Resource Real Estate Opportunity REIT II (RREO) 424B3 Prospectus supplement

FILED PURSUANT TO RULE 424(B)(3)

REGISTRATION NO. 333-184476

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

SUPPLEMENT NO. 3 DATED APRIL 2, 2015

TO THE PROSPECTUS DATED MARCH 13, 2015

This document supplements, and should be read in conjunction with, the prospectus of Resource Real Estate Opportunity REIT II, Inc. dated March 13, 2015, Supplement No. 1 dated March 13, 2015 and Supplement No. 2 dated March 25, 2015. As used herein, the terms “we,” “our” and “us” refer to Resource Real Estate Opportunity REIT II, Inc. and, as required by context, RRE Opportunity OP II, LP, which we refer to as our “Operating Partnership” and to their subsidiaries. Capitalized terms used in this supplement have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose:

• the status of our public offering;

• our acquisition of a multifamily community located in Atlanta, Georgia;

• “Management’s Discussion and Analysis of Financial Condition and Results of Operations” similar to that filed in our Annual Report on Form 10-K for the year ended December 31, 2014;

• updated “Experts” information; and

• our audited financial statements and the notes thereto as of December 31, 2014 and for the years ended December 31, 2014 and 2013.

Status of the Offering

We commenced this initial public offering of shares of our common stock on February 6, 2014. As of April 1, 2015, we had accepted aggregate gross offering proceeds of approximately $136.8 million related to the sale of approximately 13.7 million shares of common stock, including shares sold pursuant to our distribution reinvestment plan. As of April 1, 2015, approximately 86.2 million shares of our common stock remain available for sale in our primary offering, and approximately 9.9 million shares of our common stock remain available for issuance under our distribution reinvestment plan.

Property Acquisition

On March 30, 2015, we, through a wholly owned subsidiary, purchased a multifamily community located in Atlanta, Georgia (the “Atlanta Property”) from an unaffiliated seller. The Atlanta Property is a multifamily community with 216 units located on an approximately 5.3-acre site with amenities, including but not limited to a clubhouse, fitness center and pool. The Atlanta Property was constructed in 1989 and is currently 91% leased.

The contract purchase price for the Atlanta Property was $32.5 million, excluding closing costs. We funded the purchase price with proceeds from this offering. In connection with the acquisition, we paid to our advisor an acquisition fee of $652,232, which is 2.0% of the cost of the property, including acquisition expenses and the debt attributable to the acquisition. We believe that the Atlanta Property is suitable for its intended purpose and adequately insured; however, we intend to make certain renovations to the property. We intend to redesign the clubhouse, fitness center and pool areas, paint the façade and upgrade all of the unit interiors.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a Maryland corporation that intends to invest in multifamily assets across the entire spectrum of investments in order to provide investors with growing cash flow and increasing asset values. Our targeted portfolio will consist, at the time of acquisition, of commercial real estate assets, principally (i) underperforming multifamily rental properties which we will renovate and stabilize in order to increase rents, (ii) distressed real estate owned by financial institutions, usually as a result of foreclosure, and non-performing or distressed loans, including first- and second-priority mortgage loans and other loans which we will resolve, and (iii) performing loans, including first- and second-priority mortgage loans and other loans we originate or purchase either directly or with a co-investor or joint venture partner. We anticipate acquiring approximately 60% of our total assets in category (i) listed above, 20% of total assets in category (ii) listed above, and 20% of our total assets in category (iii) listed above. We believe multiple opportunities exist within the multifamily industry today and will continue to present themselves over the next few years to real estate investors who possess the following characteristics: (i) extensive experience in multifamily investing, (ii) strong management platforms specializing in operational and financial performance optimization, (iii) financial sophistication allowing them to benefit from complex opportunities and (iv) the overall scale and breadth of a national real estate platform in both the equity and debt markets. If we are only able to raise an amount substantially less than our maximum offering, our plan of operation will be scaled down considerably and we would expect to acquire a limited

number of assets. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition. Thus, to the extent that our advisor presents us with investment opportunities that allow us to meet the requirements to be treated as a REIT, under the Internal Revenue Code, and to maintain our exclusion from regulation as an investment company under the Investment Company Act of 1940, our portfolio composition may vary from what we initially expect.

We commenced this public offering of our common stock in February 2014. We describe this offering in “Liquidity and Capital Resources,” below.

Results of Operations

We were formed on September 28, 2012. We commenced active real estate operations on June 4, 2014 with the acquisition of our first multi-family property. As of December 31, 2014, we owned two multifamily properties. Our management is not aware of any material trends or uncertainties, favorable, or unfavorable, other than national economic conditions affecting our targeted portfolio, the multifamily residential housing industry and real estate generally, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of such assets or those that we expect to acquire.

Year ended December 31, 2014 Compared to the Year ended December 31, 2013

As a result of the timing of our commencement of this offering and active real estate operations, comparative operating results are not relevant to a discussion of operations for the two periods represented. We expect revenue and expenses to increase in future periods as we acquire additional properties. The following table sets forth the results of our operations:

	Years Ended
	December 31,
	2014			2013
Revenues:
Rental income	$	991,543		$	—
Interest income		8,251			451
Total revenues		999,794			451
Expenses:
Rental operating		689,325			—
Acquisition costs		1,588,944			—
Management fees - related parties		127,496			—
General and administrative		1,472,181			—
Loss on disposal of assets		198,840			—
Depreciation and amortization expense		531,058			—
Total expenses		4,607,844			—
(Loss) income before other expense		(3,608,050	)		451
Other expense:
Interest expense		158,842			—
Net (loss) income	$	(3,766,892	)	$	451

Revenues. During the year ended December 31, 2014, our revenue was primarily from the rent of our multifamily properties.

Expenses. Our operating expenses for the year ended December 31, 2014 were from the ongoing operations of our business and the acquisition of two operating properties. Accordingly, we incurred management fees, general and administrative expenses, and depreciation and amortization expenses. 

• General and administrative expenses related to the start up of early operations were $1.5 million, primarily related to the following:

• Company level expenses included $906,187 in payroll costs allocated to us by our advisor, $144,225 of director and officer’s insurance, $126,261 of director fees, and $165,564 of professional fees.

• Property level expenses of $90,766 were related to the operations of our two multifamily properties.

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• Acquisition costs of $1.6 million related to the acquisition of our two multifamily properties with an aggregate purchase price of $56.5 million.

• Loss on disposal of assets of $198,840 related to the disposition of existing appliance packages at Bear Creek.

• We recorded $158,842 of interest expense related to the mortgage loans and bridge loan secured to finance the property acquisitions, as well as amortization of deferred financing costs.

