2014, we sold the Arbor Pointe Apartments for $8,325,000, resulting in a gain of $2,034,244 from the original purchase price.

Prairie Walk Apartments

On December 22, 2011, we acquired the Prairie Walk Apartments located in Kansas City, Missouri for a total purchase price of $6,100,000 excluding closing costs. On August 6, 2014, we sold the Prairie Walk Apartments for $6,700,000, resulting in a gain of $837,596 from the original purchase price.

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, 2013 filed with the SEC. During the nine months ended September 30, 2014, the Company adopted Accounting Standards Update, or ASU, 2014-08, which impacts the Company's reporting on discontinued operations. See also Note 2 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies, including the adoption of ASU 2014-08. There have been no other significant changes to our accounting policies during 2014.

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, 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

46

PART I — FINANCIAL INFORMATION (continued)

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

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, 2014 and December 31, 2013, 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, 2013, 2012 and 2011.

Distributions

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. We may declare distributions in excess of our cash provided by operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are calculated at a rate of $0.001964 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.

The distributions paid during each of the last five fiscal quarters ended September 30, 2014, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:

Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Distributions Paid(3)						Sources of Distributions Paid				Net Cash Provided By (Used In) Operating Activities
											Cash Flow From Operations		Offering Proceeds
					Cash		Reinvested		Total
Third Quarter 2013	$	7,736,858	$	0.181	$	3,884,480	$	3,141,286	$	7,025,766	$	2,561,680	$	4,464,086	$	2,561,680
Fourth Quarter 2013	10,727,539		0.181		5,014,893		4,437,438		9,452,331		—		9,452,331		(7,887,318		)
First Quarter 2014	13,174,851		0.177		6,455,864		6,227,486		12,683,350		7,784,361		4,898,989		7,784,361
Second Quarter 2014	13,454,087		0.179		6,834,399		6,709,523		13,543,922		9,503,118		4,040,804		9,503,118
Third Quarter 2014	13,785,040		0.181		6,993,862		6,743,864		13,737,726		13,737,726		—		15,165,296
	$	58,878,375	$	0.899	$	29,183,498	$	27,259,597	$	56,443,095	$	33,586,885	$	22,856,210	$	27,127,137

________________

(1) Distributions are based on daily record dates and calculated at a rate of $0.001964 per share per day.

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

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

For the three and nine months ended September 30, 2014, we paid aggregate distributions of $13,737,726 and $39,964,998, including $6,993,862 and $20,284,125 of distributions paid in cash and 693,100 and 2,022,701 in shares of our common stock issued pursuant to our distribution reinvestment plan for $6,743,864 and $19,680,873, respectively. For the three and nine months ended September 30, 2014, our net loss was $3,337,573 and $21,074,163, we had funds from operations, or FFO, of $9,765,815 and $22,619,391 and net cash provided by operations of $15,165,296 and $32,452,775, respectively. For the three and nine months ended September 30, 2014, we funded $13,737,726 and $31,025,205 of distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with net cash provided by operating activities and with proceeds

47

PART I — FINANCIAL INFORMATION (continued)

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

from our public offering of $0 and $8,939,793, respectively. 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 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 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 was deferred up to an aggregate amount of $5,000,000. As of December 31, 2013, we had deferred $5,000,000 in fees payable to our advisor pursuant to the terms of the advisory agreement. On June 11, 2014, we entered into a restricted stock agreement with our advisor whereby we issued to our advisor 488,281.25 restricted shares of our common stock at a fair market value of $10.24 per share to pay certain deferred fees due to the advisor in the aggregate amount of $5,000,000 that were to be paid upon certain performance metrics. The shares of restricted stock become non-forfeitable upon the earliest to occur of (i) 50% at December 31, 2015 and 50% at December 31, 2016, (ii) certain liquidity events, (iii) our cumulative modified funds from operations exceed the lesser of (a) the cumulative amount of distributions paid to our stockholders or (b) an amount that is equal to a 7.0% cumulative, non-compounded annual return on our stockholders’ invested capital, or (iv) our termination of, or failure to renew, the advisory agreement other than for “cause” (as defined in the advisory agreement). The shares of restricted stock shall be forfeited if our advisor is terminated for any reason other than (iv) above.

