Steadfast Income REIT 10-Q 2013 Q2 Quarterly report

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 June 30, 2013

OR

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

Commission file number 000-54674

STEADFAST INCOME REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

As of August 9, 2013, there were 41,068,429 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 June 30, 2013 (unaudited) and December 31, 2012	2
Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012 (unaudited)	3
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2012 and for the six months ended June 30, 2013 (unaudited)	4
Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 (unaudited)	5
Condensed Notes to Consolidated Financial Statements as of June 30, 2013 (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3. Quantitative and Qualitative Disclosures About Market Risk	66
Item 4. Controls and Procedures	67
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	68
Item 1A. Risk Factors	68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3. Defaults Upon Senior Securities	70
Item 4. Mine Safety Disclosures	70
Item 5. Other Information	70
Item 6. Exhibits	71
Signatures	72
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2013			December 31, 2012
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	72,082,837		$	52,128,526
Building and improvements	708,891,816			512,420,903
Tenant origination and absorption costs	17,688,993			13,496,020
Other intangible assets	1,257,357			—
Total real estate, cost	799,921,003			578,045,449
Less accumulated depreciation and amortization	(36,569,438		)	(18,073,362		)
Total real estate, net	763,351,565			559,972,087
Cash and cash equivalents	45,147,522			9,528,664
Restricted cash	10,981,805			5,467,219
Rents and other receivables	2,453,872			1,414,875
Deferred financing costs and other assets, net	10,738,043			6,203,711
Total assets	$	832,672,807		$	582,586,556
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	14,093,425		$	8,536,953
Below-market leases, net	24,033			301,349
Notes payable:
Mortgage notes payable, net	558,971,870			408,802,388
Revolving credit facility	—			5,000,000
Total notes payable, net	558,971,870			413,802,388
Distributions payable	2,072,152			1,343,399
Due to affiliates, net	4,676,877			3,471,796
Total liabilities	579,838,357			427,455,885
Commitments and contingencies (Note 9)
Redeemable common stock	6,349,417			3,049,521
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, 36,929,950 and 22,908,859 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	369,298			229,086
Convertible stock, $0.01 par value per share; 1,000 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively	10			10
Additional paid-in capital	311,914,028			191,130,977
Cumulative distributions and net losses	(65,798,303		)	(39,278,923		)
Total stockholders’ equity	246,485,033			152,081,150
Total liabilities and stockholders’ equity	$	832,672,807		$	582,586,556

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 June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues:
Rental income	$	19,979,998		$	5,448,943		$	36,779,427		$	9,049,745
Tenant reimbursements and other	2,390,455			505,692			4,181,782			797,710
Total revenues	22,370,453			5,954,635			40,961,209			9,847,455
Expenses:
Operating, maintenance and management	5,944,288			1,707,282			10,472,201			2,817,754
Real estate taxes and insurance	3,300,748			700,525			5,914,486			1,133,107
Fees to affiliates	4,550,796			2,484,829			8,736,922			4,138,263
Depreciation and amortization	9,772,519			3,390,309			18,496,076			5,324,333
Interest expense	4,552,197			1,328,909			8,854,210			2,086,991
General and administrative expenses	994,118			660,057			1,704,940			1,364,393
Acquisition costs	1,001,902			582,240			3,120,390			1,155,721
	30,116,568			10,854,151			57,299,225			18,020,562
Net loss	(7,746,115		)	(4,899,516		)	(16,338,016		)	(8,173,107		)
Net loss per common share — basic and diluted	$	(0.24	)	$	(0.57	)	$	(0.57	)	$	(1.13	)
Weighted average number of common shares outstanding — basic and diluted	32,136,950			8,629,043			28,727,291			7,219,033

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, 2012

AND FOR THESIX MONTHS ENDEDJUNE 30, 2013 (Unaudited)

	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, December 31, 2011	4,638,699		$	46,387		1,000	$	10	$	38,260,059		$	(8,082,838	)	$	30,223,618
Issuance of common stock	18,314,135		183,139			—	—		182,891,102			—			183,074,241
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—	—		(17,154,479		)	—			(17,154,479		)
Transfers to redeemable common stock	—		—			—	—		(2,722,156		)	—			(2,722,156		)
Redemption of common stock	(43,975	)	(440		)	—	—		(417,293		)	—			(417,733		)
Other offering costs to affiliates	—		—			—	—		(9,820,681		)	—			(9,820,681		)
Distributions declared	—		—			—	—		—			(8,636,158		)	(8,636,158		)
Amortization of stock-based compensation	—		—			—	—		94,425			—			94,425
Net loss for the year ended December 31, 2012	—		—			—	—		—			(22,559,927		)	(22,559,927		)
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	14,081,683		140,818			—	—		143,301,028			—			143,441,846
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—	—		(13,432,890		)	—			(13,432,890		)
Transfers to redeemable common stock	—		—			—	—		(3,319,127		)	—			(3,319,127		)
Redemption of common stock	(60,592	)	(606		)	—	—		(582,086		)	—			(582,692		)
Other offering costs to affiliates	—		—			—	—		(5,221,670		)	—			(5,221,670		)
Distributions declared	—		—			—	—		—			(10,181,364		)	(10,181,364		)
Amortization of stock-based compensation	—		—			—	—		37,796			—			37,796
Net loss for the six months ended June 30, 2013	—		—			—	—		—			(16,338,016		)	(16,338,016		)
BALANCE, June 30, 2013	36,929,950		$	369,298		1,000	$	10	$	311,914,028		$	(65,798,303	)	$	246,485,033

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)

	Six Months Ended June 30,
	2013			2012
Cash Flows from Operating Activities:
Net loss	$	(16,338,016	)	$	(8,173,107	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	18,496,076			5,324,333
Accretion of below-market leases	(426,318		)	—
Amortization of deferred financing costs	395,747			103,560
Amortization of stock-based compensation	243,796			19,383
Amortization of debt premium	(387,942		)	(33,623		)
Change in fair value of interest rate cap agreements	(373,855		)	105,333
Changes in operating assets and liabilities:
Restricted cash for operating activities	(4,413,849		)	(1,015,448		)
Rents and other receivables	(551,776		)	(26,067		)
Other assets	189,680			(45,404		)
Accounts payable and accrued liabilities	5,538,451			3,253,601
Due to affiliates, net	704,511			499,755
Net cash provided by operating activities	3,076,505			12,316
Cash Flows from Investing Activities:
Acquisition of real estate investments	(163,523,649		)	(102,823,060		)
Addition to real estate investments	(2,331,167		)	(599,892		)
Escrow deposits for pending real estate acquisitions	(4,739,792		)	125,100
Restricted cash for investing activities	(1,100,737		)	(1,442,707		)
Purchase of interest rate caps	(920,246		)	(295,870		)
Net cash used in investing activities	(172,615,591		)	(105,036,429		)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	100,521,000			63,341,001
Principal payments on mortgage notes payable	(3,404,116		)	(6,859,659		)
Borrowings from credit facility	20,000,000			—
Principal payments on credit facility	(25,000,000		)	—
Proceeds from issuance of common stock	138,847,097			54,796,203
Payments of commissions on sale of common stock and related dealer manager fees	(13,432,890		)	(5,252,171		)
Reimbursement of other offering costs to affiliates	(4,721,099		)	(3,029,041		)
Payment of deferred financing costs	(1,666,066		)	(1,000,337		)
Distributions to common stockholders	(5,403,290		)	(1,298,150		)
Redemptions of common stock	(582,692		)	(322,401		)
Net cash provided by financing activities	205,157,944			100,375,445
Net increase (decrease) in cash and cash equivalents	35,618,858			(4,648,668		)
Cash and cash equivalents, beginning of period	9,528,664			12,200,681
Cash and cash equivalents, end of period	$	45,147,522		$	7,552,013

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	8,433,993		$	1,711,865
Supplemental Disclosure of Noncash Transactions:
Increase in distributions payable	$	728,753		$	297,185
Assumption of mortgage notes payable to acquire real estate	$	51,270,501		$	60,361,048
Application of escrow deposits to acquire real estate	$	2,580,200		$	—
Premium on assumed mortgage notes payable	$	2,170,039		$	—
Increase in amounts receivable from stockholders	$	(487,221	)	$	(19,988	)
Increase (decrease) in amounts payable to affiliates for other offering costs	$	500,572		$	(58,808	)
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	4,049,321		$	907,387

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

June 30, 2013

(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. As the Company accepts subscriptions for shares of its common stock, the Company transfers substantially all of the net offering proceeds to the Operating Partnership in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increases proportionately. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009.

As of June 30, 2013, the Company owned 39 multifamily properties comprising a total of 8,771 apartment homes and 25,675 square feet of rentable commercial space. For more information on the Company's real estate portfolio, see Note 3.

Private Offering

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

Public Offering

On July 23, 2009, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share (with discounts available for certain categories of purchasers) (the “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.The SEC declared the Company’s registration statement effective on July 9, 2010. The Company commenced the Public Offering on July 19, 2010. The Company may reallocate shares of common stock registered in the Public Offering between the Primary Offering and the DRP.

On July 12, 2012, the Company’s board of directors determined an estimated value per share of the Company’s common stock 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. Effective

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

September 10, 2012, the Company’s board of directors increased the amount of distributions paid on each share of the Company’s common stock from $0.001917 per share per day to $0.001964 per share per day, which, if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on the new offering price of $10.24 per share. The Company’s board of directors may again, in its sole discretion, change the price at which the Company offers shares of common stock to the public in the Primary Offering or to its stockholders pursuant to the DRP to reflect future changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

From the commencement of the Public Offering on July 19, 2010 to June 30, 2013, the Company sold 36,326,023 shares of common stock in the Public Offering for gross proceeds of $365,765,634, including 809,640 shares of common stock issued pursuant to the DRP for gross offering proceeds of $7,820,978.

On May 3, 2013, the Company filed a registration statement on Form S-11 (File No. 333-188362) with the SEC to register a follow-on public offering of up to $253,450,000 in shares of common stock. The Company will offer up to $204,800,000 in shares of its common stock to the public at an initial price of $10.24 per share and up to $48,650,000 in shares of common stock to its stockholders pursuant to the DRP at an initial price of $9.73 per share. Upon the SEC declaring the registration statement effective for the Company's follow-on offering, the Company will terminate the Public Offering and commence the follow-on offering.  Under rules promulgated by the SEC, the Company can continue the Public Offering until as late as January 3, 2014.  

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

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on May 4, 2014. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company's board of directors and provides investment management services on the Company’s behalf. The Company has retained Steadfast Capital Markets Group, LLC (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager for the Public Offering. The Dealer Manager is responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, also provides offering services, marketing, investor relations and other administrative services on the Company’s behalf.

The Partnership Agreement provides that the Operating Partnership 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.

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

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2012. 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, 2012 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2013.

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 six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012.

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.

Reclassifications

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

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;

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

• 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 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 in the accompanying consolidated balance sheets.

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

	June 30, 2013
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	1,427,210	$	—

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.

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables and 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 June 30, 2013 and December 31, 2012, the fair value of the mortgage notes payable was $547,271,810 and $353,947,202, respectively, compared to the carrying value of $558,971,870 and $408,802,388, 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). For the period from January 1, 2012 to September 9, 2012, distributions were based on daily record dates and calculated at a rate of $0.001917 per share per day and $0.001964 per share per day beginning September 10, 2012 through June 30, 2013. Each day during the period from January 1, 2013 through June 30, 2013 was a record date for distributions.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code.

Per Share Data

Basic earnings (loss) per share attributable for all periods presented are computed by dividing net income (loss) attributable to controlling interest by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings (loss) per share are computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assumes each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period. During the three and six months ended June 30, 2013, the Company declared distributions of $0.179 and $0.355 per common share. During the three and six months ended June 30, 2012, the Company declared distributions of $0.174 and $0.349 per common share.

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.