Liquidity and Capital Resources

We are offering and selling to the public in this public offering up to $1.0 billion in shares of common stock, $0.01 par value per share, at $10 per share. We are also offering up to $95.0 million in shares of our common stock to be issued pursuant to our distribution reinvestment plan under which our stockholders may elect to have distributions reinvested in additional shares at $9.50 per share.

We anticipate deriving the capital required to purchase real estate investments and conduct our operations from the proceeds of our public offering and any future offerings we may conduct, from secured or unsecured financings from banks or other lenders, from proceeds from the sale of assets and from any undistributed funds from our operations. In addition, our advisor has and will advance funds to us for certain accrued organization and offering costs. As of December 31, 2014, we had not identified any additional sources of financing or additional investments.

If we are unable to raise substantial funds in this offering, 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 will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in this 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. As of December 31, 2014, we had raised $46.7 million in our public offering.

We intend to allocate funds as necessary to aid our objective of preserving value for our investors by supporting the maintenance and viability of properties we acquire in the future. If such allocations and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties, debt investments or other assets we may hold. We cannot assure you that we will be able to access additional funds when we need them or upon acceptable terms.

We may obtain REIT-level financing through a line of credit from third-party financial institutions or other commercial lenders. Our assets will serve as collateral for this type of debt incurred to acquire real estate investments. In addition to debt financing at the REIT-level, we may also finance the acquisition costs of individual real estate investments, as well as the acquisition costs of all or a group of real estate investments acquired by us, by causing our subsidiaries to borrow directly from third-party financial institutions or other commercial lenders. Under these circumstances, our advisor anticipates that certain properties acquired will serve as collateral for the debt we incur to acquire those particular properties and that we will seek to obtain nonrecourse financing for the acquisition of the properties. However, there is no guarantee that our advisor will be successful in obtaining financing arrangements on a property-by-property basis and that the loans would be nonrecourse to us. Finally, we may also obtain seller financing with respect to specific assets that we acquire.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make payments to our advisor and the dealer manager of this public offering, which is an affiliate of our advisor. During our organization and offering stage, these payments will include payments to the dealer manager for selling commissions and the dealer manager fee and payments to the dealer manager and our advisor for reimbursement of organization and offering expenses. However, our advisor has agreed to reimburse us to the extent that selling commissions, the dealer manager fee and other organization and 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 or purchase of real estate investments, the management of our assets and costs incurred by our advisor in providing services to us. We describe these payments in more detail in Note 11 to our consolidated financial statements.

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Capital Expenditures

We deployed a total of $109,264 during the year ended December 31, 2014 for capital expenditures primarily related to unit rehabilitations at Bear Creek, our first multifamily real estate investment. We have budgeted over the next two years an additional $3.2 million for additional capital expenditures at Bear Creek and $7.6 million for capital expenditures at Oak Hill.

Gross Offering Proceeds

As of December 31, 2014, we had an aggregate of 4,759,567 shares of $0.01 par value common stock outstanding, including our advisor’s additional purchase of 117,778 shares of common stock for $1.1 million, as follows:

	Common
	Shares Issued		Gross Proceeds
Initial public offering		4,702,399	$	46,748,354
Shares issued through stock distributions		19,554		—
Shares issued through distribution reinvestment plan		22,614		214,833
Advisor’s initial investment, net of 5,000 share conversion		15,000		150,000
		4,759,567	$	47,113,187

Mortgage Debt

The following is a summary of our mortgage notes payable:

Collateral	Balance Outstanding at December 31, 2014		Maturity Date		Interest Rate			Average Monthly Debt Service		Interest Expense Incurred for the Year ended December 31, 2014
Bear Creek	$	7,465,000		7/1/2024		2.54	%	$	15,901	$	110,302
Oak Hill		31,075,000		1/1/2025		2.07	%		54,323		36,557
	$	38,540,000

On June 4, 2014, in connection with our acquisition of Bear Creek, we entered into a $7.5 million, 10-year secured mortgage loan with Berkadia Commercial Mortgage, LLC, (the “Bear Creek Mortgage Loan”), secured by Bear Creek. The Bear Creek Mortgage Loan, which matures on July 1, 2024, bears interest at a floating rate of one-month London InterBank Offered Rate, or LIBOR, plus 2.37%. As of December 31, 2014, the interest rate was 2.54%. Monthly payments are initially interest only. Beginning with the August 2018 payment, monthly payments will include interest and repayments of principal in the amount of approximately $23,432 per month.

On December 19, 2014, in connection with the acquisition of Oak Hill, we entered into a $31.1 million, secured mortgage loan with M&T Reality Capital Corporation (the “Oak Hill Mortgage Loan”), secured by the property. The Oak Hill Mortgage Loan, which matures on January 1, 2025, bears interest at a floating rate of one-month LIBOR plus 1.90%. As of December 31, 2014, the interest rate was 2.07%. Monthly payments are initially interest only. Beginning with the February 2017 payment, monthly payments will include interest and principal in the amount of approximately $109,047 per month.

On June 4, 2014, our advisor provided us a $1.3 million bridge loan, (the “Bridge Loan”). We used the proceeds of the Bridge Loan to partially finance the acquisition of Bear Creek. The Bridge Loan, which was scheduled to mature on December 4, 2014, incurred interest at an annual rate of LIBOR plus 3.0%. As of December 31, 2014, we had repaid the Bridge Loan in full and paid $2,242 in interest.

Operating Properties

As of December 31, 2014, our wholly-owned interests in multifamily properties were as follows:

Subsidiary	Apartment Complex	Number of Units		Property Location
RRE Bear Creek Holdings, LLC, or Bear Creek	Bear Creek		152	Dallas, TX
RRE Oak Hill Holdings, LLC, or Oak Hill	Oak Hill		360	Fort Worth, TX
			512

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As both of our multifamily properties are located in the Dallas-Fort Worth area, our portfolio is currently particularly susceptible to adverse economic developments in this real estate market. Any adverse economic or real estate developments in this market, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect our liquidity and adversely affect our ability to fund our ongoing operations.

Organization and Offering Costs

Our advisor has advanced funds to us for certain organization and offering costs. We reimburse the advisor for all of the expenses paid or incurred by our advisor or its affiliates on our behalf or in connection with the services provided to us in relation to this ongoing public offering. This includes all organization and offering costs of other than selling commission and dealer manager fees, but only to the extent that such reimbursement will not cause organization and offering expenses (other than selling commissions and the dealer manager fee) to exceed 2.5% of gross offering proceeds as of the date of such reimbursement. As of December 31, 2014, our advisor has advanced a total of $3.0 million for organization and offering costs and received $734,493 in reimbursements.