Inflation

Substantially all of our multifamily property leases are 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.

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

We use, and intend to use in the future, secured and unsecured borrowings for the acquisition of properties. However, under our Third Articles of Amendment and Restatement, or our charter, we have a limitation on borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances. As of September 30, 2014, our borrowings were not in excess of 300% of the value of our net assets.

48

PART I — FINANCIAL INFORMATION (continued)

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

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

Our principal demand for funds will be to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. 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;

• various forms of secured financing;

• equity capital from joint venture partners;

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

• proceeds from our distribution reinvestment plan.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners, 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 and proceeds from the sale of our properties. 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 may 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 to borrow up to $5,000,000.  On April 25, 2013, we amended the credit facility to increase the borrowing capacity to $20,000,000. On July 18, 2014, we further amended the revolving credit facility, to, among other things, increase the borrowing capacity from $20,000,000 to $35,000,000. The amended and restated credit facility consists of a Tranche A and a Tranche B, and provides certain security therefor. The maximum amount that may be borrowed under Tranche A and Tranche B are $20,000,000 and $15,000,000, respectively. The amended and restated credit facility has a maturity date of July 17, 2016, subject to extension. As of September 30, 2014, $0 was outstanding on our revolving line of credit. 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 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 debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

49

PART I — FINANCIAL INFORMATION (continued)

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

Cash Flows Provided by Operating Activities

As of September 30, 2014, we owned 65 multifamily properties. During the nine months ended September 30, 2014, net cash provided by operating activities was $32,452,775 compared to net cash provided by operating activities of $5,638,185 for the nine months ended September 30, 2013. The increase in net cash provided by operating activities is primarily due to the increase in depreciation and amortization expense, the change in fair value of interest rate cap agreements, restricted cash, and deferred financing costs and other assets, partially offset by the changes in net loss, gain on sales of real estate, and accounts payable and accrued liabilities.

Cash Flows Used in Investing Activities

During the nine months ended September 30, 2014, net cash used in investing activities was $106,550,890 compared to net cash used in investing activities of $463,656,192 during the nine months ended September 30, 2013. The decrease in net cash used in investing activities was primarily due to the acquisition of six multifamily properties during the nine months ended September 30, 2014, compared to 21 property acquisitions during the nine months ended September 30, 2013. Net cash used in investing activities during the nine months ended September 30, 2014 consisted of the following:

• $110,388,964 of cash used related to the acquisition of six multifamily properties;

• $18,082,456 of cash used for improvements to real estate investments;

• $3,120,400 of cash used for deposits for potential real estate investments;

• $3,893,968 of cash used in restricted cash accounts related to replacement reserves and proceeds from the sale of real estate restricted for use toward future real estate acquisition;

• $826,284 of cash used to purchase interest rate cap agreements; and

• $29,761,182 of cash provided by the sale of real estate investments, net of disposition fees of $463,688 and closing costs of $678,518.    

Cash Flows from Financing Activities

During the nine months ended September 30, 2014, net cash provided by financing activities was $74,774,037 compared to net cash provided by financing activities of $468,875,413 during the nine months ended September 30, 2013. The decrease in cash flow from financing activities is due primarily to a decrease in proceeds from the issuance of common stock and proceeds from the issuance of notes payable. Net cash provided by financing activities during the nine months ended September 30, 2014 consisted of the following:

• $23,455,983 of cash provided by offering proceeds related to our initial public offering, net of the reimbursement of other offering costs to affiliates in the amount of $3,105,246;

• $73,234,197 of proceeds from the issuance of mortgage notes payable, net of deferred financing costs in the amount of $1,436,113 and principal payments of $45,913,275;

• $1,632,018 of cash paid for the redemption of common stock; and

• $20,284,125 of net cash distributions, after giving effect to distributions reinvested by stockholders of $19,680,873.