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

3. Real Estate

As of June 30, 2013, the Company owned 39 multifamily properties. The following table provides summary information regarding the Company’s property portfolio:

							Mortgage Debt Outstanding at June 30, 2013		Average Occupancy as of				Average Monthly Rent as of
Property Name	Location		Purchase Date	Number of Units	Contract Purchase Price				Jun 30, 2013		Dec 31, 2012		Jun 30, 2013		Dec 31, 2012
Lincoln Tower Apartments	Springfield, IL		8/11/2010	190	$	9,500,000	$	8,544,087	94.2	%	96.8	%	$	866	$	848
Park Place Condominiums	Des Moines, IA		12/22/2010	150	8,253,500		5,000,000		98.0	%	88.6	%	874		859
Arbor Pointe Apartments	Louisville, KY		5/5/2011	130	6,500,000		5,046,762		99.2	%	95.4	%	781		775
Clarion Park Apartments	Olathe, KS		6/28/2011	220	11,215,000		8,705,648		98.6	%	95.5	%	707		697
Cooper Creek Village	Louisville, KY		8/24/2011	123	10,420,000		6,684,478		90.2	%	95.1	%	942		938
Truman Farm Villas	Grandview, MO		12/22/2011	200	9,100,000		5,871,028		97.5	%	96.5	%	661		654
Prairie Walk Apartments	Kansas City, MO		12/22/2011	128	6,100,000		3,935,310		96.9	%	95.3	%	632		615
EBT Lofts	Kansas City, MO		12/30/2011	102	8,575,000		5,548,745		97.1	%	98.0	%	888		876
Windsor on the River Apartments	Cedar Rapids, IA		1/26/2012	424	33,000,000		23,500,000		96.9	%	88.0	%	711		728
Renaissance St. Andrews Apartments	Louisville, KY		2/17/2012	216	12,500,000		9,084,000		88.4	%	93.5	%	691		699
Spring Creek of Edmond	Edmond, OK		3/9/2012	252	19,350,000		14,074,896		94.0	%	92.9	%	862		850
Montclair Parc Apartments	Oklahoma City, OK		4/26/2012	360	35,750,000		24,537,086		97.8	%	88.6	%	936		926
Sonoma Grande Apartments	Tulsa, OK		5/24/2012	336	32,200,000		22,540,000		90.5	%	91.4	%	960		945
Estancia Apartments	Tulsa, OK		6/29/2012	294	27,900,000		22,024,170		92.5	%	95.2	%	975		950
Montelena Apartments	Round Rock, TX		7/13/2012	232	18,350,000		12,744,612		97.8	%	94.0	%	903		869
Valley Farms Apartments	Louisville, KY		8/30/2012	160	15,100,000		10,329,069		94.4	%	94.4	%	886		883
Hilliard Park Apartments	Columbus, OH		9/11/2012	201	19,800,000		13,860,000		85.1	%	92.0	%	1,014		992
Sycamore Terrace Apartments	Terre Haute, IN		9/20/2012	178	16,500,000		11,445,185		96.6	%	95.5	%	1,021		1,015
Hilliard Summit Apartments	Columbus, OH		9/28/2012	208	24,100,000		16,800,000		93.8	%	93.8	%	1,095		1,063
Springmarc Apartments	San Marcos, TX	1	10/19/2012	240	21,850,000		15,470,000		94.6	%	88.8	%	887		974

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

							Mortgage Debt Outstanding at June 30, 2013		Average Occupancy as of				Average Monthly Rent as of
Property Name	Location		Purchase Date	Number of Units	Contract Purchase Price				Jun 30, 2013		Dec 31, 2012		Jun 30, 2013		Dec 31, 2012
Renaissance at St. Andrews Condominiums	Louisville, KY	1	10/31/2012	29	$	1,375,000	$	—	100.0	%	58.6	%	$	682	$	704
Ashley Oaks Apartments	San Antonio, TX	1	11/29/2012	462	30,790,000		21,712,000		90.3	%	91.1	%	764		745
Arrowhead Apartments	Palatine, IL	1	11/30/2012	200	16,750,000		12,562,000		98.0	%	96.5	%	1,040		997
The Moorings Apartments	Roselle, IL	1	11/30/2012	216	20,250,000		15,187,000		94.4	%	97.7	%	1,032		1,010
Forty 57 Apartments	Lexington, KY	1	12/20/2012	436	52,500,000		38,500,000		97.5	%	87.2	%	855		866
Keystone Farms Apartments	Nashville, TN	1	12/28/2012	90	8,400,000		6,200,000		98.9	%	97.8	%	975		952
Riverford Crossing Apartments	Frankfort, KY	1	12/28/2012	300	30,000,000		21,900,000		91.3	%	92.7	%	863		861
South Pointe at Valley Farms	Louisville, KY	1	12/28/2012	32	5,275,000		—		96.9	%	93.8	%	994		969
Montecito Apartments	Austin, TX	1	12/31/2012	268	19,000,000		14,250,000		94.0	%	91.8	%	805		752
Hilliard Grand Apartments	Dublin, OH	1	12/31/2012	314	40,500,000		29,154,784		95.2	%	92.0	%	1,228		1,190
The Hills at Fair Oaks	Fair Oaks Ranch, TX	1	1/31/2013	288	34,560,000		24,767,000		92.4	%	—	%	964		—
Library Lofts East	Kansas City, MO	1	2/28/2013	118	12,750,000		9,196,664		97.5	%	—	%	901		—
The Trails at Buda Ranch	Buda, TX	1	3/28/2013	264	23,000,000		17,030,000		91.3	%	—	%	925		—
Deep Deuce at Bricktown	Oklahoma City, OK	1	3/28/2013	294	38,220,000		27,745,040		89.8	%	—	%	1,144		—
Deer Valley Apartments	Lake Bluff, IL	1	4/30/2013	224	28,600,000		20,875,000		97.8	%	—	%	1,201		—
Grayson Ridge	North Richland Hills, TX	1	5/31/2013	240	14,300,000		10,725,000		95.4	%	—	%	700		—
Rosemont at Olmos Park	San Antonio, TX	1	5/31/2013	144	22,050,000		15,100,000		83.3	%	—	%	1,323		—
Retreat at Quail North	Oklahoma City, OK	1	6/12/2013	240	25,250,000		17,267,567		96.7	%	—	%	994		—
The Lodge at Trails Edge	Indianapolis, IN	1	6/18/2013	268	18,400,000		11,054,739		96.3	%	—	%	697		—
				8,771	$	788,033,500	$	558,971,870	94.3	%	92.4	%	$	907	$	783

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Second Quarter Acquisitions

On April 30, 2013, the Company acquired a fee simple interest in the Deer Valley Luxury Apartments located in Lake Bluff, Illinois (the “Deer Valley Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $28,600,000, exclusive of closing costs. The Deer Valley Property consists of 13two- and three-story buildings and contains 224 units consisting of 120one-bedroom apartments and 104two-bedroom apartments. The apartments range in size from 725 to 1,050 square feet and average 876 square feet. An acquisition fee of $580,985 was earned by the Advisor in connection with the acquisition of the Deer Valley Property.

On May 31, 2013, the Company acquired a fee simple interest in the Grayson Ridge located in North Richland Hills, Texas (the “Grayson Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $14,300,000, exclusive of closing costs. The Grayson Property consists of 16two- and three-story buildings and contains 240 units consisting of 144one-bedroom apartments and 96two-bedroom apartments. The apartments range in size from 518 to 1,025 square feet and average 760 square feet. An acquisition fee of $291,165 was earned by the Advisor in connection with the acquisition of the Grayson Property.

On May 31, 2013, the Company acquired a fee simple interest in the Rosemont at Olmos Park located in San Antonio, Texas (the “Rosemont Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $22,050,000, exclusive of closing costs. The Rosemont Property consists of 10three-story buildings and contains 144 units consisting of 53one-bedroom apartments, 67two-bedroom apartments and 24three-bedroom apartments. The apartments range in size from 711 to 1,296 square feet and average 963 square feet. An acquisition fee of $448,153 was earned by the Advisor in connection with the acquisition of the Rosemont Property.

On June 12, 2013, the Company acquired a fee simple interest in the Retreat at Quail North located in Oklahoma City, Oklahoma (the “Quail North Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $25,250,000, exclusive of closing costs. The Quail North Property consists of 3three-story buildings and contains 240 units consisting of 108one-bedroom apartments, 120two-bedroom apartments and 12three-bedroom apartments. The apartments range in size from 665 to 1,429 square feet and average 987 square feet. An acquisition fee of $508,717 was earned by the Advisor in connection with the acquisition of the Quail North Property.

On June 18, 2013, the Company acquired a fee simple interest in the The Lodge at Trails Edge located in Indianapolis, Indiana (the “Trails Edge Property”), through a wholly-owned subsidiary of the Operating Partnership, for a purchase price of $18,400,000, exclusive of closing costs. The Trails Edge Property consists of 13two-story buildings and contains 268 units consisting of 136one-bedroom apartments and 132two-bedroom apartments. The apartments range in size from 661 to 854 square feet and average 756 square feet. An acquisition fee of $372,591 was earned by the Advisor in connection with the acquisition of the Trails Edge Property.

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

The purchase price for the Company’s acquisitions during the three months ended June 30, 2013 was allocated as follows as of the respective closing dates of each acquisition:

Property Name	Purchase Date	Land		Building and Improvements		Tenant Origination and Absorption Costs		Premium on Assumed Liabilities(1)			Total Purchase Price
Deer Valley Apartments	4/30/2013	$	2,494,142	$	25,576,950	$	528,908	$	—		$	28,600,000
Grayson Ridge	5/31/2013	1,594,099		12,352,127		353,774		—			14,300,000
Rosemont at Olmos Park	5/31/2013	2,064,447		19,562,430		423,123		—			22,050,000
Retreat at Quail North	6/12/2013	1,700,810		23,536,900		488,643		(476,353		)	25,250,000
The Lodge at Trails Edge	6/18/2013	2,389,613		15,742,487		385,620		(117,720		)	18,400,000
		$	10,243,111	$	96,770,894	$	2,180,068	$	(594,073	)	$	108,600,000

________________

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

As of June 30, 2013 and December 31, 2012, accumulated depreciation and amortization related to the Company's consolidated real estate properties and related intangibles were as follows:

	June 30, 2013
	Assets														Liabilities
	Land		Building and Improvements			Tenant Origination and Absorption			Other Intangible Assets			Total Real Estate			Below-Market Leases
Investments in real estate	$	72,082,837	$	708,891,816		$	17,688,993		$	1,257,357		$	799,921,003		$	(589,054	)
Less: Accumulated depreciation and amortization	—		(21,383,417		)	(15,163,066		)	(22,955		)	(36,569,438		)	565,021
Net investments in real estate and related lease intangibles	$	72,082,837	$	687,508,399		$	2,525,927		$	1,234,402		$	763,351,565		$	(24,033	)

	December 31, 2012
	Assets													Liabilities
	Land		Building and Improvements			Tenant Origination and Absorption			Other Intangible Assets		Total Real Estate			Below-Market Leases
Investments in real estate	$	52,128,526	$	512,420,903		$	13,496,020		$	—	$	578,045,449		$	(440,052	)
Less: Accumulated depreciation and amortization	—		(9,515,773		)	(8,557,589		)	—		(18,073,362		)	138,703
Net investments in real estate and related lease intangibles	$	52,128,526	$	502,905,130		$	4,938,431		$	—	$	559,972,087		$	(301,349	)

Depreciation and amortization expenses were $9,772,519 and $18,496,076 for the three and six months ended June 30, 2013, and $3,390,309 and $5,324,333 for the three and six months ended June 30, 2012, respectively.

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

The increase in net loss as a result of amortization of the Company’s tenant origination and absorption costs was $3,280,773 and $6,605,477 for the three and six months ended June 30, 2013, and $1,844,828 and $2,847,590 for the three and six months ended June 30, 2012, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

The increase in rental income as a result of the accretion of the Company’s below-market lease intangible liabilities for the three months ended June 30, 2013 and 2012 was $426,318 and $0. 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.

Operating Leases

As of June 30, 2013, the Company’s real estate portfolio comprised 8,771 residential units and was 94.3% occupied by a diverse group of residents. For each of the three and six months ended June 30, 2013 and 2012, the Company’s real estate portfolio earned approximately 99% of its rental income from residential tenants and approximately 1% of its rental income from commercial office tenants. The residential tenant lease terms consist of lease durations equal to twelve months or less. The commercial office tenant leases consist of lease durations varying from three to five years.

Some residential and commercial leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit for commercial tenants. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $2,289,366 and $1,809,508 as of June 30, 2013 and December 31, 2012, respectively.

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial office tenants as of June 30, 2013 and thereafter is as follows:

July 1 through December 31, 2013	$	172,824
2014	256,847
2015	217,198
2016	188,789
2017	187,680
Thereafter	31,280
	$	1,054,618

As of June 30, 2013 and December 31, 2012, no tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

4. Deferred Financing Costs and Other Assets

As of June 30, 2013 and December 31, 2012, deferred financing costs and other assets, net of accumulated amortization, consisted of:

	June 30, 2013			December 31, 2012
Deferred financing costs	$	5,455,657		$	3,789,591
Less: accumulated amortization	(655,435		)	(259,688		)
	4,800,222			3,529,903
Prepaid expenses	375,848			975,843
Interest rate cap agreements	1,427,210			133,109
Escrow deposits for pending real estate acquisitions	3,334,700			1,175,100
Deposits	800,063			389,756
	$	10,738,043		$	6,203,711

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

5. Debt

Mortgage Notes Payable

The following is a summary of notes payable secured by real property as of June 30, 2013 and December 31, 2012:

					Principal Outstanding at
	Property Name	Payment Type	Maturity Date	Interest Rate(1)	June 30, 2013		December 31, 2012
1	Lincoln Tower Property	Principal and interest	May 1, 2019	3.66%	$	8,544,087	$	8,652,963
2	Park Place Property(2)	Principal and interest(3)	July 1, 2018	3.50%	5,000,000		5,000,000
3	Arbor Pointe Property	Principal and interest	June 1, 2018	4.86%	5,046,762		5,087,013
4	Clarion Park Property	Principal and interest	July 1, 2018	4.58%	8,705,648		8,778,412
5	Cooper Creek Property	Principal and interest(3)	September 1, 2018	3.89%	6,684,478		6,743,782
6	Truman Farm Villas Property	Principal and interest(3)	January 1, 2019	3.78%	5,871,028		5,915,000
7	Prairie Walk Property	Principal and interest(3)	January 1, 2019	3.74%	3,935,310		3,965,000
8	EBT Lofts Property	Principal and interest(3)	January 1, 2019	3.82%	5,548,745		5,590,000
9	Windsor Property	Interest only	May 1, 2042	Variable(4)(5)	23,500,000		23,500,000
10	Renaissance Property(6)	Principal and interest(3)	January 1, 2023	3.85%	9,084,000		9,084,000
11	Spring Creek Property(7)	Principal and interest	February 1, 2018	4.88%	14,074,896		14,236,229
12	Montclair Parc Property	Principal and interest	May 1, 2019	3.70%	24,537,086		24,766,709
13	Sonoma Grande Property	Principal and interest(8)	June 1, 2019	3.31%	22,540,000		22,540,000
14	Estancia Property(9)	Interest only	October 1, 2017(10)	5.94%	22,024,170		22,203,718
15	Montelena Property(11)	Principal and interest(12)	August 1, 2018	4.82%	12,744,612		12,817,796
16	Valley Farms Property	Principal and interest	January 1, 2020	4.25%	10,329,069		10,400,000
17	Hilliard Park Property	Principal and interest(3)	October 1, 2022	3.62%	13,860,000		13,860,000
18	Sycamore Terrace Property	Principal and interest	December 1, 2019	LIBOR + 3.44%	11,445,185		11,550,000
19	Hilliard Summit Property	Principal and interest(3)	October 1, 2022	3.56%	16,800,000		16,800,000
20	Springmarc Property	Principal and interest(3)	November 1, 2019	3.69%	$	15,470,000	$	15,470,000
21	Ashley Oaks Property(13)	Principal and interest(3)	November 1, 2021	LIBOR + 2.35%	21,712,000		21,712,000
22	Arrowhead Property	Principal and interest(3)	December 1, 2019	3.38%	12,562,000		12,562,000
23	The Moorings Property	Principal and interest(3)	December 1, 2019	3.37%	15,187,000		15,187,000
24	Forty 57 Property	Principal and interest(14)	January 1, 2023	3.73%	38,500,000		38,500,000
25	Keystone Farms Property	Principal and interest(3)	January 1, 2023	3.86%	6,200,000		6,200,000
26	Riverford Crossing Property	Principal and interest(14)	January 1, 2023	3.78%	21,900,000		21,900,000
27	South Pointe Property	Interest only	June 3, 2013	6.00%	—		2,275,000