Acquisition and Asset Management Costs

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make payments to our advisor. During our acquisition stage, we expect to make payments to our advisor in connection with the acquisition of real estate investments. In addition, we expect to continue to make payments to our advisor for the management of our assets and costs incurred by our advisor in providing services to us. We describe these payments in more detail in Note 11 of the notes to our consolidated financial statements.

Operating Expenses

Under our charter, commencing with the four fiscal quarters ending June 30, 2015, our advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of our assets invested, directly or indirectly, in equity interests in 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 us, as determined under Generally Accepted Accounting Principles (“GAAP”), that are in any way related to our operation, including advisory 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, registration and stock exchange listing of our 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 our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

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Distributions

For the year ended December 31, 2014, we paid aggregate distributions of $328,785, including $113,952 of distributions paid in cash and $214,833 of distributions reinvested in shares of common stock through our distribution reinvestment plan, as follows:

Authorization Date	Per Common Share		Record Date	Distribution Date	Distributions invested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
June 5, 2014	$	0.00068493	July 31, 2014	August 1, 2014	$	5,065	$	5,560	$	10,625
June 5, 2014		0.00068493	August 31, 2014	September 2, 2014		11,086		8,844		19,930
June 5, 2014		0.00068493	September 30, 2014	October 1, 2014		18,497		11,197		29,694
October 6, 2014		0.00082192	October 30, 2014	October 31, 2014		27,143		13,970		41,113
October 30, 2014		0.00068493	November 26, 2014	November 28, 2014		31,213		15,113		46,326
November 13, 2014		0.00164384	December 30, 2014	December 31, 2014		121,829		59,268		181,097
					$	214,833	$	113,952	$	328,785

On November 13, 2014, our Board of Directors authorized cash distributions of $259,379 ($0.00164384 per common share) to stockholders of record for every day in the period from December 31, 2014 through January 29, 2015, which distributions were paid on January 30, 2015.

On June 5, 2014, our Board of Directors authorized a stock distribution of 0.00625 shares of common stock, or 0.625% of each outstanding share of common stock to the stockholders of record at the close of business on June 30, 2014. Such stock distribution was issued on July 14, 2014.

On August 14, 2014, our Board of Directors authorized a stock distribution of 0.01 shares of common stock, or 1.0% of each outstanding share of common stock to the stockholders of record at the close of business on September 30, 2014. Such stock distribution was issued on October 15, 2014.

On November 19, 2014, our Board of Directors authorized a stock distribution of 0.008333 shares of common stock, $0.01 par value per share, or 0.8333% of each outstanding share of common stock to the stockholders of record at the close of business on December 31, 2014. Such distribution was issued January 15, 2015.

Funds from Operations and Modified Funds from Operations

Funds from operations, or FFO, is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts to be net income (loss), computed in accordance with GAAP excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property (including deemed sales and settlements of pre-existing relationships), plus depreciation and amortization on real estate assets, and after related adjustments for unconsolidated partnerships, joint ventures and subsidiaries and noncontrolling interests. We believe that FFO is helpful to our investors and our management as a measure of operating performance because it excludes real estate-related depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which are not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate and intangibles diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, is helpful for our investors in understanding our performance. Factors that impact FFO include start-up costs, fixed costs, delay in buying assets, lower yields on cash held in accounts, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses. In addition, FFO will be affected by the types of investments in our targeted portfolio which will consist of, but are not limited to, commercial real estate assets, principally (i) underperforming multifamily rental properties which we will renovate and stabilize in order to increase rents, (ii) distressed real estate owned by financial institutions, usually as a result of foreclosure, and non-performing or distressed loans, including first- and second-priority mortgage loans and other loans which we will resolve, and (iii) performing loans, including first- and second-priority mortgage loans and other loans we originate or purchase either directly or with a co-investor or joint venture partner.

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Since FFO was promulgated, GAAP has adopted several new accounting pronouncements, such that management and many investors and analysts have considered the presentation of FFO alone to be insufficient. Accordingly, in addition to FFO, we use modified funds from operations, or MFFO, as defined by the IPA. MFFO excludes from FFO the following items:

(1) acquisition fees and expenses;

(2) straight-line rent amounts, both income and expense;

(3) amortization of above- or below-market intangible lease assets and liabilities;

(4) amortization of discounts and premiums on debt investments;

(5) impairment charges;

(6) gains or losses from the early extinguishment of debt;

(7) gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivatives holdings except where the trading of such instruments is a fundamental attribute of our operations;

(8) gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting, including interest rate and foreign exchange derivatives;

(9) gains or losses related to consolidation from, or deconsolidation to, equity accounting;

(10) gains or losses related to contingent purchase price adjustments; and

(11) adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We believe that MFFO is helpful in assisting management assess the sustainability of operating performance in future periods and, in particular, after our offering and acquisition stages are complete, primarily because it excludes acquisition expenses that affect property operations only in the period in which the property is acquired. Although MFFO includes other adjustments, the exclusion of acquisition expenses is the most significant adjustment to us at the present time, as we are currently in our offering and acquisition stage. Thus, MFFO provides helpful information relevant to evaluating our operating performance in periods in which there is no acquisition activity.

As explained below, management’s evaluation of our operating performance excludes the items considered in the calculation based on the following economic considerations. Many of the adjustments in arriving at MFFO are not applicable to us. Nevertheless, we explain below the reasons for each of the adjustments made in arriving at our MFFO definition:

• Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Prior to 2009, acquisition costs for both of these types of investments were capitalized under GAAP; however, beginning in 2009, acquisition costs related to business combinations are expensed. Both of these acquisition costs have been and will continue to be funded from the proceeds of our offering and not from operations. We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include those paid to our advisor or third parties.

• Adjustments for straight-line rents and amortization of discounts and premiums on debt investments. In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

• Adjustments for amortization of above or below market intangible lease assets. Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate.

• Impairment charges, gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting and gains or losses related to contingent purchase price adjustments. Each of these items relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding which may not be directly attributable to current operating performance. As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rate, occupancy and other core operating fundamentals.

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• Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price. Similar to extraordinary items excluded from FFO, these adjustments are not related to continuing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators.

By providing MFFO, we believe we are presenting useful information that also assists investors and analysts in the assessment of the sustainability of our operating performance after our offering and acquisition stages are completed. We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry. MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisition stages are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities or as affected by other MFFO adjustments. However, investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our acquisition stage is completed, as it excludes acquisition costs that have a negative effect on our operating performance and the reported book value of our common stock and stockholders’ equity during the periods in which properties are acquired.