50

PART I — FINANCIAL INFORMATION (continued)

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

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. 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. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2014, 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. We expect to make payments to our advisor or its affiliates in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of September 30, 2014, we had indebtedness totaling an aggregate principal amount of $1,061,074,015. The following is a summary of our contractual obligations as of September 30, 2014:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	283,032,833	$	9,242,611	$	73,028,283	$	67,489,786	$	133,272,153
Principal payments on outstanding debt obligations(2)	1,056,078,519		3,469,617		31,728,744		135,446,455		885,433,703
Total	$	1,339,111,352	$	12,712,228	$	104,757,027	$	202,936,241	$	1,018,705,856

_____________________________

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2014. We incurred interest expense of $9,095,277 and $30,292,922 during the three and nine months ended September 30, 2014, including amortization of deferred financing costs totaling $356,430 and $1,115,818, respectively.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the 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, 2014 and 2013. The ability to compare one period to another is significantly affected by acquisitions completed and dispositions made during those periods. As of September 30, 2014, we owned 65 multifamily properties compared to owning 51 multifamily properties at September 30, 2013. The increase in our property portfolio is the primary cause of the increases in operating income and expenses, as further discussed below.

51

PART I — FINANCIAL INFORMATION (continued)

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

Our results of operations for the three and nine months ended September 30, 2014 are not indicative of those expected in future periods. We expect to continue to deploy capital, increase our borrowings and fund future acquisitions, which would have an impact on our future results of operations. In general, we expect that our revenues and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate.

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 financial measure) to net loss, see “—Net Operating Income.”

Consolidated Results of Operations for the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013

The following table summarizes the consolidated results of continuing operations for the three months ended September 30, 2014 and 2013:

	For the Three Months Ended September 30,
	2014			2013			Change $			Change %
Total revenues	$	50,217,617		$	28,761,843		$	21,455,774		75	%
Operating, maintenance and management	14,005,015			7,379,830			6,625,185			90	%
Real estate taxes and insurance	9,211,396			4,356,209			4,855,187			111	%
Fees to affiliates	5,603,741			9,722,514			(4,118,773		)	(42	)%
Depreciation and amortization	15,975,228			11,796,884			4,178,344			35	%
Interest expense	9,095,277			7,015,217			2,080,060			30	%
Loss on debt extinguishment	1,047,932			—			1,047,932			100	%
General and administrative expenses	1,232,577			1,025,724			206,853			20	%
Acquisition costs	255,864			2,172,569			(1,916,705		)	(88	)%
Loss from continuing operations	$	(6,209,413	)	$	(14,707,104	)	$	8,497,691		(58	)%
NOI(1)	$	25,123,312		$	15,927,290		$	9,196,022		58	%
FFO(2)	$	9,765,815		$	(2,910,220	)	$	12,676,035		(436	)%
MFFO(2)	$	11,488,933		$	6,406,549		$	5,082,384		79	%

________________

(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

52

PART I — FINANCIAL INFORMATION (continued)

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

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.”

Loss from continuing operations

For the three months ended September 30, 2014, we had a loss from continuing operations of $6,209,413 compared to a loss from continuing operations of $14,707,104 for the three months ended September 30, 2013. The decrease in loss from continuing operations of $8,497,691 over the comparable prior year period was primarily due to the increase in total revenues of $21,455,774, the decrease in fees to affiliates of $4,118,773 and the decrease in acquisition costs of $1,916,705, partially offset by the increase in operating, maintenance and management expenses of $6,625,185, the increase in real estate taxes and insurance of $4,855,187, the increase in depreciation and amortization expense of $4,178,344, the increase in interest expense of $2,080,060, the increase in loss on debt extinguishment of $1,047,932 and the increase in general and administrative expenses of $206,853. The increase in these expenses was due primarily to the increase in our property portfolio from 51 properties at September 30, 2013 to 65 properties at September 30, 2014.