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

					Principal Outstanding at
	Property Name	Payment Type	Maturity Date	Interest Rate(1)	June 30, 2013		December 31, 2012
28	Montecito Property	Principal and interest(3)	January 1, 2020	3.47%	14,250,000		14,250,000
29	Hilliard Grand Property	Principal and interest	August 1, 2052	5.59%	29,154,784		29,255,766
30	The Hills at Fair Oaks	Principal and interest(14)	February 1, 2023	4.02%	24,767,000		—
31	Library Lofts	Principal and Interest	April 1, 2020	3.66%	9,196,664		—
32	Trails at Buda Ranch(15)	Principal and interest(3)	April 1, 2023	LIBOR + 2.42%	17,030,000		—
33	Deep Deuce at Bricktown Apartments(16)	Principal and interest	April 1, 2018	5.04%	24,945,040		—
34	Deep Deuce at Bricktown — Supplemental Loan	Principal and interest	April 1, 2018	4.73%	2,800,000		—
35	Deer Valley(17)	Principal and interest(3)	May 1, 2023	LIBOR + 2.40%	20,875,000		—
36	Grayson Ridge(18)	Principal and interest(3)	July 1, 2020	LIBOR + 2.63%	10,725,000		—
37	Rosemont Olmos Park (18)	Principal and interest(14)	July 1, 2020	LIBOR + 2.65%	15,100,000		—
38	Retreat at Quail North(19)	Principal and interest	January 1, 2053	4.80%	17,267,567		—
39	The Lodge at Trails Edge(20)	Principal and interest	November 1, 2020	4.47%	11,054,739		—
					$	558,971,870	$	408,802,388

_____________________________

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

(2) On June 18, 2013, the loan was modified to extend the maturity date to July 1, 2018 and the interest rate was reduced to a fixed rate per annum of 3.50%.

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

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

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

remarketing agent having due regard for prevailing market conditions, would be the minimum interest rate necessary to cause the sale of the Bonds on the first day of an interest period at a price equal to 100% of the principal amount of the Bonds plus accrued interest. The Bonds currently bear interest at a weekly rate.

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

(6) On December 27, 2012, the Company refinanced the existing mortgage loan secured by the Renaissance St. Andrews Property with the proceeds of a new mortgage loan in the aggregate principal amount of $9,084,000. A portion of the proceeds from the new loan were used to retire $7,000,000 of principal and accrued interest outstanding on the existing mortgage loan.

(7) The principal balance at June 30, 2013 includes the unamortized portion of the debt premium of $465,790. During the three and six months ended June 30, 2013, the Company recorded amortization of debt premiums of $25,357 and $50,714, respectively, as an offset to interest expense in the accompanying consolidated statements of operations.

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

(9) The principal balance at June 30, 2013 includes the unamortized portion of the debt premium of $1,524,170. During the three and six months ended June 30, 2013, the Company recorded amortization of debt premiums of $89,774 and $179,548, respectively, as an offset to interest expense in the accompanying consolidated statements of operations.

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

(11) The principal balance at June 30, 2013 includes the unamortized portion of the debt premium of $744,612. During the three and six months ended June 30, 2013, the Company recorded amortization of debt premiums of $36,592 and $73,184, respectively, as an offset to interest expense in the accompanying consolidated statements of operations.

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

(13) The Company entered into an interest rate cap that limits the London Interbank Offered Rate (“LIBOR”) portion of the interest rate to 5% through November 1, 2016.

(14) 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.

(15) The Company entered into an interest rate cap that limits the LIBOR portion of the interest rate to 2% through April 1, 2018.

(16) The principal balance at June 30, 2013 includes the unamortized portion of the debt premium of $1,493,779. During the three and six months ended June 30, 2013, the Company recorded amortization of debt premiums of $78,798 and $82,187, respectively, as an offset to interest expense in the accompanying consolidated statements of operations.

(17) The Company entered into an interest rate cap that limits the LIBOR portion of the interest rate to 2% through May 1, 2018.

(18) The Company entered into an interest rate cap that limits the LIBOR portion of the interest rate to 2% through July 1, 2017.

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

(19) The principal balance at June 30, 2013 includes the unamortized portion of the debt premium of $474,794. During the three and six months ended June 30, 2013, the Company recorded amortization of debt premiums of $1,559 and $1,559, respectively, as an offset to interest expense in the accompanying consolidated statements of operations.

(20) The principal balance at June 30, 2013 includes the unamortized portion of the debt premium of $116,970. During the three and six months ended June 30, 2013, the Company recorded amortization of debt premiums of $750 and $750, respectively, as an offset to interest expense in the accompanying consolidated statements of operations.

Revolving Credit Facility

On October 22, 2012, the Company entered into an unsecured revolving line of credit with PNC Bank, N.A. to borrow up to $5,000,000. On April 25, 2013, the Company amended the credit facility to increase the borrowing capacity to $20,000,000. Each advance under the facility is due within 180 days from the date of the advance and all unpaid principal and interest is due and payable in full on October 22, 2013.

For each advance, the Company has 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 credit agreement), (B) the sum of the Federal Funds Rate (as defined in the credit 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 is selected by the Company, the Company may select either the one-month LIBOR, three-month LIBOR or six-month LIBOR. As of June 30, 2013, $0 was outstanding on the credit facility.

The following is a summary of the Company's aggregate maturities as of June 30, 2013:

			Remainder of 2013		Maturities During the Years Ending December 31,
Contractual Obligation	Total				2014		2015		2016		2017		Thereafter
Principal payments on outstanding debt obligations(1)	$	558,971,870	$	7,530,460	$	7,538,151	$	9,927,772	$	10,378,695	$	31,208,359	$	492,388,433

_____________________________

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

The Company’s notes payable contain customary financial and non-financial debt covenants. As of June 30, 2013 and December 31, 2012, the Company was in compliance with all financial debt covenants.

For the three and six months ended June 30, 2013, the Company incurred interest expense of $4,552,197 and $8,854,210. Interest expense for the three and six months ended June 30, 2013 includes amortization of deferred financing costs of $235,453 and $395,747, amortization of loan premiums of $232,830 and $387,942, and net unrealized gains from the change in fair value of interest rate caps of $438,472 and $373,855, respectively.

For the three and six months ended June 30, 2012, the Company incurred interest expense of $1,328,909 and $2,086,991. Interest expense for the three and six months ended June 30, 2012 includes amortization of deferred financing costs of $69,402 and $103,560, amortization of loan premiums of $27,352 and $33,623, and net unrealized losses from the change in fair value of interest rate caps of $105,333 and $105,333, respectively.

Interest expense of $1,638,373 and $852,105 was payable as of June 30, 2013 and December 31, 2012, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

As of June 30, 2013, the Company’s weighted-average interest rate on its outstanding debt was 3.86%.

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Letter of Credit

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

The Company paid a nonrefundable fee in connection with the origination of the Letter of Credit in the amount of $118,950. In addition, the Company will pay the Credit Provider an annual fee based upon a fixed percentage of the Letter of Credit Amount (the “Facility Fee”). The Facility Fee is: (1) for the period commencing on the closing date and ending on the day immediately preceding the first anniversary of the closing date (which occurred on January 26, 2013), 2.00% per annum; (2) for the period commencing on the first anniversary of the closing date and ending on the day immediately preceding the third anniversary of the closing date, 2.25% per annum; and (3) for the period commencing on the third anniversary of the closing date and thereafter, 2.50% per annum.

6. Stockholders’ Equity

General

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

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 June 30, 2013, the Company had issued 36,963,302 shares of common stock in its Private Offering and Public Offering for offering proceeds of $319,396,082, net of offering costs of $52,213,877, including 809,640 shares of common stock pursuant to the DRP for total proceeds of $7,820,978. The offering costs primarily consist of selling commissions and dealer manager fees. Offering proceeds include $997,590 and $590,856 of amounts receivable from the Company’s transfer agent as of June 30, 2013 and December 31, 2012, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets.

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

During the year ended December 31, 2012, the Company granted 17,500 shares of restricted stock to its independent directors at a weighted average fair value of $9.23 as compensation for services in connection with their initial election or re-election to the board of directors at the Company’s annual meeting. During the year ended December 31, 2011, the Company granted 7,500 shares of restricted common stock to its independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $9.10 per share in connection with their re-election to the board of directors at the Company’s annual meeting and 5,000 shares of restricted common stock to one of its then independent directors at a fair value of $9.10 per share in connection with her initial election to the board of directors. During 2010, the Company granted 15,000 shares of restricted common stock to its independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $8.55 per share in connection with the Company raising $2,000,000 in the Private Offering. The shares of restricted common stock vest and become non-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant and will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

Included in general and administrative expenses is $16,670 and $37,796 for the three and six months ended June 30, 2013 and $11,034 and $19,383 for the three and six months ended June 30, 2012, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the restricted common stock is 1.29 years as of June 30, 2013.

Convertible Stock

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

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of June 30, 2013 and December 31, 2012, no shares of the Company’s preferred stock were issued and outstanding.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(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 new offering price of $10.24 per share. The Company’s board of directors may, in its sole discretion, from time to time, change this price based upon changes in the Company’s estimated value per share, the then current price of shares of the Company’s common stock in the Public Offering and other factors that the Company’s board of directors deems relevant.

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

Share Repurchase Plan and Redeemable Common Stock

The Company’s 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 Company’s 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.

Prior to the completion of the Company’s Offering Stage (as defined below), 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 Purchase Price
2 years	95.0% of Purchase Price
3 years	97.5% of Purchase Price
4 years	100.0% of Purchase Price
In the event of a stockholder’s death or disability(2)	Average Issue Price for Shares(3)

After the completion of the Company’s Offering Stage, 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(4)
2 years	95.0% of Estimated Value per Share(4)
3 years	97.5% of Estimated Value per Share(4)
4 years	100.0% of Estimated Value per Share(4)
In the event of a stockholder’s death or disability(2)	Average Issue Price for Shares(3)

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

________________

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

(2) The 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. For purposes of the Company’s share repurchase plan a “disability” means (a) the stockholder has received a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the shares to be redeemed, and (b) the determination of such disability was made by the governmental agency responsible for reviewing and awarding the disability retirement benefits that the stockholder could be eligible to receive, which the Company refers to as the “applicable governmental agency.” The applicable governmental agencies are limited to the following: (i) the Social Security Administration; (ii) the U.S. Office of Personnel Management with respect to disability benefits under the Civil Service Retirement System (“CSRS”); or (iii) the Veteran’s Administration; and in each case, the agency charged with administering disability benefits at that time on behalf of one of the applicable governmental agencies. Disability determinations by governmental agencies other than those listed above, including, but not limited to, worker’s compensation insurance or the administration or enforcement of the Rehabilitation Act of 1973, as amended, or the Americans with Disabilities Act of 1990, as amended, will not entitle a stockholder to the terms available for the repurchase of shares. Repurchase requests following an award by the applicable governmental agency of disability Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Veteran’s Administration record of disability-related discharge, as the case may be, or such other documentation issued by the applicable governmental agency that the Company deems acceptable and demonstrates an award of the disability benefits. As the following disabilities generally do not entitle a worker to Social Security or related disability benefits, they will not qualify as a “disability” for purposes of our share repurchase plan: (a) disabilities occurring after the legal retirement age; (b) temporary disabilities; and (c) disabilities that do not render a worker incapable of performing substantial gainful activity. However, where a stockholder requests the repurchase of shares due to a disability and the stockholder does not have a disability that meets the definition described above, but is subject to similar circumstances, the Company’s board of directors may repurchase the stockholder’s shares, in its sole discretion.

(3) 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.

(4) 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. Thereafter, 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.

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.

The Company will consider the Company’s Offering Stage complete on the first date that the Company is no longer publicly offering equity securities that are not listed on a national securities exchange, whether through the Public Offering or follow-on public equity offerings, provided the Company has not filed a registration statement for a follow-on public equity offering as of such date (for purposes of this definition, the Company does not consider “public equity offerings” to include offerings on behalf of selling stockholders or offerings related to a distribution reinvestment plan, employee benefit plan or the redemption of interests in the Operating Partnership).

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

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 the Repurchase Date. During the three and six months ended June 30, 2013, the Company redeemed a total of 31,423 and 60,592 shares with a total redemption value of $309,441 and $582,692 and received requests for the redemption of 25,749 and 61,345 shares with a total redemption value of $251,875 and $602,782, respectively.

As of June 30, 2013, the Company had 29,551 shares of outstanding and unfulfilled redemption requests and recorded $289,361 in accounts payable and accrued liabilities on the accompanying consolidated balance sheet related to these unfulfilled redemption requests. The Company redeemed 28,911 of the outstanding redemption requests as of June 30, 2013 totaling $274,210 on the July 30, 2013 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 the Company’s 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 the Company’s 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 the shares redeemed in any calendar year 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.

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.

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.