Neither FFO nor MFFO should be considered as an alternative to net income (loss), nor as an indication of our liquidity, nor are any of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. In particular, as we are currently in the acquisition phase of our life cycle, acquisition costs and other adjustments that are increases to MFFO and AFFO are, and may continue to be, a significant use of cash. Accordingly, FFO and MFFO should be reviewed in connection with other GAAP measurements. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs.

The following section presents our calculation of FFO and MFFO and provides additional information related to our operations. As a result of the timing of the commencement of our initial public offering and our active real estate operations and the general and administrative expenses incurred in connection with these events. FFO and MFFO are not relevant to a discussion comparing operations for the two periods presented. We expect revenues and expenses to increase in future periods as we acquire additional investments.

	Years Ended
	December 31,
	2014			2013
Net (loss) income – GAAP	$	(3,766,892	)	$	451
Depreciation expense		179,695			—
FFO		(3,587,197	)		451
Adjustments for straight-line rents		(705	)		—
Amortization of intangible lease assets		351,363			—
Acquisition costs		1,588,944			—
MFFO	$	(1,647,595	)	$	451
Basic and diluted income (loss) per common share - GAAP	$	(2.24	)	$	0.02
FFO per share	$	(2.14	)	$	0.02
MFFO per share	$	(0.98	)	$	0.02
Weighted average shares outstanding		1,666,473			19,849

Critical Accounting Policies

We consider these policies critical because they involve significant management judgments and assumptions, they require estimates about matters that are inherently uncertain, and they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of our assets and liabilities and our disclosure of contingent assets and liabilities on 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.

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Real Estate Assets

Depreciation. We make subjective assessments as to the useful lives of our depreciable assets. These assessments have a direct impact on our net income, because, if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis throughout the expected useful lives of these investments. We consider the period of future benefit of an asset to determine its appropriate useful life. The estimated useful lives of our assets by class are as follows:

Buildings	27.5 years
Building improvements	3-27.5 years
Tenant improvements	Shorter of lease term or expected useful life

Real Estate Purchase Price Allocation. We record above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize any capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining non-cancelable terms of the respective leases, which we expect will range from one month to ten years.

We measure the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

We consider information obtained about each property as a result of our preacquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.

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

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

Estimates of the fair values of the tangible and intangible assets will require us to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate estimates would result in an incorrect assessment of our purchase price allocation, which would impact the amount of our net income.

Valuation of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may not be recoverable, we will assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. If based on this analysis we do not believe that we will be able to recover the carrying value of the asset, we will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset.

Projections of future cash flows require us to estimate the expected future operating income and expenses related to an asset as well as market and other trends. The use of inappropriate assumptions in our future cash flows analysis would result in an incorrect assessment of our assets’ future cash flows and fair values and could result in the overstatement of the carrying values of our real estate assets and an overstatement of our net income.

9

Revenue Recognition

We recognize minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and we will include amounts expected to be received in later years in deferred rents. We record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period in which the related expenses are incurred.

We make estimates of the collectability of our tenant receivables in relation to base rents, including straight-line rentals, expense reimbursements and other revenue or income. We specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, we will make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. These estimates have a direct impact on our net income because a higher bad debt reserve results in less net income.

The specific timing of a sale will be measured against various criteria related to the terms of the transaction and any continuing involvement associated with the property. If the criteria for profit recognition under the full-accrual method are not met, we will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery methods, as appropriate, until the appropriate criteria are met.

Interest income from performing loans receivable are recognized based on the contractual terms of the loan agreement. Fees related to any buy-down of the interest rate will be deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income. Closing costs related to the purchase of a performing loan held for investment will be amortized using effective yield method over the term of the loan and accreted as an adjustment against interest income.

Adoption of New Accounting Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance to change the criteria for reporting development stage entities. Under the new guidance, the requirement to present inception-to-date information on the statement of operations, cash flows and statement of equity has been eliminated. In addition, financial statements no longer need to be labeled as those of a development stage entity, disclosure of a description of the development stage activities in which the entity is engaged is no longer required, and disclosing in the first year the company is no longer a development stage entity and that in prior years it had been in the development stage is also no longer required. Our early adoption of this guidance, as of January 1, 2014, did not have a material impact on our consolidated financial position, results of operations or cash flows.

Accounting Standards Issued But Not Yet Effective

In May 2014, FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU No. 2014-09”), which will replace most existing revenue recognition guidance in GAAP. The core principle of ASU No. 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU No. 2014-09 will be effective for us beginning January 1, 2017, including interim periods in 2017, and allows for both retrospective and prospective methods of adoption. We are in the process of determining the method of adoption and assessing the impact of ASU No. 2014-09 on our consolidated financial position, results of operations and cash flows.

In January 2015, FASB issued ASU No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU No. 2015-01”). The amendments in ASU No. 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendment will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We do not expect the adoption of ASU No. 2015-01 to have a significant impact on our financial statements.

Off-Balance Sheet Arrangements

As of December 31, 2014 and 2013, we did not have any off-balance sheet arrangements or obligations.

10

Subsequent Events

On January 26, 2015, our Board of Directors authorized cash distributions to the stockholders of record at the close of business each day in the period commencing January 30, 2015 through March 30, 2015 equal to a daily amount of $0.00164384 per share of common stock, payable on February 27, 2015 and March 31, 2015.

On February 19, 2015, our Board of Directors authorized a stock distribution of 0.005 shares of common stock, or 0.5% of each outstanding share of common stock, to the stockholders of record at the close of business on March 31, 2015. Such distribution is to be issued on April 15, 2015.

On March 30, 2015, we, through our operating partnership, purchased a 216 unit multifamily community located in Atlanta, Georgia from an unaffiliated seller for $32.5 million.

On March 24, 2015, our Board of Directors authorized cash distributions to the stockholders of record at the close of business each day in the period commencing March 31, 2015 through and including June 29, 2015 equal to a daily amount of $0.000164384 per share of common stock, payable on April 30, 2015, May 29, 2015 and June 30, 2015.

Experts

The following information supplements the disclosure in the prospectus under the heading “Experts.”

The consolidated financial statements and related financial statement schedule as of December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013, included in this registration statement and prospectus, have been so included in reliance upon the report of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing in giving said report.