Total revenues

Rental income and tenant reimbursements for the three months ended September 30, 2014 were $50,217,617 compared to $28,761,843 for the three months ended September 30, 2013. The increase of $21,455,774 was primarily due to the fact that we owned 65 multifamily properties as of September 30, 2014 compared to 51 multifamily properties as of September 30, 2013. Additionally, our total units increased by 4,206 from 12,189 at September 30, 2013 to 16,395 at September 30, 2014. Average monthly rents increased from $888 as of September 30, 2013 to $962 as of September 30, 2014. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, our value-enhancement efforts and improved occupancy.

Operating, maintenance and management expense

Operating, maintenance and management expenses for the three months ended September 30, 2014 were $14,005,015 compared to $7,379,830 for the three months ended September 30, 2013. The increase of $6,625,185 was primarily due to the fact that we operated 65 multifamily properties as of September 30, 2014 compared to 51 multifamily properties as of September 30, 2013. We expect that these amounts will decrease as a percentage of total revenues as we stabilize our property portfolio and implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the three months ended September 30, 2014 were $9,211,396 compared to $4,356,209 for the three months ended September 30, 2013. The increase of $4,855,187 was due primarily to the acquisition of 17 multifamily properties since September 30, 2013 and the continuing operation of the properties owned as of September 30, 2013. We expect these amounts may increase in future periods as a result of municipal property tax increases as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates for the three months ended September 30, 2014 were $5,603,741 compared to $9,722,514 for the three months ended September 30, 2013. The decrease of $4,118,773 was primarily due to the fact that the acquisition fees earned by our advisor decreased in connection with the acquisition of one multifamily property with an aggregate purchase price of $18,350,000 during the three months ended September 30, 2014, compared to the acquisition of 12 multifamily properties with an aggregate purchase price of $330,550,000 during the three months ended September 30, 2013. This decrease was partially

53

PART I — FINANCIAL INFORMATION (continued)

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

offset by investment management fees of $3,353,069 earned by our advisor during the three months ended September 30, 2014 in connection with managing our portfolio of 65 multifamily properties, compared to investment management fees of $1,938,575 earned during the three months ended September 30, 2013 in connection with managing our portfolio of 51 multifamily properties. We expect fees to affiliates to decrease in future periods as a result of the decrease in anticipated future acquisitions along with an increase in anticipated future dispositions of real estate and real estate-related investments.

Depreciation and amortization

Depreciation and amortization expenses for the three months ended September 30, 2014 were $15,975,228 compared to $11,796,884 for the three months ended September 30, 2013. The increase of $4,178,344 was primarily due to the net increase in depreciable and amortizable assets of $412,614,840 since September 30, 2013. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2014 was $9,095,277 compared to $7,015,217 for the three months ended September 30, 2013. The increase of $2,080,060 was primarily due to the net increase in the notes payable balance of $294,374,633 since September 30, 2013 due to financing incurred in connection with the acquisition of 17 multifamily properties since September 30, 2013. Included in interest expense is the amortization of deferred financing costs of $356,430 and $295,391 and amortization of loan premiums of $308,698 and $288,763 for the three months ended September 30, 2014 and 2013, respectively. Also included in interest expense is the unrealized loss on derivative instruments of $46,544 and $730,408 for the three months ended September 30, 2014 and 2013, respectively. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire and dispose of real estate and real estate-related investments meeting our investment objectives.

Loss on debt extinguishment

Loss on debt extinguishment for the three months ended September 30, 2014 was $1,047,932 compared to $0 for the three months ended September 30, 2013. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of the Arbor Pointe Apartments and Prairie Walk Apartments. We expect loss on debt extinguishment may increase in future periods if we repay the remaining outstanding principal on properties that are sold prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expense

General and administrative expenses for the three months ended September 30, 2014 were $1,232,577 compared to $1,025,724 for the three months ended September 30, 2013. These general and administrative costs consisted primarily of legal fees, D&O insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $206,853 was primarily due to the acquisition of 17 multifamily properties since September 30, 2013 and the continuing operation of the properties owned as of September 30, 2013.We expect general and administrative expenses to decrease as a percentage of total revenue.