Pursuant to the share repurchase plan, for the three and six months ended June 30, 2013, the Company reclassified $1,971,174 and $3,319,127, net of $309,441 and $582,692 of fulfilled redemption requests, and for the three and six months ended June 30, 2012, the Company reclassified $555,297 and $907,422, net of $81,547 and $293,135 of fulfilled redemption requests, respectively, from permanent equity to temporary equity, which is included as redeemable common stock on the

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

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

Distributions

The Company’s long-term policy is to pay distributions from cash flow from operations. However, the Company expects to have insufficient cash flow from operations available for distribution until it makes substantial investments. In order to provide additional available funds to pay distributions, under certain circumstances the Company’s obligation to pay all fees due to the Advisor from the Company pursuant to the Advisory Agreement will be deferred up to an aggregate amount of $5,000,000 through the date the SEC declares effective the registration statement for the Company's follow-on offering. If, during any calendar quarter during this period, the distributions paid by the Company exceed funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts, plus (1) any acquisition expenses and acquisition fees expensed that are related to any property, loan or other investment acquired or expected to be acquired, and (2) any non-operating, non-cash charges incurred, such as impairments of property or loans, any other than temporary impairments of marketable securities, or other similar charges, for the quarter, which is defined in the Advisory Agreement as “Adjusted Funds From Operations,” the payment of fees the Company is obligated to pay the Advisor will be deferred in an amount equal to the amount by which distributions paid to stockholders for the quarter exceed Adjusted Funds From Operations for such quarter up to an amount equal to a 7.0% cumulative non-compounded annual return on stockholders’ invested capital, pro-rated for such quarter. As of June 30, 2013 and December 31, 2012, $3,060,482 and $2,399,153, respectively, of fees had been deferred pursuant to the Advisory Agreement.

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

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

Distributions Declared

Distributions declared to date (1) accrue daily to stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month, and (3) are calculated at a rate of $0.001964 per share per day, which if paid each day over a 365-day period is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. Prior to September 10, 2012, distributions were calculated at a rate of $0.001917 per share of common stock, which was equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.00 per share of common stock. Stockholders may elect to receive cash distributions or purchase additional shares through the DRP.

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Distributions declared for the three and six months ended June 30, 2013 were $5,720,601 and $10,181,364, including $2,499,794 and $4,396,706, or 256,916 and 451,871 shares of common stock, respectively, attributable to the DRP.

Distributions declared for the three and six months ended June 30, 2012 were $1,498,103 and $2,502,721, including $625,928 and $1,039,075, or 65,887 and 109,376 shares of common stock, respectively, attributable to the DRP.

As of June 30, 2013 and December 31, 2012, $2,072,152 and $1,343,399 distributions declared were payable, which included $914,225 and $566,840 of distributions reinvested pursuant to the DRP, respectively.

Distributions Paid

For the three and six months ended June 30, 2013, the Company paid cash distributions of $3,003,582 and $5,403,290, which related to distributions declared for each day in the period from March 1, 2013 through May 31, 2013 and December 1, 2012 through May 31, 2013, respectively. Additionally, for the three and six months ended June 30, 2013, 234,450 and 416,169 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $2,281,198 and $4,049,321, respectively. For the three and six months ended June 30, 2013, the Company paid total distributions of $5,284,780 and $9,452,611.

For the three and six months ended June 30, 2012, the Company paid cash distributions of $784,467 and $1,298,150, which related to distributions declared for each day in the period from March 1, 2012 through May 31, 2012 and December 1, 2011 through May 31, 2012, respectively. Additionally, for the three and six months ended June 30, 2012, 58,473 and 95,515 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $555,490 and $907,387, respectively. For the three and six months ended June 30, 2012, the Company paid total distributions of $1,339,957 and $2,205,537.

7. Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager with respect to the Public Offering. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, and the Company is obligated to reimburse the Advisor and its affiliates for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. As discussed in Note 6, in certain circumstances, the Company’s obligation to pay some or all of the fees due to the Advisor pursuant to the Advisory Agreement will be deferred up to an aggregate amount of $5,000,000.

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and six months ended June 30, 2013 and 2012 are as follows:

	Incurred For the				Incurred For the
	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	1,498,270	$	354,435	$	2,754,866	$	569,455
Acquisition fees(1)	2,201,611		1,937,563		4,423,929		3,249,940
Acquisition expenses(2)	504,243		203,561		2,176,011		433,259
Property management
Fees(1)	671,007		192,831		1,219,860		318,868
Reimbursement of onsite personnel(3)	1,831,979		590,473		3,288,973		950,645
Other fees(1)	179,908		—		338,267		—
Other operating expenses(4)	259,019		250,999		446,757		948,185
Consolidated Balance Sheets:
Additional paid-in-capital
Other offering costs reimbursement	2,707,408		1,671,250		5,221,670		2,970,234
Selling commissions	5,513,018		1,834,388		8,578,186		3,345,536
Dealer management fees	3,156,122		1,057,487		4,854,704		1,906,635
	$	18,522,585	$	8,092,987	$	33,303,223	$	14,692,757

_____________________________

(1) Included in fees to affiliates in the accompanying consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.

(2) Included in acquisition costs in the accompanying consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.

(4) Included in general and administrative expenses in the accompanying consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Amounts attributable to the Advisor and its affiliates paid during the three and six months ended June 30, 2013 and 2012 are as follows:

	Paid During the				Paid During the
	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Consolidated Statements of Operations:
Expensed
Investment management fees	$	836,941	$	—	$	2,093,537	$	—
Acquisition fees	2,356,147		2,316,517		4,288,807		3,172,111
Acquisition expenses	1,897,598		407,020		2,320,059		514,322
Property management
Fees	610,561		171,253		1,127,012		267,788
Reimbursement of onsite personnel	1,872,763		527,768		3,268,590		880,435
Other fees	192,454		—		329,175		—
Other operating expenses	293,524		618,610		516,973		1,135,942
Consolidated Balance Sheets:
Additional paid-in-capital
Other offering costs reimbursement	2,223,228		1,737,939		4,721,099		3,029,041
Selling commissions	5,513,018		1,834,388		8,578,186		3,345,536
Dealer management fees	3,156,122		1,057,487		4,854,704		1,906,635
Due to (from) affiliates
Due from Advisor	—		—		—		—
	$	18,952,356	$	8,670,982	$	32,098,142	$	14,251,810

30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Amounts outstanding to the Advisor and its affiliates as of June 30, 2013 and December 31, 2012 are as follows:

	Payable as of
	June 30, 2013		December 31, 2012
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	2,412,060	$	1,750,731
Acquisition fees(2)	1,072,206		937,084
Acquisition expenses	—		144,048
Property management
Fees	243,481		150,633
Reimbursement of onsite personnel	222,226		201,843
Other fees	24,532		15,440
Other operating expenses	88,888		159,104
Consolidated Balance Sheets:
Additional paid-in-capital
Other offering costs reimbursement	613,484		112,913
Due to affiliates, net	$	4,676,877	$	3,471,796

_____________________________

(1) Investment management fees earned by the Advisor totaling $2,412,060 and $1,750,731 were deferred as of June 30, 2013 and December 31, 2012, respectively, pursuant to the terms of the Advisory Agreement. No investment management fees were due and payable at June 30, 2013 and December 31, 2012, respectively.

(2) Acquisition fees earned by the Advisor totaling $648,422 and $648,422 were deferred as of June 30, 2013 and December 31, 2012, respectively, pursuant to the terms of the Advisory Agreement. The remaining acquisition fees of $423,784 and $288,662 were due and payable and are included in due to affiliates in the accompanying consolidated balance sheets at June 30, 2013 and December 31, 2012, respectively.

Organization and Offering Costs

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

31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Included in organization and offering costs are payments made to Crossroads Capital Advisors, LLC (“Crossroads”), a wholly-owned subsidiary of Crossroads Capital Group, LLC, a member of the Sponsor, for certain offering related 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; and assisting in public relations activities and the administration of our distribution reinvestment plan and share redemption plan.

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

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

The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through June 30, 2013 is as follows:

	Amount			Percentage of Gross Offering Proceeds
Gross offering proceeds:	$	363,788,981		100.00	%
O&O limitation	15		%
Total O&O costs available to be paid/reimbursed	$	54,568,347		15.00	%
O&O expenses recorded:
Sales commissions paid	$	22,084,876		6.07	%
Broker dealer fees paid	12,628,238			3.47	%
Private offering costs reimbursements	423,707			0.12	%
Public offering costs reimbursements	17,077,056			4.69	%
Organizational costs reimbursements	100,738			0.03	%
Total O&O costs recorded by the Company	$	52,314,615		14.38	%

The Company may also reimburse certain costs of bona fide training and education meetings (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology costs associated with the Public Offering, costs and expenses related to such

32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross proceeds of the Public Offering, as required by the rules of FINRA.

As of June 30, 2013 and December 31, 2012, the Advisor had incurred $57,342,002 and $39,439,196, respectively, of organizational and offering costs on behalf of the Company, of which $5,027,387 and $5,779,140, respectively, have been deferred as of the applicable date, as follows:

	Incurred through December 31, 2012		Amounts Recognized		Amounts Deferred as of December 31, 2012		Incurred for the Six Months Ended June 30, 2013		Amounts Recognized		Amounts Deferred as of June 30, 2013		Amounts Recognized Through June 30, 2013
Organizational expenses	$	100,738	$	100,738	$	—	$	—	$	—	$	—	$	100,738
Private Offering costs	2,301,719		876,649		1,425,070		—		—		1,425,070		876,649
Public Offering costs	37,036,739		32,682,669		4,354,070		17,902,806		18,654,559		3,602,317		51,337,228
	$	39,439,196	$	33,660,056	$	5,779,140	$	17,902,806	$	18,654,559	$	5,027,387	$	52,314,615

Organization costs are expensed as incurred. From inception through June 30, 2013, 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 six months ended June 30, 2013 and 2012.

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 six months ended June 30, 2013 and 2012, the Advisor did not incur any costs, nor did the Company reimburse the Advisor for any costs related to the Private Offering. From inception through June 30, 2013, the Advisor had incurred total offering costs related to the Private Offering of $2,301,719, of which $1,425,070 is deferred and remains potentially reimbursable to the Advisor, subject to the approval of the independent directors of the Company.

For the three and six months ended June 30, 2013, the Advisor incurred $11,313,638 and $17,902,806, and the Company reimbursed the Advisor $11,376,548 and $18,654,559, respectively, of offering costs related to the Public Offering. Included in the $11,313,638 and $17,902,806 of offering costs incurred by the Advisor during the three and six months ended June 30, 2013 are $522,597 and $849,597 of amounts paid to Crossroads for certain offering services provided. For the three and six months ended June 30, 2012, the Advisor incurred $5,522,198 and $9,780,853, and the Company reimbursed the Advisor $4,563,125 and $8,222,405, respectively, of offering costs related to the Public Offering. Included in the $5,522,198 and $9,780,853 of offering costs incurred by the Advisor during the three and six months ended June 30, 2012 are $352,000 and $804,000 of amounts paid to Crossroads for certain offering services provided. The Advisor has incurred total offering costs related to the Public Offering of $54,939,545 from inception through June 30, 2013, of which $3,602,317 is deferred and remains potentially reimbursable, subject to the 15% limitation described above and the approval of the independent directors.

The Company has reimbursed the Advisor $52,314,615 for organization and offering costs incurred from inception through June 30, 2013, including reimbursements of organization costs of $100,738, reimbursements of Private Offering costs of $876,649 and reimbursements of Public Offering costs of $51,337,228. The Company accrued $613,484 and $112,913 for the reimbursement of offering costs in the financial statements as of June 30, 2013 and December 31, 2012, respectively.

33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal to one-twelfth of 0.80% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each real property or real estate-related asset acquired through a joint venture. Such fee will be calculated including acquisition fees, acquisition expenses and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. During the three months ended June 30, 2013 and the year ended December 31, 2012, the distributions the Company paid exceeded the Company’s Adjusted Funds From Operations for each period; therefore, in accordance with the Advisory Agreement, $2,412,060 and $1,750,731 of investment management fees the Company was obligated to pay the Advisor had been deferred as of June 30, 2013 and December 31, 2012, respectively.

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. During the three and six months ended June 30, 2013, the Company incurred acquisition fees of $2,201,611 and $4,423,929, and $2,356,147 and $4,288,807 in acquisition fees were paid to the Advisor. During the three and six months ended June 30, 2012, the Company incurred acquisition fees of $1,937,563 and $3,249,940, and $2,316,517 and $3,172,111 in acquisition fees were paid to the Advisor. Acquisition fees of $423,784 and $288,662 were due and payable and included in due to affiliates in the accompanying balance sheets at June 30, 2013 and December 31, 2012, respectively. During the three months ended June 30, 2013 and the year ended December 31, 2012, the distributions the Company paid exceeded the Company’s Adjusted Funds From Operations for each period; therefore, in accordance with the Advisory Agreement, $648,422 and $648,422 of acquisition fees the Company was obligated to pay the Advisor had been deferred as of June 30, 2013 and December 31, 2012, respectively.

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. For the three and six months ended June 30, 2013, the Advisor incurred $504,243 and $2,176,011 of direct acquisition costs and the Company paid $497,659 and $944,379 of acquisition costs to third parties.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Property Management Fees and Expenses

The Company has entered into Property Management Agreements with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the acquisition of each of the Company's properties (other than EBT Lofts, Keystone Farms and Library Lofts, which are managed by an unaffiliated third-party management company). The

34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(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 3.5% of the annual gross revenue collected which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors. In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager for benefit administration and training services. 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. For the three and six months ended June 30, 2013, the Company incurred $671,007 and $1,219,860, respectively, of property management fees, of which $610,561 and $1,127,012 was paid to the Property Manager. For the three and six months ended June 30, 2012, the Company incurred $192,831 and $318,868, respectively, of property management fees, of which $171,253 and $267,788 was paid to the Property Manager. Property management fees totaling $243,481 and $150,633 were payable to the Property Manager at June 30, 2013 and December 31, 2012, respectively.