11

INDEX TO FINANCIAL STATEMENTS

Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2014 and 2013	F-3
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2014 and 2013	F-4
Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December  31, 2014 and 2013	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013	F-6
Notes to Consolidated Financial Statements – December 31, 2014	F-7
Schedule III – Real Estate and Accumulated Depreciation	F-25

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Resource Real Estate Opportunity REIT II, Inc.:

We have audited the accompanying consolidated balance sheets of Resource Real Estate Opportunity REIT II, Inc. (a Maryland corporation) and subsidiaries (collectively, the “Company”) as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2014. Our audits of the basic consolidated financial statements included the financial statement schedules listed in the index appearing under Item 15(b). These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Resource Real Estate Opportunity REIT II, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

March 30, 2015

F-2

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED BALANCE SHEETS

	December 31, 2014			December 31, 2013
ASSETS
Investments:
Rental properties, net	$	54,703,305		$	—
Identified intangible assets, net		1,176,061			—
		55,879,366			—
Cash		15,780,579			200,644
Restricted cash		725,305			—
Tenant receivables		5,746			—
Due from related parties		34,025			—
Subscriptions receivable		3,819,991			—
Prepaid expenses and other assets		774,338			—
Deferred offering costs		3,618,954			—
Deferred financing costs, net		581,783			—
Total assets	$	81,220,087		$	200,644
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable	$	38,540,000		$	—
Accounts payable and accrued expenses		857,897			—
Due to related parties		3,851,263			—
Tenant prepayments		30,704			—
Security deposits		68,696			—
Distribution payable		259,379			—
Total liabilities		43,607,939			—
Stockholders’ equity:
Preferred stock (par value $.01, 10,000,000 shares authorized, none issued and outstanding)		—			—
Convertible stock (par value $.01; 50,000 shares authorized, 50,000 issued and outstanding)		500			500
Common stock (par value $.01; 1,000,000,000 shares authorized, 4,759,567 and 15,000 issued and outstanding, respectively)		47,596			150
Additional paid-in capital		42,148,473			199,350
Accumulated other comprehensive loss		(34,468	)		—
Accumulated (deficit) earnings		(4,549,953	)		644
Total stockholders’ equity		37,612,148			200,644
Total liabilities and stockholders’ equity	$	81,220,087		$	200,644

The accompanying notes are an integral part of these consolidated financial statements.

F-3

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

	Years Ended
	December 31,
	2014			2013
Revenues:
Rental income	$	991,543		$	—
Interest income		8,251			451
Total revenues		999,794			451
Expenses:
Rental operating		689,325			—
Acquisition costs		1,588,944			—
Management fees - related parties		127,496			—
General and administrative		1,472,181			—
Loss on disposal of assets		198,840			—
Depreciation and amortization expense		531,058			—
Total expenses		4,607,844			—
(Loss) income before other expense		(3,608,050	)		451
Other expense:
Interest expense		158,842			—
Net (loss) income		(3,766,892	)		451
Other comprehensive loss:
Designated derivative, fair value adjustment		(34,468	)		—
Comprehensive (loss) income	$	(3,801,360	)	$	451
Weighted average common shares outstanding		1,680,062			19,849
Basic and diluted (loss) earnings per common share	$	(2.24	)	$	0.02

The accompanying notes are an integral part of these consolidated financial statements.

F-4

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	Common Stock						Convertible Stock				Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings/ (Accumulated Deficit)
	Shares			Amount			Shares		Amount											Total
Balance at January 1, 2013		20,000		$	200			—	$	—	$	199,800			—		$	193		$	200,193
Conversion of common stock to convertible stock		(5,000	)		(50	)		50,000		500		(450	)		—			—			—
Net income		—			—			—		—		—			—			451			451
Balance at December 31, 2013		15,000			150			50,000		500		199,350			—			644			200,644
Issuance of stock		4,702,399			47,024			—		—		46,701,330			—			—			46,748,354
Distributions of common stock		19,554			196			—		—		195,346			—			(195,542	)		—
Syndication costs		—			—			—		—		(5,162,160	)		—			—			(5,162,160	)
Common stock issued through distribution reinvestment plan		22,614			226			—		—		214,607			—			(214,833	)		—
Distributions declared		—			—			—		—		—			—			(373,330	)		(373,330	)
Designated derivative, fair value adjustment		—			—			—		—		—			(34,468	)		—			(34,468	)
Net loss		—			—			—		—		—			—			(3,766,892	)		(3,766,892	)
Balance, at December 31, 2014		4,759,567		$	47,596			50,000	$	500	$	42,148,473		$	(34,468	)	$	(4,549,953	)	$	37,612,148

The accompanying notes are an integral part of this consolidated financial statement.

F-5

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2014			2013
Cash flows from operating activities:
Net (loss) income	$	(3,766,892	)	$	451
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Loss on disposal of assets		198,840			—
Depreciation and amortization		531,058			—
Amortization of deferred financing costs		9,581			—
Changes in operating assets and liabilities:
Restricted cash		(725,305	)		—
Tenant receivables, net		(5,746	)		—
Due from related party		(34,025	)		—
Prepaid expenses and other assets		(642,278	)		—
Due to related parties		2,384,199			—
Accounts payable and accrued expenses		452,781			—
Tenant prepayments		17,379			—
Security deposits		6,397			—
Net cash (used in) provided by operating activities		(1,574,011	)		451
Cash flows from investing activities
Property acquisitions		(56,434,350	)		—
Capital expenditures		(109,264	)		—
Net cash used in investing activities		(56,543,614	)		—
Cash flows from financing activities:
Proceeds from issuance of common stock		42,928,363			—
Payment of deferred financing costs		(591,364	)		—
Deferred offering costs		(1,815,856	)		—
Increase in borrowings		39,862,000			—
Repayments on borrowings		(1,322,000	)		—
Purchase of interest rate caps		(87,470	)		—
Distributions paid on common stock		(113,952	)		—
Syndication costs		(5,162,161	)		—
Net cash provided by financing activities		73,697,560			—
Net increase in cash		15,579,935			451
Cash at beginning of period		200,644			200,193
Cash at end of period	$	15,780,579		$	200,644

The accompanying notes are an integral part of these consolidated financial statements.

F-6

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Real Estate Opportunity REIT II, Inc. (the “Company”) was organized in Maryland on September 28, 2012. The Company is offering up to 100,000,000 shares of common stock in its primary initial public offering for $10 per share, with volume discounts available to investors who purchase $1.0 million or more of shares through the same participating broker-dealer. Discounts are also available for other categories of investors. The Company is also offering up to 10,000,000 shares pursuant to the Company’s distribution reinvestment plan at a purchase price initially equal to $9.50 per share. The Company has adopted a fiscal year ending December 31. On February 6, 2014, the Securities and Exchange Commission (the “SEC”) declared effective the Company’s Registration Statement on Form S-11, as amended (Commission File No. 333-184476) (the “Registration Statement”), relating to the offering of up to 110,000,000 shares of the Company’s common stock, including shares offered pursuant to the Company’s distribution reinvestment plan.