Acquisition costs

Acquisition costs for the three months ended September 30, 2014 were $255,864 compared to $2,172,569 for the three months ended September 30, 2013. The decrease in acquisition costs related primarily to our acquisition of one multifamily property with an aggregate purchase price of $18,350,000 during the three months ended September 30, 2014 compared to the acquisition of 12 multifamily properties with an aggregate purchase price of $330,550,000 during the three months ended September 30, 2013. We expect acquisition costs may decrease in future periods as we expect to acquire fewer properties and real estate-related investments in future periods.

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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 Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013

The following table summarizes the consolidated results of continuing operations for the nine months ended September 30, 2014 and 2013:

	For the Nine Months Ended September 30,
	2014			2013			Change $			Change %
Total revenues	$	145,121,380		$	69,723,052		$	75,398,328		108	%
Operating, maintenance and management	40,173,136			17,852,031			22,321,105			125	%
Real estate taxes and insurance	26,412,787			10,270,695			16,142,092			157	%
Fees to affiliates	18,233,188			18,459,436			(226,248		)	(1	)%
Depreciation and amortization	53,637,688			30,292,960			23,344,728			77	%
Interest expense	30,292,922			15,869,427			14,423,495			91	%
Loss on debt extinguishment	1,939,817			—			1,939,817			100	%
General and administrative expenses	4,093,993			2,730,664			1,363,329			50	%
Acquisition costs	1,356,146			5,292,959			(3,936,813		)	(74	)%
Loss from continuing operations	$	(31,018,297	)	$	(31,045,120	)	$	26,823		—	%
NOI(1)	$	73,016,807		$	38,943,685		$	34,073,122		87	%
FFO(2)	$	22,619,391		$	(752,160	)	$	23,371,551		(3,107	)%
MFFO(2)	$	31,983,855		$	15,308,755		$	16,675,100		109	%

________________

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

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

Loss from continuing operations

For the nine months ended September 30, 2014, we had a loss from continuing operations of $31,018,297 compared to a loss from continuing operations of $31,045,120 for the nine months ended September 30, 2013. The decrease in loss from continuing operations of $26,823 over the comparable prior year period was primarily due to the increase in total revenues of $75,398,328, the decrease in acquisition costs of $3,936,813 and the decrease in fees to affiliates of $226,248, partially offset by the increase in operating, maintenance and management expenses of $22,321,105, the increase in real estate taxes and insurance of $16,142,092, the increase in depreciation and amortization expense of $23,344,728, the increase in interest expense of $14,423,495, the increase in loss on debt extinguishment of $1,939,817 and the increase in general and administrative expenses of $1,363,329. The increase in these expenses was due primarily to the increase in our property portfolio from 51 properties at September 30, 2013 to 65 properties at September 30, 2014.

55

PART I — FINANCIAL INFORMATION (continued)

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

Total revenues

Rental income and tenant reimbursements for the nine months ended September 30, 2014 were $145,121,380 compared to $69,723,052 for the nine months ended September 30, 2013. The increase of $75,398,328 was primarily due to the fact that we owned 65 multifamily properties as of September 30, 2014 compared to 51 multifamily properties as of September 30, 2013. Additionally, our total units increased by 4,206 from 12,189 at September 30, 2013 to 16,395 at September 30, 2014. Average monthly rents increased from $888 as of September 30, 2013 to $962 as of September 30, 2014. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, our value-enhancement efforts and improved occupancy.