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 construction management, benefit administration and training services. For the three and six months ended June 30, 2013, the Company incurred $179,908 and $338,267, respectively, of other fees, of which $192,454 and $329,175 was paid to the Property Manager. The Company did not pay other fees in connection with the Property Management Agreements during the three and six months ended June 30, 2012. Other fees totaling $24,532 and $15,440 were payable to the Property Manager at June 30, 2013 and December 31, 2012, respectively.

In addition, the Company reimburses the Property Manager for the salaries and related benefits of on-site property management employees. For the three and six months ended June 30, 2013, the Company incurred $1,831,979 and $3,288,973 of salaries and related benefits of on-site property management employees, of which $1,872,763 and $3,268,590 was paid to the Property Manager. For the three and six months ended June 30, 2012, the Company incurred $590,473 and $950,645 of salaries and related benefits of on-site property management employees, of which $527,768 and $880,435 was paid to the Property Manager. Property management expenses totaling $222,226 and $201,843 were payable to the Property Manager at June 30, 2013 and December 31, 2012, respectively.

Other Operating Expense Reimbursement

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

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

35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

determining the 2%/25% Limitation amount, “Average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead and investment management fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

The general and administrative expenses recognized by the Company and incurred by the Advisor on behalf of the Company, which are inclusive of total operating expenses for the three and six months ended June 30, 2013 and 2012, were as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,				For the Period from May 4, 2009 (Inception) to September 30, 2012
	2013		2012		2013		2012
General and administrative expenses recognized by the Company	$	994,118	$	660,057	$	1,704,940	$	1,364,393	$	6,658,670
General and administrative expenses incurred by the Advisor on behalf of the Company (and not recognized by the Company)	—		—		—		—		1,123,107
Allocable share of Advisor's overhead incurred on behalf of the Company (and not recognized by the Company)	—		—		—		—		1,448,803
	$	994,118	$	660,057	$	1,704,940	$	1,364,393	$	9,230,580

For the three and six months ended June 30, 2013, the Advisor and its affiliates incurred $259,019 and $446,757 of the Company's operating expenses, including the allocable share of Advisor's overhead expenses of $259,019 and $446,757, none of which were in excess of the 2%/25% Limitation and are included in the $994,118 and $1,704,940 of general and administrative expenses recognized by the Company. For the three and six months ended June 30, 2012, the Advisor and its affiliates incurred $677,393 and $837,514 of the Company’s operating expenses none of which were in excess of the 2%/25% Limitation and are included in the $660,057 and $1,364,393 of general and administrative expenses recorded by the Company. From inception through June 30, 2013, the Advisor and its affiliates incurred operating expenses in excess of the 2%/25% Limitation on behalf of the Company of $2,571,910, consisting of $1,123,107 of general and administrative expenses and $1,448,803 of the Company’s allocable share of the Advisor’s overhead expenses. These excess amounts have not been recognized by the Company nor are the amounts included in due to affiliates, net, on the accompanying consolidated balance

36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

sheets as the independent directors have not approved, nor have they been requested to approve, the reimbursement of such amounts in excess of the 2%/25% Limitation pursuant to the Reimbursement Agreement with Advisor.

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. The Charter limits the maximum amount of the disposition fees payable to the Advisor for the sale of any real property to the lesser of one-half of the brokerage commission paid or 3% of the contract sales price. As of June 30, 2013, the Company had not sold or otherwise disposed of property or real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of June 30, 2013.

Selling Commissions and Dealer Manager Fees

The Company pays the Dealer Manager up to 6.5% and 3.5% of the gross offering proceeds from the Primary Offering as selling commissions and dealer manager fees, respectively. A reduced sales commission and dealer manager fee is paid in connection with volume discounts and certain other categories of sales. No sales commission or dealer manager fee is paid with respect to shares of common stock issued pursuant to the DRP. The Dealer Manager reallows 100% of sales commissions earned to participating broker-dealers. The Dealer Manager may also reallow to any participating broker-dealer a portion of the dealer manager fee that is attributable to that participating broker-dealer for certain marketing costs of that participating broker-dealer. The Dealer Manager will negotiate the reallowance of the dealer manager fee on a case-by-case basis with each participating broker-dealer subject to various factors associated with the cost of the marketing program. For the three and six months ended June 30, 2013, the Company paid selling commissions of $5,513,018 and $8,578,186 and dealer manager fees of $3,156,122 and $4,854,704, respectively. For the three and six months ended June 30, 2012, the Company paid selling commissions of $1,834,388 and $3,345,536 and dealer manager fees of $1,057,487 and $1,906,635, respectively.

8. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of June 30, 2013 and December 31, 2012, 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

37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

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.

On April 15, 2010, after raising $2,000,000 in gross offering proceeds in the Private Offering, the Company granted each of the then three independent directors 5,000 shares of restricted common stock. On August 11, 2011, the Company granted each of the then three independent directors 2,500 shares of restricted common stock upon re-election to the Company’s board of directors. On October 23, 2011, one of the independent directors resigned from the Company’s board of directors and, by so doing, forfeited 4,375 shares of unvested restricted common stock. On October 24, 2011, the Company granted a newly elected independent director 5,000 shares of restricted common stock. On August 8, 2012, the Company granted each of the then three independent directors 2,500 shares of restricted stock upon re-election to the Company's board of directors. On October 1, 2012, the Company granted 5,000 shares of restricted common stock to each of its two new independent directors. In addition to the shares granted under the independent directors’ compensation plan, one of the independent directors had elected to receive 50% of director compensation in stock through December 31, 2012. The Company recorded stock-based compensation expense of $16,670 and $37,796 for the three and six months ended June 30, 2013 and $11,034 and $19,383 for the three and six months ended June 30, 2012, respectively.

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 has 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 will terminate on the earliest to occur of (i) November 15, 2013, (ii) the termination of the Public Offering, (iii) any suspension of the Public Offering by the Company’s board of directors or a regulatory body, (iv) the date upon which the purchase of stock would cause the aggregate number of shares of stock owned by Ms. Neyland to exceed the ownership limits set forth in the Charter, or (v) the termination of Ms. Neyland’s employment with Steadfast REIT Services, Inc. and its affiliates. The shares will be 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.

9. Commitments and Contingencies

Economic Dependency

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

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Oklahoma City, Oklahoma; San Antonio, Texas; Columbus, Ohio; Lexington, Kentucky 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.

38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Environmental

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

Legal Matters

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

10. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate swap and cap agreements are used to accomplish this objective. As of June 30, 2013, the Company had six interest rate cap agreements with notional amounts totaling $108,942,000. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at June 30, 2013:

Type	Purpose	Effective Date	Maturity Date	Notional Amount		Based on	Variable Rate		Fixed Rate		Fair Value as of June 30, 2013
Cap	Cap Floating Rate	2/9/2012	2/1/2019	$	23,500,000	SIFMA Municipal Swap Index	0.06	%	3.00	%	$	167,724
Cap	Cap Floating Rate	10/24/2011	11/1/2016	21,712,000		One-Month LIBOR	0.19	%	5.00	%	19,250
Cap	Cap Floating Rate	3/28/2013	4/1/2018	17,030,000		One-Month LIBOR	0.19	%	2.00	%	381,165
Cap	Cap Floating Rate	4/30/2013	5/1/2018	20,875,000		One-Month LIBOR	0.19	%	2.00	%	492,788
Cap	Cap Floating Rate	6/26/2013	7/1/2017	10,725,000		One-Month LIBOR	0.19	%	2.00	%	153,508
Cap	Cap Floating Rate	6/20/2013	7/1/2017	15,100,000		One-Month LIBOR	0.19	%	2.00	%	212,775
				$	108,942,000						$	1,427,210

The interest rate cap agreements are not designated, nor do they qualify as, cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and six months ended June 30, 2013 resulted in an unrealized gain of $438,472 and $373,855, respectively, which is included in interest expense in the accompanying consolidated statements of operations. The fair value of the interest rate caps of $1,427,210 as of June 30, 2013 is included in deferred financing costs and other assets, net on the accompanying consolidated balance sheets.

39

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

11. Pro Forma Information (unaudited)

The following table summarizes, on an unaudited basis, the consolidated pro forma results of operations of the Company for the three and six months ended June 30, 2013 and 2012. The Company acquired five properties during the three months ended June 30, 2013 and nine properties during the six months ended June 30, 2013. These properties contributed $4,551,700 of revenues and $2,483,034 of net loss, including $3,262,296 of depreciation and amortization, to the Company's results of operations from the date of acquisition to June 30, 2013. The following unaudited pro forma information for the three and six months ended June 30, 2013 and 2012 has been provided to give effect to the acquisitions of the properties as if they had occurred on January 1, 2012. 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 June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues	$	23,646,091		$	23,949,458		$	47,292,182		$	47,898,916
Net loss	$	(7,042,231	)	$	(19,841,687	)	$	(14,084,462	)	$	(39,683,374	)
Basic and diluted net loss per common share	$	(0.19	)	$	(0.54	)	$	(0.38	)	$	(1.07	)

The pro forma information reflects adjustments for actual revenues and expenses of the properties acquired during the three and six months ended June 30, 2013 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, 2012 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.

12. Subsequent Events

Distributions Paid

On July 1, 2013, the Company paid distributions of $2,072,152, which related to distributions declared for each day in the period from June 1, 2013 through June 30, 2013 and consisted of cash distributions paid in the amount of $1,157,927 and $914,225 in shares issued pursuant to the DRP.

On August 1, 2013, the Company paid distributions of $2,347,167, which related to distributions declared for each day in the period from July 1, 2013 through July 31, 2013 and consisted of cash distributions paid in the amount of $1,304,361 and $1,042,806 in shares issued pursuant to the DRP.

Redemption

On July 30, 2013, the Company redeemed 28,911 shares of its common stock for a total redemption value of $274,210, or $9.48 per share, pursuant to the Company's share repurchase plan.

40

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Status of the Offering

The Company commenced its Public Offering on July 19, 2010. As of August 9, 2013, the Company had sold 40,431,150 shares of common stock in the Public Offering for gross proceeds of $408,028,549, including 1,010,796 shares of common stock issued pursuant to the DRP for gross offering proceeds of $9,778,222. Total shares sold as of August 9, 2013 in the Private Offering and Public Offering were 41,068,429 shares representing gross proceeds of $413,872,873, including 1,010,796 shares of common stock issued pursuant to the DRP for gross offering proceeds of $9,778,222.

Acquisition of the Arbors at Carrollton

On July 3, 2013, the Company acquired a fee simple interest in the Arbors at Carrollton located in Carrollton, Texas (the “Arbors Property”), through a wholly-owned subsidiary of the Operating Partnership, for an aggregate purchase price of $8,800,000. The Company financed the payment of the purchase price for the Arbors Property with (1) proceeds from the Public Offering and (2) the assumption of two existing mortgage loans with an aggregate outstanding principal balance of $6,247,500. The Arbors Property consists of 14two-story buildings and contains 131 units consisting of 55one-bedroom apartments and 76two-bedroom apartments. The apartments range in size from 698 to 974 square feet and average 858 square feet. An acquisition fee of approximately $180,000 was earned by the Advisor in connection with the acquisition of the Arbors Property.

The Company has not yet measured the fair value of the tangible and identifiable intangible assets and liabilities of the acquisition.

Acquisition of the Waterford on the Meadow

On July 3, 2013, the Company acquired a fee simple interest in the Waterford on the Meadow located in Plano, Texas, (the “Waterford Property”), through a wholly-owned subsidiary of the Operating Partnership, for an aggregate purchase price of $23,100,000. The Company financed the payment of the purchase price for the Waterford Property with (1) proceeds from the Public Offering and (2) the assumption of two existing mortgage loans with an aggregate outstanding principal balance of $16,670,806. The Waterford Property consists of 47one- and two-story buildings and contains 350 units consisting of 102one-bedroom apartments and 248two-bedroom apartments. The apartments range in size from 744 to 981 square feet and average 888 square feet. An acquisition fee of approximately $468,000 was earned by the Advisor in connection with the acquisition of the Waterford Property.

The Company has not yet measured the fair value of the tangible and identifiable intangible assets and liabilities of the acquisition.

Acquisition of The Belmont

On July 26, 2013, the Company acquired a fee simple interest in The Belmont located in Grand Prairie, Texas, (the “Belmont Property”), through a wholly-owned subsidiary of the Operating Partnership, for an aggregate purchase price of $12,100,000. The Company financed the payment of the purchase price for the Belmont Property with (1) proceeds from the Public Offering and (2) the assumption of an existing mortgage loan with an outstanding principal balance of $8,866,626. The Belmont Property consists of ninethree-story buildings and contains 260 units consisting of 104one-bedroom apartments and 156two-bedroom apartments. The apartments range in size from 770 to 1,046 square feet and average 935 square feet. An acquisition fee of approximately $245,000 was earned by the Advisor in connection with the acquisition of the Belmont Property.

The Company has not yet measured the fair value of the tangible and identifiable intangible assets and liabilities of the acquisition.

41

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Acquisition of the Meritage at Steiner Ranch

On August 6, 2013, the Company acquired a fee simple interest in the Meritage at Steiner Ranch located in Austin, Texas, (the “Steiner Ranch Property”), through a wholly-owned subsidiary of the Operating Partnership, for an aggregate purchase price of $80,000,000. The Company financed the payment of the purchase price for the Steiner Ranch Property with (1) proceeds from the Public Offering and (2) the proceeds of a mortgage loan in the principal amount of $55,500,000. The Steiner Ranch Property consists of 35two- and three-story buildings and contains 502 units consisting of 144one-bedroom apartments, 172two-bedroom apartments, 106three-bedroom apartments and 80four-bedroom apartments. The apartments range in size from 997 to 2,279 square feet and average 1,499 square feet. An acquisition fee of approximately $1,620,000 was earned by the Advisor in connection with the acquisition of the Steiner Ranch Property.