Resource Real Estate Opportunity Advisor II, LLC (the “Advisor”) is a wholly owned subsidiary of Resource Real Estate, Inc. (the “Sponsor”) and an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”), a publicly traded company (NASDAQ: REXI) operating in the real estate, financial fund management and commercial finance sectors. The Advisor acts as the Company’s external advisor and manages the Company’s day-to-day operations and its portfolio of real estate investments and provides asset-management, marketing, investor relations and other administrative services on the Company’s behalf, all subject to the supervision of the Company’s Board of Directors. On October 9, 2012, the Advisor contributed $200,000 to the Company in exchange for 20,000 shares of common stock. On December 20, 2013, the Advisor received 50,000 shares of convertible stock in exchange for 5,000 shares of the Company’s common stock. The Advisor purchased an additional 117,778 shares of common stock in 2014 for $1.1 million.

On June 2, 2014, the Company satisfied the $2.0 million minimum offering amount for its initial public offering, broke escrow and issued shares of common stock in the offering. The Company subsequently raised the minimum New York offering amount of $2.5 million on June 4, 2014. On October 21, 2014, the Company raised the minimum Ohio offering amount of $20.0 million; and on January 8, 2015, the Company raised the minimum Pennsylvania offering amount of $50.0 million. As of December 31, 2014, a total of 4,759,567 shares, including shares purchased by the Advisor and shares issued through the distribution reinvestment plan, have been issued in connection with the Company’s public offering resulting in gross offering proceeds of $47.1 million. As of December 31, 2014, the Company had issued 22,614 shares for $214,833 pursuant to its distribution reinvestment plan.

The Company’s objective is to take advantage of the Sponsor’s dedicated multifamily investing and lending platforms to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values. The Company’s targeted portfolio will consist, at the time of acquisition, of commercial real estate assets, principally (i) underperforming multifamily rental properties which the Company will renovate and stabilize in order to increase rents, (ii) distressed real estate owned by financial institutions, usually as a result of foreclosure, and non-performing or distressed loans, including first- and second-priority mortgage loans and other loans which the Company will resolve, and (iii) performing loans, including first- and second-priority mortgage loans and other loans the Company originates or purchases either directly or with a co-investor or joint venture partner.

The Company intends to elect and qualify to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2014. As such, to maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes at least 90% of its REIT taxable income to its stockholders. The Company also intends to operate its business in a manner that will permit it to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

F-7

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:

Subsidiary	Apartment Complex	Number of Units	Property Location
RRE Opportunity Holdings II, LLC	N/A	N/A	N/A
RRE Opportunity OP II, LP	N/A	N/A	N/A
RRE Bear Creek Holdings, LLC (“Bear Creek”)	Bear Creek	152	Dallas, TX
RRE Oak Hill Holdings, LLC (“Oak Hill”)	Oak Hill	360	Fort Worth, TX

N/A - Not Applicable

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2014, the Company had $15.8 million of deposits at various banks, $14.8 million of which was greater than the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on such deposits.

Real Estate Investments

The Company records acquired real estate at fair value. The Company considers the period of future benefit of an asset to determine its appropriate useful life. The Company’s estimated useful lives of its assets by class are as follows:

Buildings	27.5 years
Building improvements	3.0 to 27.5 years
Tenant improvements	Expected useful life
Lease intangibles	Remaining term of related lease

Impairment of Long Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

F-8

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. There were no impairments as of December 31, 2014.

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, the Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, identified intangible lease assets, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases, the value of tenant relationships, and liabilities, based in each case on their fair values.

Fair value estimates are based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports, along with the aforementioned information available to the Company’s management, is used in allocating the purchase price. The independent appraisers have no involvement in management’s allocation decisions other than providing market information.

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

The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.

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

F-9

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

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

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. These estimates are subject to change until all information is finalized, which is generally within one year of the acquisition date.

Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

As a condition of the Company’s mortgage loan, from time to time the Company may be required to enter into certain derivative transactions as may be required by the lender. These transactions would generally be in line with the Company’s own risk management objectives and also serve to protect the lender.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company entered into interest rate caps that were designated as cash flow hedges during 2014. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2014, such derivatives were used to hedge the variable cash flows, indexed to USD- London InterBank Offered Rate (“LIBOR”), associated with an existing variable-rate loan agreement. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the year ended December 31, 2014, the Company did not record any hedge ineffectiveness in earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

Revenue Recognition

The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and includes amounts expected to be received in later years in deferred rents. The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period the related expenses are incurred.

F-10

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

The specific timing of a sale is measured against various criteria related to the terms of the transaction and any continuing involvement associated with the property. If the criteria for profit recognition under the full-accrual method are not met, the Company defers the gain recognition and accounts for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery methods, as appropriate, until the appropriate criteria are met.

The future minimum rental payments to be received from noncancelable operating leases are $3.7 million and $85,000 for the years ending December 31, 2015 and 2016, and none thereafter.

Tenant Receivables

The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income. The Company specifically analyzes accounts receivable and historical bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year.

Income Taxes

The Company intends to elect and qualify to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it lost its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Taxable income, generally, will differ from net income reported on the financial statements because the determination of taxable income is based on tax provisions and not financial accounting principles.

The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRSs”). In general, the Company’s TRS may hold assets and engage in activities that it cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes.

While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity.

Earnings Per Share

Basic earnings per share is calculated on the basis of weighted-average number of common shares outstanding during the year. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. Due to reported losses for the periods presented, the convertible shares (discussed in Note 12) are not included in the diluted earnings per share

F-11

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

calculation. All common shares and per common share information in the financial statements have been adjusted retroactively for the effect of one 0.625% stock distribution, issued on July 14, 2014, one 1.00% stock distribution, issued October 15, 2014, and one 0.83333% stock distribution, issued on January 15, 2015.

Organization and Offering Costs

The Company incurs organizational, accounting, and offering costs in connection with its ongoing initial public offering. Organization and offering costs (other than selling commissions and dealer-manager fees) of the Company are initially paid by the Advisor on behalf of the Company. Offering costs are discussed in more detail below under the heading “Deferred Offering Costs.” Organization costs are expensed as incurred and include all expenses to be 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.

Pursuant to the Amended and Restated Advisory Agreement between the Company and the Advisor dated January 9, 2014 (the “Advisory Agreement”), the Company is obligated to reimburse the Advisor for organizational and offering costs it incurs on the Company’s behalf, but only to the extent that such reimbursements will not cause organizational and offering expenses (other than selling commissions and the dealer manager fees) to exceed 2.5% of the gross offering proceeds raised in the offering, when recorded by the Company. As of December 31, 2014, a total of $2.3 million in reimbursable organizational and offering costs incurred on behalf of the Company by the Advisor has yet to be reimbursed by the Company. These costs are included in due to related parties on the consolidated balance sheet as of December 31, 2014.