Operating, maintenance and management expense

Operating, maintenance and management expenses for the nine months ended September 30, 2014 were $40,173,136 compared to $17,852,031 for the nine months ended September 30, 2013. The increase of $22,321,105 was primarily due to the fact that we operated 65 multifamily properties as of September 30, 2014 compared to 51 multifamily properties as of September 30, 2013. We expect that these amounts will decrease as a percentage of total revenues as we stabilize our property portfolio and implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the nine months ended September 30, 2014 were $26,412,787 compared to $10,270,695 for the nine months ended September 30, 2013. The increase of $16,142,092 was primarily due to the acquisition of 17 multifamily properties since September 30, 2013 and the continuing operation of the properties owned as of September 30, 2013. We expect these amounts may increase in future periods as a result of municipal property tax increases as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates for the nine months ended September 30, 2014 were $18,233,188 compared to $18,459,436 for the nine months ended September 30, 2013. This slight decrease was due to the fact that the acquisition fees earned by our advisor decreased in connection with the acquisition of six multifamily properties with an aggregate purchase price of $112,454,157 during the nine months ended September 30, 2014, compared to the acquisition of 21 multifamily properties with an aggregate purchase price of $547,680,000 during the nine months ended September 30, 2013. The decrease in acquisition fees was offset by investment management fees of $9,844,858 earned by our advisor during the nine months ended September 30, 2014 in connection with managing our portfolio of 65 multifamily properties, compared to investment management fees of $4,693,441 earned during the nine months ended September 30, 2013 in connection with managing the Company's portfolio of 51 multifamily properties.We expect fees to affiliates to decrease in future periods as a result of the decrease in anticipated future acquisitions along with an increase in anticipated future dispositions of real estate and real estate-related investments.

Depreciation and amortization

Depreciation and amortization expenses for the nine months ended September 30, 2014 were $53,637,688 compared to $30,292,960 for the nine months ended September 30, 2013. The increase of $23,344,728 was primarily due to the net increase in depreciable and amortizable assets of $412,614,840 since September 30, 2013. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the nine months ended September 30, 2014 was $30,292,922 compared to $15,869,427 for the nine months ended September 30, 2013. The increase of $14,423,495 was primarily due to the net increases in the notes payable balance of $294,374,633 since September 30, 2013 due to financing incurred in connection with the acquisition of 17 multifamily properties since September 30, 2013. Included in interest expense is the amortization of deferred financing costs of

56

PART I — FINANCIAL INFORMATION (continued)

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

$1,115,818 and $691,138 and amortization of loan premiums of $926,095 and $676,705 for the nine months ended September 30, 2014 and 2013, respectively. Also included in interest expense is the unrealized loss on derivative instruments of $3,362,058 and $356,553 for the nine months ended September 30, 2014 and 2013, respectively. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire and dispose of real estate and real estate-related investments meeting our investment objectives.

Loss on debt extinguishment

Loss on debt extinguishment for the nine months ended September 30, 2014 was $1,939,817 compared to $0 for the nine months ended September 30, 2013. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sales of the Lincoln Tower Apartments, Arbor Pointe Apartments and Prairie Walk Apartments. We expect loss on debt extinguishment may increase in future periods if we repay the remaining outstanding principal on properties that are sold prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expense

General and administrative expenses for the nine months ended September 30, 2014 were $4,093,993 compared to $2,730,664 for the nine months ended September 30, 2013. These general and administrative costs consisted primarily of legal fees, D&O insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $1,363,329 was due to the acquisition of 17 multifamily properties since September 30, 2013 and the continuing operation of the properties owned as of September 30, 2013.We expect general and administrative expenses to decrease as a percentage of total revenue.

Acquisition costs

Acquisition costs for the nine months ended September 30, 2014 were $1,356,146 compared to $5,292,959 for the nine months ended September 30, 2013. The decrease in acquisition costs related primarily to our acquisition of six multifamily properties with an aggregate purchase price of $112,454,157 during the nine months ended September 30, 2014 compared to the acquisition of 21 multifamily properties with an aggregate purchase price of $547,680,000 during the nine months ended September 30, 2013. We expect acquisition costs may decrease in future periods as we expect to acquire fewer properties and real estate-related investments in future periods.