The Company has not yet measured the fair value of the tangible and identifiable intangible assets and liabilities of the acquisition.

Acquisition of the Tapestry Park Apartments

On August 13, 2013, the Company acquired a fee simple interest in the Tapestry Park Apartments located in Birmingham, Alabama, (the “Tapestry Property”), through a wholly-owned subsidiary of the Operating Partnership, for an aggregate purchase price of $32,400,000. The Company financed the payment of the purchase price for the Tapestry Property with proceeds from the Public Offering. The Tapestry Property consists of sixthree- and four-story buildings and contains 223 units consisting of 73one-bedroom apartments, 117two-bedroom apartments and 33three-bedroom apartments. The apartments range in size from 750 to 1,312 square feet and average 1,028 square feet. An acquisition fee of approximately $656,000 was earned by the Advisor in connection with the acquisition of the Tapestry Property.

The Company has not yet measured the fair value of the tangible and identifiable intangible assets and liabilities of the acquisition.

42

PART I — FINANCIAL INFORMATION (continued)

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

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

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

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

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

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

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

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

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

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

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

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

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

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

43

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 Item 1A of Part II of this Quarterly Report on Form 10-Q and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on March 27, 2013.

Overview

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

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

On July 23, 2009, we filed a registration statement on Form S-11 with the SEC to offer a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share, which we refer to as our “initial public offering.” We also registered up to 15,789,474 shares of common stock for sale pursuant to our distribution reinvestment plan at an initial price of $9.50 per share. The SEC declared our registration statement effective on July 9, 2010 and we commenced the initial public offering on July 19, 2010. We may reallocate the shares registered for the initial public offering and those shares registered pursuant to the distribution reinvestment plan. From the commencement of our public offering on July 19, 2010 to June 30, 2013, we had sold 36,326,023 shares of common stock in our initial public offering for gross offering proceeds of $365,765,634, including 809,640 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $7,820,978.

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

44

PART I — FINANCIAL INFORMATION (continued)

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

stock from $0.001917 per share per day to $0.001964 per share per day, which, if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on the new offering price of $10.24 per share. For additional information on the methodology used by our board of directors to determine our estimated value per share of our common stock, see our Current Report on Form 8-K filed with the SEC on July 13, 2012.

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

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

As of June 30, 2013, we owned 39 multifamily properties located within the greater midwest and southern geographic regions of the United States. Our property portfolio consists of an aggregate of 8,771 apartment homes and 25,675 square feet of rentable commercial space. The cost of our real estate portfolio was $788,033,500, exclusive of closing costs. At June 30, 2013, our portfolio was approximately 97.4% leased.

Steadfast Income Advisor, LLC is our advisor. Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf. The dealer manager for our initial public offering is Steadfast Capital Markets Group, LLC, an affiliate of our advisor, which we refer to as the “dealer manager.”

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

We have elected to be taxed as a REIT for federal income tax purposes beginning with the taxable year ending December 31, 2010. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, 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.

On May 3, 2013, we filed a registration statement on Form S-11 (File No. 333-188362) with the SEC to register a follow-on public offering of up to $253,450,000 in shares of our common stock. We will offer up to $204,800,000 in shares of our common stock to the public at an initial price of $10.24 per share and up to $48,650,000 in shares of common stock to our stockholders pursuant to our distribution reinvestment plan at an initial price of $9.73 per share. Upon the SEC declaring the registration statement effective for our follow-on offering, we will terminate our initial public offering and commence the follow-on offering.  Under rules promulgated by the SEC, we can continue our initial public offering until as late as January 3, 2014.  

45

PART I — FINANCIAL INFORMATION (continued)

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

Second Quarter Real Estate Acquisitions

On April 30, 2013, we acquired a fee simple interest in the Deer Valley Luxury Apartments located in Lake Bluff, Illinois, for an aggregate purchase price of approximately $28,600,000, exclusive of closing costs. We financed the payment of the purchase price for the Deer Valley Luxury Apartments with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $20,875,000 from a financial institution.

On May 31, 2013, we acquired a fee simple interest in the Grayson Ridge located in North Richland Hills, Texas, for an aggregate purchase price of approximately $14,300,000, exclusive of closing costs. We financed the payment of the purchase price for the Grayson Ridge with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $10,725,000 from a financial institution.

On May 31, 2013, we acquired a fee simple interest in the Rosemont at Olmos Park located in San Antonio, Texas, for an aggregate purchase price of approximately $22,050,000, exclusive of closing costs. We financed the payment of the purchase price for the Rosemont at Olmos Park with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $15,100,000 from a financial institution.

On June 12, 2013, we acquired a fee simple interest in the Retreat at Quail North located in Oklahoma City, Oklahoma, for an aggregate purchase price of approximately $25,250,000, exclusive of closing costs. We financed the payment of the purchase price for the Retreat at Quail North with (1) proceeds from our initial public offering and (2) the assumption of a secured loan in the aggregate principal amount of $16,792,773 from a financial institution.

On June 18, 2013, we acquired a fee simple interest in The Lodge at Trails Edge located in Indianapolis, Indiana, for an aggregate purchase price of approximately $18,400,000, exclusive of closing costs. We financed the payment of the purchase price for The Lodge at Trails Edge with (1) proceeds from our initial public offering and (2) the assumption of a secured loan in the aggregate principal amount of $10,954,683 from a financial institution.

Recent Real Estate Acquisition

On July 3, 2013, we acquired a fee simple interest in the Arbors at Carrollton located in Carrollton, Texas, for an aggregate purchase price of approximately $8,800,000, exclusive of closing costs. We financed the payment of the purchase price for the Arbors at Carrollton with (1) proceeds from our initial public offering and (2) the assumption of a secured loan in the aggregate principal amount of $6,247,500 from a financial institution.

On July 3, 2013, we acquired a fee simple interest in the Waterford on the Meadow located in Plano, Texas, for an aggregate purchase price of approximately $23,100,000, exclusive of closing costs. We financed the payment of the purchase price for the Waterford on the Meadow with (1) proceeds from our initial public offering and (2) the assumption of a secured loan in the aggregate principal amount of $16,670,806 from a financial institution.

On July 26, 2013, we acquired a fee simple interest in The Belmont located in Grand Prairie, Texas, for an aggregate purchase price of approximately $12,100,000, exclusive of closing costs. We financed the payment of the purchase price for The Belmont with (1) proceeds from our initial public offering and (2) the assumption of a secured loan in the aggregate principal amount of $8,866,626 from a financial institution.

On August 6, 2013, we acquired a fee simple interest in the Meritage at Steiner Ranch located in Austin, Texas, for an aggregate purchase price of approximately $80,000,000, exclusive of closing costs. We financed the payment of the purchase price for the Meritage at Steiner Ranch with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $55,500,000 from a financial institution.

On August 13, 2013, we acquired a fee simple interest in the Tapestry Park Apartments located in Birmingham, Alabama, for an aggregate purchase price of approximately $32,400,000, exclusive of closing costs. We financed the payment of the purchase price for the Tapestry Park Apartments with proceeds from our initial public offering.

46

PART I — FINANCIAL INFORMATION (continued)

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

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, 2012 filed with the SEC. There have been no significant changes to our accounting policies during 2013. 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.

Organization and Offering Costs

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

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

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

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

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such beginning with the taxable year ending December 31, 2010. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we

47

PART I — FINANCIAL INFORMATION (continued)

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

distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of June 30, 2013 and December 31, 2012, 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, 2012 and 2011.

Distributions

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

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are calculated at a rate of $0.001964 per share per day, which if paid each day over a 365-day period is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. Prior to September 10, 2012, distributions were calculated at a rate of $0.001917 per share of common stock, which was equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.00 per share of common stock. We made our first monthly distribution payment in September 2010.

The distributions paid during each of the last five fiscal quarters ended June 30, 2013, 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
Second Quarter 2012	$	1,498,103	$	0.174	$	784,467	$	555,490	$	1,339,957	$	—	$	1,339,957	$	(635,040	)
Third Quarter 2012	2,422,753		0.177		1,133,942		830,430		1,964,372		—		1,964,372		(1,016,774		)
Fourth Quarter 2012	3,710,684		0.181		1,943,113		1,434,332		3,377,445		—		3,377,445		(3,558,738		)
First Quarter 2013	4,460,763		0.177		2,399,708		1,768,123		4,167,831		2,308,865		1,858,966		2,308,865
Second Quarter 2013	5,720,601		0.179		3,003,582		2,281,198		5,284,780		767,640		4,517,140		767,640
	$	17,812,904	$	0.888	$	9,264,812	$	6,869,573	$	16,134,385	$	3,076,505	$	13,057,880	$	(2,134,047	)

For the three and six months ended June 30, 2013, we paid aggregate distributions of $5,284,780 and $9,452,611, including $3,003,582 and $5,403,290 of distributions paid in cash and 234,450 and 416,169 shares of our common stock issued pursuant to our distribution reinvestment plan for $2,281,198 and $4,049,321, respectively. For the three and six months ended June 30, 2013, our net loss was $7,746,115 and $16,338,016, we had funds from operations, or FFO, of $2,026,404 and $2,158,060 and net cash provided by operations of $767,640 and $3,076,505, respectively. For the three and six months ended June 30, 2013, we funded $767,640 and $3,076,505 of distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with net cash provided by operating activities and $4,517,140 and $6,376,106 with proceeds from our public offering. However, on a cumulative basis, as of June 30, 2013, all distributions have been funded with proceeds from our public

48

PART I — FINANCIAL INFORMATION (continued)

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

offering. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

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

In order to provide additional available funds for us to pay distributions, under certain circumstances our obligation to pay all fees due to our advisor pursuant to the advisory agreement by and among us, our operating partnership and our advisor will be deferred up to an aggregate amount of $5 million until the registration statement for our follow-on offering is declared effective by the SEC. If, during any calendar quarter prior to such date, the distributions we pay exceed our FFO (as defined by the National Association of Real Estate Investment Trusts, or NAREIT), plus (1) any acquisition expenses and acquisition fees expensed by us that are related to any property, loan or other investment acquired or expected to be acquired by us and (2) any non-operating, non-cash charges incurred by us, such as impairments of property or loans, any other than temporary impairments of marketable securities, or other similar charges, for the quarter, which is defined in the advisory agreement as “adjusted funds from operations,” the payment of fees we are obligated to pay our advisor will be deferred in an amount equal to the amount by which the distributions paid to our stockholders for the quarter exceed our adjusted funds from operations up to an amount equal to a 7.0% cumulative non-compounded annual return on stockholders’ invested capital, prorated for such quarter. For purposes of this calculation, if our adjusted funds from operations is negative, adjusted funds from operations shall be deemed to be zero. As of June 30, 2013, we had deferred $3,060,482 in fees payable to our advisor pursuant to the terms of the advisory agreement. We deferred $661,329 during the three months ended June 30, 2013 as adjusted funds from operations did not exceed the total distributions paid for the quarter.

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

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

On May 14, 2013, we, our operating partnership and our advisor amended the advisory agreement to revise the period during which our advisor will defer fees from the end of our offering stage (the date we are no longer publicly offering securities) to the date the registration statement for our follow-on offering is declared effective by the SEC.

Inflation

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

49

PART I — FINANCIAL INFORMATION (continued)

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

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

As of June 30, 2013, we had not entered into any leases as a lessee.

REIT Compliance

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

Liquidity and Capital Resources

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

We use, and intend to use in the future, secured and unsecured borrowings for the acquisition of properties. Once we have fully invested the proceeds of our initial public offering, we expect that our overall borrowings will be 60% – 65% of the cost of our investments, although we expect to exceed this level during our offering stage in order to enable us to quickly build a diversified portfolio. Under our Second Articles of Amendment and Restatement, or our charter, we have a limitation on borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances. As of June 30, 2013, our borrowings were not in excess of 300% of the value of our net assets.

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

Our principal demand for funds will be to acquire properties and real estate-related assets, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs for items, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current cash balances;

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

• various forms of secured financing;

• equity capital from joint venture partners;

50

PART I — FINANCIAL INFORMATION (continued)

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

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

• proceeds from our distribution reinvestment plan; and

• cash from operations.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, proceeds from our initial public offering, our ability to raise equity capital from joint venture partners, our ability to obtain various forms of secured financing and proceeds from our operating partnership’s private placements, if any, will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the sources of capital noted above which we will rely on to meet our short term liquidity requirements, we may also utilize additional secured and unsecured financings. We may also conduct additional public or private offerings. We also have entered into a revolving line of credit facility with PNC Bank, National Association for an amount up to $20,000,000, all of which remains available. We expect these resources to be adequate to fund our operating activities, debt service and distributions, which we presently anticipate will grow over time, and will be sufficient to fund our ongoing acquisition activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

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

To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain limitations described in our charter, we may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

Cash Flows Provided by Operating Activities

We commenced real estate operations with the acquisition of our first multifamily property on August 11, 2010. As of June 30, 2013, we owned 39 multifamily properties. During the six months ended June 30, 2013, net cash provided by operating activities was $3,076,505 compared to net cash provided by operating activities of $12,316 for the six months ended June 30, 2012. The increase in net cash provided by operating activities is primarily due to the increase in net operating income from $5,577,726 for the six months ended June 30, 2012 to $23,016,395 for the six months ended June 30, 2013. We expect cash provided by operating activities to increase in future periods as we expand our property portfolio and stabilize its operations.

Cash Flows Used in Investing Activities

Our cash used in investing activities will vary based on how quickly we raise funds in our ongoing initial public offering and how quickly we invest those funds towards acquisitions of real estate and real-estate related investments. During the six months ended June 30, 2013, net cash used in investing activities was $172,615,591 compared to net cash used in investing activities of $105,036,429 during the six months ended June 30, 2012. The increase in net cash used in investing activities was primarily due to the acquisition of nine multifamily properties during the six months ended June 30, 2013, compared to six property acquisitions during the six months ended June 30, 2012.