Deferred Offering Costs

Through December 31, 2014, the Company has incurred $4.4 million for the payment of public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. As of December 31, 2014, the Advisor has advanced $3.0 million of these costs on behalf of the Company. A portion of these costs was charged to equity upon the sale of each share of common stock sold under the public offering. Similarly, a portion of the proceeds received from the sales of shares in the Company’s public offering was paid to the Advisor to reimburse it for the amount incurred on behalf of the Company. Deferred offering costs represent the portion of the total costs incurred that have not been charged to equity to date. As of December 31, 2014, the Company has reimbursed $734,493 of deferred offering costs to the Advisor. Upon completion of the public offering, any excess deferred offering costs in excess of the limit on organization and offering costs discussed above, will be charged back to the Advisor.

New Accounting Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance to change the criteria for reporting development stage entities. Under the new guidance, the requirement to present inception-to-date information on the statement of operations, cash flows and statement of equity has been eliminated. In addition, financial statements no longer need to be labeled as those of a development stage entity, disclosure of a description of the development stage activities in which the entity is engaged is no longer required, and disclosing in the first year the company is no longer a development stage entity and that in prior years it had been in the development stage is also no longer required. The Company’s early adoption of this guidance, as of January 1, 2014, did not have a material impact on its consolidated financial position, results of operations or cash flows.

Accounting Standards Issued But Not Yet Effective

In May 2014, FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU No. 2014-09”), which will replace most existing revenue recognition guidance in GAAP. The core principle of ASU No. 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be

F-12

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

entitled to receive for those goods or services. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU No. 2014-09 will be effective for the Company beginning January 1, 2017, including interim periods in 2017, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of ASU No. 2014-09 on the Company’s consolidated financial position, results of operations and cash flows.

In January 2015, FASB issued ASU No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU No. 2015-01”). The amendments in ASU No. 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendment will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU No. 2015-01 to have a significant impact on its financial statements.

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents supplemental cash flow information:

	Years Ended
	December 31,
	2014		2013
Non-cash financing and investing activities:
Increase in subscription receivables	$	3,819,991	$	—
Cash distributions on common stock declared but not yet paid		259,379		—
Stock issued from distribution reinvestment plan		195,542		—
Stock distributions issued		214,833		—
Deferred offering costs		1,803,098		—
Due to related parties		1,467,064		—
Cash paid during the period for:
Interest	$	133,036	$	—

F-13

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

NOTE 4 - RESTRICTED CASH

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvement. A summary of the components of restricted cash follows:

	December 31, 2014		December 31, 2013
Real estate taxes	$	128,871	$	—
Insurance		157,600		—
Capital improvements		438,834		—
Total	$	725,305	$	—

NOTE 5 - RENTAL PROPERTIES, NET

The Company’s investments in rental properties consisted of the following:

	December 31, 2014			December 31, 2013
Land	$	6,723,368		$	—
Building and improvements		47,546,786			—
Furniture, fixtures and equipment		612,846			—
		54,883,000			—
Less: accumulated depreciation		(179,695	)		—
	$	54,703,305		$	—

Depreciation expense for the years ended December 31, 2014 and 2013 was $179,695 and $0, respectively.

NOTE 6 - ACQUISITIONS

As of December 31, 2014, the Company owned two properties. The table below summarizes these acquisitions and the respective fair values assigned:

Multifamily Community Name	City and State	Date of Acquisition		Purchase Price (1)		Land		Building and Improvements		Furniture, Fixture and Equipment		Intangible Assets		Other Liabilities			Fair Valued Assigned
Bear Creek	Dallas, TX		6/4/2014	$	9,500,000	$	1,888,982	$	7,060,815	$	198,840	$	351,363	$	(84,732	)	$	9,415,268
Oak Hill	Fort Worth, TX		12/19/2014		47,000,000		4,834,386		40,485,971		503,582		1,176,061		(59,977	)		46,940,023

(1) Purchase price excludes closing costs and acquisition expenses.

On June 4, 2014, the Company acquired its first investment, a 152-unit, multifamily apartment community located in Dallas, Texas known as Bear Creek, for $9.5 million, excluding closing costs. The Company paid an acquisition fee of $264,239, or 2% of the purchase price (including closing costs and any amounts reserved for capital expenditures), to the Advisor.

F-14

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

The following table reflects the fair value of the net assets acquired:

Rental property:
Land	$	1,888,982
Buildings		7,060,815
Personal property		198,840
		9,148,637
Acquired intangibles - in-place leases		351,363
Accrued real estate taxes		(69,085	)
Prepaid rents		(163	)
Security deposits		(15,484	)
Fair value assigned	$	9,415,268

On December 19, 2014, the Company acquired a 360-unit, multifamily apartment community located in Fort Worth, Texas known as Oak Hill, for $47.0 million, excluding closing costs. The Company paid an acquisition fee of $1.1 million, or 2% of the purchase price (including closing costs and any amounts reserved for capital expenditures), to the Advisor.

The following table reflects the fair value of the net assets acquired:

Rental property:
Land	$	4,834,386
Buildings		40,485,971
Personal property		503,582
		45,823,939
Acquired intangibles - in-place leases		1,176,061
Accrued real estate taxes		—
Prepaid rents		(13,162	)
Security deposits		(46,815	)
Fair value assigned	$	46,940,023

The table below summarizes the total revenues, net loss, and acquisition costs of the Company’s 2014 acquisitions:

	Years Ended
	December 31,
Multifamily Community	2014			2013
Bear Creek
Total Revenues	$	821,576		$	—
Net Loss		(748,500	)		—
Acquisition Costs		329,709			—
Oak Hill
Total Revenues	$	170,097		$	—
Net Loss		(82,184	)		—
Acquisition Costs		1,259,235			—

F-15

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of rental leases. The value of acquired in-place leases totaled $1.5 million and $-0- as of December 31, 2014 and 2013, respectively, less accumulated amortization of $351,363 and $-0-, respectively. The weighted average remaining life of the rental leases is eight months as of December 31, 2014. Expected amortization for the rental leases for the next 12 months is $1.2 million. For the year ended December 31, 2014, amortization expense totaled $351,363. There was no amortization expense for year ended December 31, 2013.