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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, 2014 Compared to the Three Months Ended September 30, 2013

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, 2013. A “non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2013.

The following table presents the same-store and non-same-store results from operations for the three months ended September 30, 2014 and 2013:

	For the Three Months Ended September 30,
	2014		2013		Change $		Change %
Same-store properties:
Revenues	$	24,693,618	$	23,097,053	$	1,596,565	7	%
Operating expenses	11,538,491		10,461,286		1,077,205		10	%
Net operating income	13,155,127		12,635,767		519,360		4	%
Non-same-store properties:
Net operating income	11,968,185		3,291,523		8,676,662
Total net operating income(1)	$	25,123,312	$	15,927,290	$	9,196,022

________________

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

Net Operating Income

Same-store net operating income for the three months ended September 30, 2014 was $13,155,127 compared to $12,635,767 for the three months ended September 30, 2013. The 4%increase in same-store net operating income was primarily due to a 7%increase in same-store rental revenues partially offset by a 10%increase in same-store operating expenses.

Revenues

Same-store revenues for the three months ended September 30, 2014 were $24,693,618 compared to $23,097,053 for the three months ended September 30, 2013. The 7%increase in same-store revenues was primarily due to average rent increases at the same-store properties from $890 to $923 coupled with the increase in same store occupancy from 93.0% as of September 30, 2013 to 95.0% as of September 30, 2014.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2014 were $11,538,491 compared to $10,461,286 for the three months ended September 30, 2013. The increase in same-store operating expenses was primarily attributable to the increase in property taxes and insurance.

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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, (2) acquisition costs, (3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs 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.

59

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, 2014 and 2013:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013
Net loss	$	(3,337,573	)	$	(14,707,104	)	$	(21,074,163	)	$	(31,045,120	)
Fees to affiliates(1)	3,725,847			8,624,000			12,714,538			15,802,795
Depreciation and amortization	15,975,228			11,796,884			53,637,688			30,292,960
Interest expense	9,095,277			7,015,217			30,292,922			15,869,427
Loss on debt extinguishment	1,047,932			—			1,939,817			—
General and administrative expenses	1,232,577			1,025,724			4,093,993			2,730,664
Acquisition costs	255,864			2,172,569			1,356,146			5,292,959
Gain on sales of real estate, net	(2,871,840		)	—			(9,944,134		)	—
Net operating income	$	25,123,312		$	15,927,290		$	73,016,807		$	38,943,685

________________

(1) Fees to affiliates for the three and nine months ended September 30, 2014 excludes property management fees of $1,484,356 and $4,301,762 and other fees of $393,538 and $1,216,888, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2013 excludes property management fees of $856,214 and $2,076,074 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 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. 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.

61

PART I — FINANCIAL INFORMATION (continued)

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

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

Our MFFO calculation complies with the IPA’s Practice Guideline described above. 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.

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PART I — FINANCIAL INFORMATION (continued)

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

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (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, 2014 and 2013:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Reconciliation of net loss to MFFO:	2014			2013			2014			2013
Net loss	$	(3,337,573	)	$	(14,707,104	)	$	(21,074,163	)	$	(31,045,120	)
Depreciation of real estate assets	15,035,916			8,435,657			43,476,249			20,303,301
Amortization of lease-related costs	939,312			3,361,227			10,161,439			9,989,659
Gain on sale of real estate, net	(2,871,840		)	—			(9,944,134		)	—
FFO	9,765,815			(2,910,220		)	22,619,391			(752,160		)
Acquisition fees and expenses(1)(2)	628,642			8,857,994			4,225,826			16,402,313
Unrealized loss on derivative instruments	46,544			730,408			3,362,058			356,553
Loss on debt extinguishment	1,047,932			—			1,939,817			—
Accretion of below-market leases	—			(271,633		)	(163,237		)	(697,951		)
MFFO	$	11,488,933		$	6,406,549		$	31,983,855		$	15,308,755

________________

(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

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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 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.