51

PART I — FINANCIAL INFORMATION (continued)

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

Cash Flows from Financing Activities

Our cash flows from financing activities consist primarily of proceeds from our ongoing initial public offering, net of distributions paid to our stockholders, and the issuance of notes payable. During the six months ended June 30, 2013, net cash provided by financing activities was $205,157,944 compared to net cash provided by financing activities of $100,375,445 during the six months ended June 30, 2012. Net cash provided by financing activities during the six months ended June 30, 2013 consisted of the following:

• $120,693,108 of cash provided by offering proceeds related to our initial public offering, net of (1) payments of commissions on sales of common stock and related dealer manager fees in the amount of $13,432,890 and (2) the reimbursement of other offering costs to affiliates in the amount of $4,721,099;

• $95,450,818 of proceeds from the issuance of mortgage notes payable, net of deferred financing costs in the amount of $1,666,066 and principal payments of $3,404,116;

• $582,692 of cash paid for the redemption of common stock; and

• $5,403,290 of net cash distributions, after giving effect to distributions reinvested by stockholders of $4,049,321.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt as a means of providing additional funds for the acquisition of our properties and our real estate-related assets. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. We expect that our borrowings will be approximately 60% – 65% of the cost of our real properties (before deducting depreciation and amortization) plus the value of our other investments, after we have invested substantially all of the net offering proceeds from our public offering. In order to facilitate investments in the early stages of our operations, we expect to temporarily borrow in excess of our long-term targeted debt level. Under our charter, we have a limitation on borrowing in excess of 300% of the value of our net assets which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. We do not intend to exceed our charter’s leverage limit except in the early stages of our operations when the costs of our investments are most likely to substantially exceed our net offering proceeds. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of June 30, 2013, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor and the dealer manager. During our organization and offering stage, these payments will include payments to the dealer manager for selling commissions and dealer manager fees and payments to the dealer manager and our advisor for reimbursement of certain organization and other offering expenses. However, our advisor has agreed to reimburse us to the extent that selling commissions, dealer manager fees and organization and other offering expenses incurred by us exceed 15% of our gross offering proceeds. During our acquisition and development stage, we expect to make payments to our advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets and costs incurred by our advisor in providing services to us.

52

PART I — FINANCIAL INFORMATION (continued)

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

As of June 30, 2013, we had notes payable in the principal amount of $558,971,870. The following is a summary of our contractual obligations as of June 30, 2013:

			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)	$	192,837,367	$	11,000,652	$	43,317,862	$	41,925,998	$	96,592,855
Principal payments on outstanding debt obligations(2)	558,971,870		7,530,460		17,465,923		41,587,054		492,388,433
Total	$	751,809,237	$	18,531,112	$	60,783,785	$	83,513,052	$	588,981,288

_____________________________

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at June 30, 2013. We incurred interest expense of $4,552,197 and $8,854,210 during the three and six months ended June 30, 2013, including amortization of deferred financing costs totaling $235,453 and $395,747, respectively.

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

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and six months ended June 30, 2013 and 2012. The ability to compare one period to another is significantly affected by acquisitions completed and dispositions made during those periods. As of June 30, 2013, we owned 39 multifamily properties compared to owning only 14 multifamily properties at June 30, 2012. The increase in our property portfolio is the primary cause of the increases in operating income and expenses, as further discussed below.

Our results of operations for the three and six months ended June 30, 2013 are not indicative of those expected in future periods. We have not yet invested all of the proceeds from our continuous initial public offering received to date and expect to continue to raise additional capital, increase our borrowings and make future acquisitions, which would have a significant impact on our future results of operations. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

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

53

PART I — FINANCIAL INFORMATION (continued)

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

Consolidated Results of Operations for the Three Months Ended June 30, 2013 Compared to the Three Months Ended June 30, 2012

The following table summarizes the consolidated results of operations for the three months ended June 30, 2013 and 2012:

	For the Three Months Ended June 30,
	2013			2012			Change $			Change %
Total revenues	$	22,370,453		$	5,954,635		$	16,415,818		276	%
Operating expenses	5,944,288			1,707,282			4,237,006			248	%
Real estate taxes and insurance	3,300,748			700,525			2,600,223			371	%
Fees to affiliates	4,550,796			2,484,829			2,065,967			83	%
Depreciation and amortization	9,772,519			3,390,309			6,382,210			188	%
Interest expense	4,552,197			1,328,909			3,223,288			243	%
General and administrative expenses	994,118			660,057			334,061			51	%
Acquisition costs	1,001,902			582,240			419,662			72	%
Net loss	$	(7,746,115	)	$	(4,899,516	)	$	(2,846,599	)	58	%
NOI(1)	$	12,274,502		$	3,353,997		$	8,920,505		266	%
FFO(2)	$	2,026,404		$	(1,509,207	)	$	3,535,611		234	%
MFFO(2)	$	4,623,453		$	1,115,929		$	3,507,524		314	%

________________

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

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

54

PART I — FINANCIAL INFORMATION (continued)

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

Net loss

For the three months ended June 30, 2013, we had a net loss of $7,746,115 compared to a net loss of $4,899,516 for the three months ended June 30, 2012. The increase in net loss of $2,846,599 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $4,237,006, the increase in real estate taxes and insurance of $2,600,223, the increase in fees to affiliates of $2,065,967, the increase in depreciation and amortization expense of $6,382,210, the increase in interest expense of $3,223,288, the increase in general and administrative expenses of $334,061 and the increase in acquisition costs of $419,662, partially offset by the increase in total revenues of $16,415,818. The increase in these expenses was due primarily to the increase in our property portfolio from 14 properties at June 30, 2012 to 39 properties at June 30, 2013.

Total revenues

Rental income and tenant reimbursements for the three months ended June 30, 2013 were $22,370,453 compared to $5,954,635 for the three months ended June 30, 2012. The increase of $16,415,818 was primarily due to the fact that we owned 39 multifamily properties as of June 30, 2013 compared to 14 multifamily properties as of June 30, 2012. Additionally, our total units increased by 5,646 from 3,125 at June 30, 2012 to 8,771 at June 30, 2013. Average monthly rents increased from $802 as of June 30, 2012 to $907 as of June 30, 2013. We expect rental income and tenant reimbursements to increase in future periods as a result of anticipated future acquisitions of real estate.

Operating, maintenance and management

Operating, maintenance and management expenses for the three months ended June 30, 2013 were $5,944,288 compared to $1,707,282 for the three months ended June 30, 2012. The increase of $4,237,006 was primarily due to the fact that we operated 39 multifamily properties as of June 30, 2013 compared to 14 multifamily properties as of June 30, 2012. We expect that these amounts will increase in future periods as a result of anticipated future acquisitions of real estate but will decrease as a percentage of total revenues.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the three months ended June 30, 2013 were $3,300,748 compared to $700,525 for the three months ended June 30, 2012. The increase of $2,600,223 was due to the acquisition of 25 multifamily properties since June 30, 2012 and the continuing operation of the properties owned as of June 30, 2012. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

Fees to affiliates

Fees to affiliates for the three months ended June 30, 2013 were $4,550,796 compared to $2,484,829 for the three months ended June 30, 2012. The increase of $2,065,967 was primarily due to acquisition fees of $2,201,611 earned by our advisor in connection with the acquisition of five multifamily properties with an aggregate purchase price of $108,600,000 during the three months ended June 30, 2013, compared to acquisition fees of $1,937,563 earned by our advisor in connection with the acquisition of three multifamily properties with an aggregate purchase price of $95,850,000 during the three months ended June 30, 2012. Additionally, the property management and investment management fees payable to our affiliated property manager and advisor increased for the three months ended June 30, 2013 as a result of the growth of our property portfolio from $230,363,500 at June 30, 2012 to $788,033,500 at June 30, 2013. We expect fees to affiliates to increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

55

PART I — FINANCIAL INFORMATION (continued)

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

Depreciation and amortization

Depreciation and amortization expenses for the three months ended June 30, 2013 were $9,772,519 compared to $3,390,309 for the three months ended June 30, 2012. The increase of $6,382,210 was primarily due to the net increase in depreciable and amortizable assets of $515,011,164 since June 30, 2012. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

Interest expense

Interest expense for the three months ended June 30, 2013 was $4,552,197 compared to $1,328,909 for the three months ended June 30, 2012. The increase of $3,223,288 was primarily due to the net increase in the notes payable balance of $394,190,054 since June 30, 2012 due to financing incurred in connection with the acquisition of 25 multifamily properties since June 30, 2012. Included in interest expense is the amortization of deferred financing costs of $235,453 and $69,402 and amortization of loan premiums of $232,830 and $27,352 for the three months ended June 30, 2013 and 2012, respectively. Also included in interest expense is the unrealized gain on derivative instruments of $438,472 for the three months ended June 30, 2013 and the unrealized loss on derivative instruments of $105,333 for the three months ended June 30, 2012. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expense

General and administrative expenses for the three months ended June 30, 2013 were $994,118 compared to $660,057 for the three months ended June 30, 2012. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. We expect general and administrative expenses to increase in future periods as we acquire additional real estate and real estate-related investments but to decrease as a percentage of total revenue.

Acquisition costs

Acquisition costs for the three months ended June 30, 2013 were $1,001,902 compared to $582,240 for the three months ended June 30, 2012. The increase in acquisition costs related primarily to our acquisition of five multifamily properties with an aggregate purchase price of $108,600,000 during the three months ended June 30, 2013 compared to the acquisition of three multifamily properties with an aggregate purchase price of $95,850,000 during the three months ended June 30, 2012. Acquisition costs in future periods will vary based on the number of acquisitions we make during the period, which will depend on the amount of proceeds raised in our ongoing initial public offering and the availability of debt financing.

56

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 Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

The following table summarizes the consolidated results of operations for the six months ended June 30, 2013 and 2012:

	For the Six Months Ended June 30,
	2013			2012			Change $			Change %
Total revenues	$	40,961,209		$	9,847,455		$	31,113,754		316	%
Operating expenses	10,472,201			2,817,754			7,654,447			272	%
Real estate taxes and insurance	5,914,486			1,133,107			4,781,379			422	%
Fees to affiliates	8,736,922			4,138,263			4,598,659			111	%
Depreciation and amortization	18,496,076			5,324,333			13,171,743			247	%
Interest expense	8,854,210			2,086,991			6,767,219			324	%
General and administrative expenses	1,704,940			1,364,393			340,547			25	%
Acquisition costs	3,120,390			1,155,721			1,964,669			170	%
Net loss	$	(16,338,016	)	$	(8,173,107	)	$	(8,164,909	)	100	%
NOI(1)	$	23,016,395		$	5,577,726		$	17,438,669		313	%
FFO(2)	$	2,158,060		$	(2,848,774	)	$	5,006,834		176	%
MFFO(2)	$	8,902,206		$	1,662,220		$	7,239,986		436	%

________________

(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).

57

PART I — FINANCIAL INFORMATION (continued)

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

Net loss

For the six months ended June 30, 2013, we had a net loss of $16,338,016 compared to a net loss of $8,173,107 for the six months ended June 30, 2012. The increase in net loss of $8,164,909 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $7,654,447, the increase in real estate taxes and insurance of $4,781,379, the increase in fees to affiliates of $4,598,659, the increase in depreciation and amortization expense of $13,171,743, the increase in interest expense of $6,767,219, the increase in general and administrative expenses of $340,547 and the increase in acquisition costs of $1,964,669, partially offset by the increase in total revenues of $31,113,754. The increase in these expenses was due primarily to the increase in our property portfolio from 14 properties at June 30, 2012 to 39 properties at June 30, 2013.

Total revenues

Rental income and tenant reimbursements for the six months ended June 30, 2013 were $40,961,209 compared to $9,847,455 for the six months ended June 30, 2012. The increase of $31,113,754 was primarily due to the fact that we owned 39 multifamily properties as of June 30, 2013 compared to 14 multifamily properties as of June 30, 2012. Additionally, our total units increased by 5,646 from 3,125 at June 30, 2012 to 8,771 at June 30, 2013. Average monthly rents increased from $802 as of June 30, 2012 to $907 as of June 30, 2013. We expect rental income and tenant reimbursements to increase in future periods as a result of anticipated future acquisitions of real estate.

Operating, maintenance and management

Operating, maintenance and management expenses for the six months ended June 30, 2013 were $10,472,201 compared to $2,817,754 for the six months ended June 30, 2012. The increase of $7,654,447 was primarily due to the fact that we operated 39 multifamily properties as of June 30, 2013 compared to 14 multifamily properties as of June 30, 2012. We expect that these amounts will increase in future periods as a result of anticipated future acquisitions of real estate but will decrease as a percentage of total revenues.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the six months ended June 30, 2013 were $5,914,486 compared to $1,133,107 for the six months ended June 30, 2012. The increase of $4,781,379 was due to the acquisition of 25 multifamily properties since June 30, 2012 and the continuing operation of the properties owned as of June 30, 2012. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

Fees to affiliates

Fees to affiliates for the six months ended June 30, 2013 were $8,736,922 compared to $4,138,263 for the six months ended June 30, 2012. The increase of $4,598,659 was primarily due to acquisition fees of $4,423,929 earned by our advisor in connection with the acquisition of nine multifamily properties with an aggregate purchase price of $217,130,000 during the six months ended June 30, 2013, compared to acquisition fees of $3,249,940 earned by our advisor in connection with the acquisition of six multifamily properties with an aggregate purchase price of $160,700,000 during the six months ended June 30, 2012. Additionally, the property management and investment management fees payable to our affiliated property manager and advisor increased for the six months ended June 30, 2013 as a result of the growth of our property portfolio from $230,363,500 at June 30, 2012 to $788,033,500 at June 30, 2013. We expect fees to affiliates to increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

58

PART I — FINANCIAL INFORMATION (continued)

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

Depreciation and amortization

Depreciation and amortization expenses for the six months ended June 30, 2013 were $18,496,076 compared to $5,324,333 for the six months ended June 30, 2012. The increase of $13,171,743 was primarily due to the net increase in depreciable and amortizable assets of $515,011,164 since June 30, 2012. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

Interest expense

Interest expense for the six months ended June 30, 2013 was $8,854,210 compared to $2,086,991 for the six months ended June 30, 2012. The increase of $6,767,219 was primarily due to the net increases in the notes payable balance of $394,190,054 since June 30, 2012 due to financing incurred in connection with the acquisition of 25 multifamily properties since June 30, 2012. Included in interest expense is the amortization of deferred financing costs of $395,747 and $103,560 and amortization of loan premiums of $387,942 and $33,623 for the six months ended June 30, 2013 and 2012, respectively. Also included in interest expense is the unrealized gain on derivative instruments of $373,855 for the six months ended June 30, 2013 and the unrealized loss on derivative instruments of $105,333 for the six months ended June 30, 2012. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expense

General and administrative expenses for the six months ended June 30, 2013 were $1,704,940 compared to $1,364,393 for the six months ended June 30, 2012. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. We expect general and administrative expenses to increase in future periods as we acquire additional real estate and real estate-related investments but to decrease as a percentage of total revenue.

Acquisition costs

Acquisition costs for the six months ended June 30, 2013 were $3,120,390 compared to $1,155,721 for the six months ended June 30, 2012. The increase in acquisition costs related primarily to our acquisition of nine multifamily properties with an aggregate purchase price of $217,130,000 during the six months ended June 30, 2013 compared to six acquisitions of multifamily properties with an aggregate purchase price of $160,700,000 during the six months ended June 30, 2012. Acquisition costs in future periods will vary based on the number of acquisitions we make during the period, which will depend on the amount of proceeds raised in our ongoing initial public offering and the availability of debt financing.

59

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 June 30, 2013 Compared to the Three Months Ended June 30, 2012

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 April 1, 2012. A “non-same-store” property is a property that was acquired, placed into service or disposed of after April 1, 2012. Our same store properties for the second quarter of 2012 and 2013 were the Lincoln Tower Apartments, Park Place Condominiums, Arbor Pointe Apartments, Clarion Park Apartments, Cooper Creek Village, Truman Farm Villas, Prairie Walk Apartments, EBT Lofts, Windsor on the River Apartments, Renaissance St. Andrews Apartments and Spring Creek of Edmond, collectively referred to as the “same-store properties.”

The following table presents the same-store and non-same-store results from operations for the three months ended June 30, 2013 and 2012:

	For the Three Months Ended June 30,
	2013		2012		Change $		Change %
Same-store properties:
Revenues	$	5,051,509	$	4,803,123	$	248,386	5	%
Operating expenses	2,476,463		2,271,308		205,155		9	%
Net operating income	2,575,046		2,531,815		43,231		2	%
Non-same-store properties:
Net operating income	9,699,456		822,182		8,877,274
Total net operating income(1)	$	12,274,502	$	3,353,997	$	8,920,505

________________

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

Net Operating Income

Same-store net operating income for the three months ended June 30, 2013 was $2,575,046 compared to $2,531,815 for the three months ended June 30, 2012. The 2%increase in same-store net operating income was primarily due to a 5%increase in same-store rental revenues partially offset by a 9%increase in same-store operating expenses over the comparable prior year period.

Revenues

Same-store revenues for the three months ended June 30, 2013 were $5,051,509 compared to $4,803,123 for the three months ended June 30, 2012. The 5%increase in same-store revenues was primarily due to average rent increases at the same-store properties from $773 to $783 coupled with the increase in same store occupancy from 92.2% to 95.6% as of June 30, 2012 and June 30, 2013, respectively.

Operating Expenses

Same-store operating expenses for the three months ended June 30, 2013 were $2,476,463 compared to $2,271,308 for the three months ended June 30, 2012. The 9%increase in same-store operating expenses was primarily due to increased personnel costs of $60,410, increased utilities expense of $83,260 and increased property taxes and insurance of $45,851 at our same store properties from the prior year period.

60

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.

61

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 six months ended June 30, 2013 and 2012 computed in accordance with GAAP:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2013			2012			2013			2012
Net loss	$	(7,746,115	)	$	(4,899,516	)	$	(16,338,016	)	$	(8,173,107	)
Fees to affiliates(1)	3,699,881			2,291,998			7,178,795			3,819,395
Depreciation and amortization	9,772,519			3,390,309			18,496,076			5,324,333
Interest expense	4,552,197			1,328,909			8,854,210			2,086,991
General and administrative expenses	994,118			660,057			1,704,940			1,364,393
Acquisition costs	1,001,902			582,240			3,120,390			1,155,721
Net operating income	$	12,274,502		$	3,353,997		$	23,016,395		$	5,577,726

________________

(1) Fees to affiliates for the three and six months ended June 30, 2013 excludes property management fees of $671,007 and $1,219,860 and other fees of $179,908 and $338,267, respectively, that are included in NOI. Fees to affiliates for the three and six months ended June 30, 2012 excludes property management fees of $192,831 and $318,868 that are included in NOI.

Funds from Operations and Modified Funds from Operations

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

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise

62

PART I — FINANCIAL INFORMATION (continued)

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

and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that public, non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until 2015. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

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

sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable,

63

PART I — FINANCIAL INFORMATION (continued)

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

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

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

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on

the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

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

64

PART I — FINANCIAL INFORMATION (continued)

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

alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no regular net asset value determination during the offering stage and for a period thereafter. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

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

Our calculation of FFO and MFFO is presented in the following table for the three and six months ended June 30, 2013 and 2012:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Reconciliation of net loss to MFFO:	2013			2012			2013			2012
Net loss	$	(7,746,115	)	$	(4,899,516	)	$	(16,338,016	)	$	(8,173,107	)
Depreciation of real estate assets	6,474,682			1,545,481			11,867,644			2,476,743
Amortization of lease-related costs	3,297,837			1,844,828			6,628,432			2,847,590
FFO	2,026,404			(1,509,207		)	2,158,060			(2,848,774		)
Acquisition fees and expenses(1)(2)	3,203,513			2,519,803			7,544,319			4,405,661
Unrealized loss on derivative instruments	(438,472		)	105,333			(373,855		)	105,333
Accretion of below-market leases	(167,992		)	—			(426,318		)	—
MFFO	$	4,623,453		$	1,115,929		$	8,902,206		$	1,662,220

________________

(1) By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. In the event that proceeds from our initial public offering are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to the advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

(2) Acquisition fees and expenses for the three and six months ended June 30, 2013 includes acquisition fees of $2,201,611 and $4,423,929 and acquisition fees of $1,937,563 and $3,249,940 for the three and six months ended June 30, 2012, respectively, that are recorded in fees to affiliates in the accompanying statements of operations.

65

PART I — FINANCIAL INFORMATION (continued)

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

Acquisition fees and expenses for the three and six months ended June 30, 2013 also includes acquisition expenses of $1,001,902 and $3,120,390 and acquisition expenses of $582,240 and $1,155,721 for the three and six months ended June 30, 2012, respectively that are recorded in acquisition costs in the accompanying statements of operations.

Pursuant to the terms of our advisory agreement, because MFFO did not exceed distributions paid during the three months ended June 30, 2013, we deferred $661,329 of acquisition and investment management fees earned during the three months ended June 30, 2013. Acquisition fees and investment management fees of $423,784 and $0, respectively, are due and payable as of June 30, 2013 and are included in due to affiliates, net, in the accompanying consolidated balance sheet.

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 June 30, 2013, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 7 to our condensed consolidated unaudited financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related-party transactions, agreements and fees.

Item 3. Qualitative and Quantitative Disclosure About Market Risk

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

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At June 30, 2013, the fair value of our fixed rate debt was $426,884,625 and the carrying value of our fixed rate debt was $438,584,685. 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 June 30, 2013. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

66

PART I — FINANCIAL INFORMATION (continued)

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 June 30, 2013, we were exposed to market risks related to fluctuations in interest rates on $120,387,185 of variable rate debt outstanding. Based on interest rates as of June 30, 2013, if interest rates were 100 basis points higher during the 12 months ending June 30, 2014, interest expense on our variable rate debt would increase by $1,220,973 and if interest rates were 100 basis points lower during the 12 months ending June 30, 2014, interest expense on the variable rate debt would decrease by $219,639.

At June 30, 2013, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.17% and 2.72%, respectively. The weighted-average interest rate represents the actual interest rate in effect at June 30, 2013 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2013 where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the 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 June 30, 2013, 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 June 30, 2013 were not in excess of the capped rates. See also Note 10 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 June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

67

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

The following risk factor supplements the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2012.

We are subject to compliance with securities laws which expose us to potential liabilities, including potential rescission rights.

As a public company whose securities are not listed on a national securities exchange, we are required to register the offer and sale of our shares in our continuous public offering with both the SEC and the state securities regulator of each U.S. state in which we conduct our continuous public offering. As part of the registration of our offering at the state level, we are generally required to submit an application to renew the registration of our continuous public offering in each state annually. In July 2013, in connection with its review of our annual application to renew our offering in the State of Ohio, the Ohio Division of Securities, which we refer to as the “Division”, notified us that the offer and sale of ours shares subsequent to September 10, 2012 may have failed to comply fully with the securities laws of the State of Ohio based upon our failure to file an amended Form U-1 with the Division. The Division notified us that, in the Division's opinion, our failure to submit revised registration documentation to the Division reflecting the adjustment in our public offering price from $10.00 per share to $10.24 per share may have violated Ohio state securities laws and caused any sales of our shares made subsequent to September 10, 2012 to be unregistered sales.

In the event that we violated the securities laws of the State of Ohio (or any other state) by failing to submit revised registration documentation to the appropriate state securities regulators reflecting the adjustment in our public offering price, stockholders who purchased our shares subsequent to September 10, 2012 (the date that we adjusted our public offering price from $10.00 to $10.24 per share) may have rescission rights with respect to the shares they purchased during such period. If our stockholders were successful in seeking rescission of their purchases of our shares or damages, we would face financial demands that could adversely affect our results of operations. As of the date hereof, we have not received any claims for rescission or damages or claims relating to any other civil liability stemming from the offer and sale of our shares in Ohio or any other jurisdiction.

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

During the three and six months ended June 30, 2013, we did not sell any equity securities that were not registered under the Securities Act of 1933, or the Securities Act.

On July 9, 2010, our Registration Statement on Form S-11 (File No. 333-160748), registering a public offering of up to $1,650,000,000 in shares of our common stock, was declared effective under the Securities Act. We commenced our initial public offering on July 19, 2010. We are offering up to 150,000,000 shares of our common stock to the public in our primary offering and up to 15,789,474 shares of our common stock pursuant to our distribution reinvestment plan. Steadfast Capital Markets Group, LLC, an affiliate of our advisor, is serving as the dealer manager for our initial public offering. Prior to commencing our initial public offering, we raised $5,844,325 in gross offering proceeds in a private offering. As of June 30, 2013, we had sold 36,963,302 shares of our common stock, including 809,640 shares issued pursuant to the distribution reinvestment plan, for gross offering proceeds of $371,609,959 in the private offering and public offering.

As a result of our determination of our estimated value per share as of March 31, 2012, effective September 10, 2012, the offering price of shares of our common stock in our public offering increased from a price of $10.00 per share to $10.24 per

68

PART II—OTHER INFORMATION (continued)

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.

From inception through June 30, 2013, 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	$	34,260,172		Actual	9.57	%
Other organization and offering costs	17,177,794			Actual	4.80	%
Total expenses	$	51,437,966
Total public offering proceeds (excluding DRP proceeds)	$	357,944,656		Actual	100.00	%
Percentage of public offering proceeds used to pay for organization and offering costs	14.37		%	Actual	14.37	%

From the commencement of our initial public offering through June 30, 2013, the net offering proceeds to us, after deducting the total expenses incurred as described above, were approximately $314,327,668 including net offering proceeds from our distribution reinvestment plan of $7,820,978. For the period from inception through June 30, 2013, the ratio of the cost of raising capital was approximately 14.37%.

We intend to use 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. In addition to our focus on multifamily properties, we may also selectively invest in other types of commercial properties. We may also acquire or originate mortgage, bridge and other real estate loans and equity securities of other real estate companies. As of June 30, 2013, we had invested in 39 multifamily properties for a total purchase price of $788,033,500. These property acquisitions were funded from proceeds of our offerings and $551,437,821 in secured financings.

During the three months ended June 30, 2013, 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
April 2013	18,770	29,454	9.89	(3)
May 2013	6,979	1,969	9.22	(3)
June 2013	—	—	—	(3)
	25,749	31,423

________________

(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;

69

PART II—OTHER INFORMATION (continued)

• 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. We will consider our offering stage complete on the first date that we are no longer publicly offering equity securities that are not listed on a national securities exchange, whether through our current public offering or follow-on public equity offerings, provided we have not filed a registration statement for a follow-on public equity offering as of such date (for purposes of this definition, we do not consider "public equity offerings" to include offerings on behalf of selling stockholders or offerings related to a distribution reinvestment plan, employee benefit plan or the redemption of interests in our operating partnership.

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

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

70

PART II—OTHER INFORMATION (continued)

Item 6. Exhibits.

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

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

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

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

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

10.1 Amendment No. 4 to the Amended and Restated Advisory Agreement, dated as of May 14, 2013, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P., and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed May 17, 2013)

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)

71

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:	August 14, 2013	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Date:	August 14, 2013	By:	/s/ Kevin J. Keating
			Kevin J. Keating
			Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

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

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

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

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

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

10.1 Amendment No. 4 to the Amended and Restated Advisory Agreement, dated as of May 14, 2013, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P., and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed May 17, 2013)

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)