(2) Acquisition fees and expenses for the three and nine months ended September 30, 2014 includes acquisition fees of $372,778 and $2,869,680 and acquisition fees of $6,685,425 and $11,109,354 for the three and nine months ended September 30, 2013, respectively, that are recorded in fees to affiliates in the accompanying statements of operations. Acquisition fees and expenses for the three and nine months ended September 30, 2014 also includes acquisition expenses of $255,864 and $1,356,146 and acquisition expenses of $2,172,569 and $5,292,959 for the three and nine months ended September 30, 2013, respectively that are recorded in acquisition costs in the accompanying statements of operations.

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

Off-Balance Sheet Arrangements

As of September 30, 2014, 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, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 8 of 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 cap, floor 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, 2014, the fair value of our fixed rate debt was $483,053,567 and the carrying value of our fixed rate debt was $482,002,588. 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, 2014. 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

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PART I — FINANCIAL INFORMATION (continued)

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, 2014, we were exposed to market risks related to fluctuations in interest rates on $579,071,427 of variable rate debt outstanding. Based on interest rates as of September 30, 2014, if interest rates were 100 basis points higher during the 12 months ending September 30, 2015, interest expense on our variable rate debt would increase by $5,853,135 and if interest rates were 100 basis points lower during the 12 months ending September 30, 2015, interest expense on the variable rate debt would decrease by $915,162.

At September 30, 2014, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.30% and 2.52%, respectively. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2014 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2014 where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2014, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate caps as of September 30, 2014 were not in excess of the capped rates. See also Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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, 2014 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

None.

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

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 and we commenced our initial public offering on July 19, 2010. We offered 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. We initially offered shares of our common stock to the public in our primary offering at a price of $10.00 per share and to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. 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. Our initial public offering terminated on December 20, 2013. Upon termination of our initial public offering, we had sold 74,245,616 shares of our common stock, including 1,588,289 shares issued pursuant to the distribution reinvestment plan, for gross offering proceeds of $751,234,073 in our private offering and public offering.

On January 3, 2014, we registered up to 12,000,000 shares of our common stock to be issued to existing shareholders pursuant to the distribution reinvestment plan. As of September 30, 2014, we had issued 1,820,881 shares for gross offering proceeds of $17,717,168.

From inception through September 30, 2014, 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	$	69,841,541		Actual	9.57	%
Other organization and offering costs	23,802,946			Actual	3.26	%
Total expenses	$	93,644,487
Total public offering proceeds (excluding DRP proceeds)	$	729,992,516		Actual	100.00	%
Percentage of public offering proceeds used to pay for organization and offering costs	12.83		%	Actual	12.83	%

The net offering proceeds to us from our initial public offering, after deducting the total expenses incurred as described above, were approximately $651,745,261 including net offering proceeds from our distribution reinvestment plan of $15,397,232. The ratio of the cost of raising capital in our initial public offering was approximately 12.83%.

We used substantially all of the net proceeds from our public and private offerings to invest in and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of September 30, 2014, we had invested in 65 multifamily properties for a total purchase price of $1,607,007,557. These property acquisitions were funded from proceeds of our offerings and $1,031,339,196 in secured financings.

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PART II—OTHER INFORMATION (continued)

During the three months ended September 30, 2014, 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
July 2014	27,601	80,042	$	9.70	(3)
August 2014	3,288	—	—		(3)
September 2014	18,038	—	—		(3)
	48,927	80,042

________________

(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 share repurchase plan, as amended, we currently redeem shares at prices determined as follows:

• 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 following our offering stage, 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.

(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.

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 Third Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2014 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. 17 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. 17 to the Company’s Registration Statement on Form S-11 (No. 333-160748)).

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)

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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, 2014	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Date:	November 13, 2014	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 Third Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2014 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. 17 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. 17 to the Company’s Registration Statement on Form S-11 (No. 333-160748)).

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)