NOTE 8 - MORTGAGE NOTES PAYABLE

The following is a summary of the Company’s mortgage notes payable as of December 31, 2014:

Collateral	Balance Outstanding at December 31, 2014		Maturity Date		Interest Rate December 31, 2014			Average Monthly Debt Service		Interest Expense Incurred for the Year ended December 31, 2014
Bear Creek	$	7,465,000		7/1/2024		2.54	%	$	15,901	$	110,302
Oak Hill		31,075,000		1/1/2025		2.07	%		54,323		36,557
	$	38,540,000

On June 4, 2014, in connection with the acquisition of Bear Creek, the Company entered into a $7.5 million, 10-year secured mortgage loan with Berkadia Commercial Mortgage, LLC (the “Bear Creek Mortgage Loan”), secured by the property. The Bear Creek Mortgage Loan, which matures on July 1, 2024, bears interest at a floating rate of one-month LIBOR plus 2.37%. As of December 31, 2014, the interest rate was 2.54%. Monthly payments are initially interest only. Beginning with the August 2018 payment, monthly payments will include interest and principal in the amount of approximately $23,432 per month.

On December 19, 2014, in connection with the acquisition of Oak Hill, the Company entered into a $31.1 million, secured mortgage loan with M&T Reality Capital Corporation (the “Oak Hill Mortgage Loan”), secured by the property. The Oak Hill Mortgage Loan, which matures on January 1, 2025, bears interest at a floating rate of one-month LIBOR plus 1.90%. As of December 31, 2014, the interest rate was 2.07%. Monthly payments are initially interest only. Beginning with the February 2017 payment, monthly payments will include interest and principal in the amount of approximately $109,047 per month.

Annual principal payments on the mortgage notes payable for each of the next five years ending December 31, and thereafter, are as follows:

2015	$	—
2016		—
2017		590,509
2018		680,324
2019		730,909
Thereafter		36,538,258
	$	38,540,000

F-16

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

NOTE 9 – DEFERRED FINANCING COSTS

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of December 31, 2014 and December 31, 2013, there were $9,581 and $-0-, respectively, of accumulated amortization of deferred financing costs. Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows:

2015	$	58,112
2016		62,137
2017		61,607
2018		60,653
2019		59,547
Thereafter		279,727
	$	581,783

NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss for the year ended December 31, 2014:

	Net unrealized loss on derivatives
January 1, 2014	$	—
Unrealized loss on designated hedge		(34,468	)
December 31, 2014	$	(34,468	)

NOTE 11 – RELATED PARTY TRANSACTIONS

Pursuant to the terms of the Advisory Agreement, the Advisor provides the Company with its management team, including its officers, along with appropriate support personnel. The Advisor will be reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits. Each of the Company’s officers is an employee of the Sponsor or one of its affiliates. The Company does not have any employees. The Advisor is not obligated to dedicate any specific portion of its time or the time of its personnel to the Company’s business. The Advisor is at all times subject to the supervision and oversight of the Company’s Board of Directors and has only such functions and authority as the Company delegates to it.

During the course of the offering, the Advisor will provide offering-related services to the Company and will advance funds to the Company for both operating costs and organization and offering costs. These amounts will be reimbursed to the Advisor from the proceeds from the offering, although there can be no assurance that the Company’s plans to raise capital will be successful. As of December 31, 2014, the Advisor has incurred costs on a cumulative basis on behalf of the Company of approximately $3.0 million.

F-17

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

Relationship with the Advisor

The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the conflicts committee of the Company’s Board of Directors. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:

Acquisition fees.The Advisor earns an acquisition fee of 2.0% of the cost of investments acquired on behalf of the Company, plus any capital expenditure reserves allocated, or the amount funded by the Company to acquire loans, including acquisition expenses and any debt attributable to such investments.

Asset management fees.The Advisor earns a monthly asset management fee equal to one-twelfth of 1.0% of the cost of each asset, without deduction for depreciation, bad debts or other non-cash reserves. The asset management fee is based only on the portion of the costs or value attributable to the Company’s investment in an asset if the Company does not own all or a majority of an asset and does not manage or control the asset.

Disposition fees.The Advisor earns a disposition fee in connection with of the sale of a property equal to the lesser of one-half of the aggregate brokerage commission paid, or if none is paid, 2.0% of the contract sales price. No properties were sold during the year ended December 31, 2014 and, therefore, no disposition fees were earned.

Debt financing fees.The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained for which it provided substantial services.

Expense reimbursements.The Company also pays directly or reimburses the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with the services provided to the Company in relation to its public offering, including its distribution reinvestment plan offering. This includes all organization and offering costs of up to 2.5% of gross offering proceeds. Reimbursements also include expenses the Advisor incurs in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees.

On June 4, 2014, the Advisor provided a $1.3 million bridge loan (the “Bridge Loan”) to the Company. The Company used the proceeds of the Bridge Loan to partially finance the acquisition of Bear Creek. The Bridge Loan, which was scheduled to mature on December 4, 2014, incurred interest at an annual rate of LIBOR plus 3.0%. The Company repaid the Bridge Loan in full on June 30, 2014 and paid $2,242 in interest during the year ended December 31, 2014.

Relationship with RAI

The receivable from related party includes escrow funds held by RAI for self insurance. The Company’s properties participate in an insurance pool with other properties directly and indirectly managed by RAI. RAI holds the escrow funds related to the insurance pool on its books. The insurance pool covers losses up to $2.5 million. Catastrophic insurance would cover losses in excess of the insurance pool up to $85 million. Therefore, unforeseen or catastrophic losses in excess of the Company’s insured limits could have a material adverse effect on the Company’s financial condition and operating results.

Relationship with Resource Real Estate Opportunity Manager II

Resource Real Estate Opportunity Manager II, LLC (the “Manager”), an affiliate of the Advisor, manages real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to the Company’s real estate property pursuant to the terms of the management agreement with the Manager.

Property management fees.The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments.

Construction management fees.The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. No construction management fees were earned during the year ended December 31, 2014.

F-18

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

Debt servicing fees.The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment. No debt servicing fees were earned during the year ended December 31, 2014.

Expense reimbursement.During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company.

Relationship with Resource Securities

Resource Securities, Inc. (“Resource Securities”), an affiliate of the Advisor, serves as the Company’s dealer-manager and is responsible for marketing the Company’s shares during the primary portion of its public offering. Pursuant to the terms of the dealer-manager agreement with Resource Securities, the Company pays Resource Securities a selling commission of up to 7% of gross primary offering proceeds and a dealer-manager fee of up to 3% of gross primary offering proceeds. Resource Securities reallows all selling commissions earned and a portion of the dealer-manager fee as a marketing fee to participating broker-dealers. No selling commissions or dealer-manager fees are earned by Resource Securities in connection with sales under the distribution reinvestment plan. Additionally, the Company may reimburse Resource Securities for bona fide due diligence expenses.

Relationship with Other Related Parties

The Company utilizes the services of a printing company, Graphic Images, LLC (“Graphic Images”), the principal owner of which is the father of RAI’s Chief Financial Officer.

The amounts receivable/payable and the fees earned/expenses incurred by such related parties are summarized in the following tables:

	December 31, 2014		December 31, 2013
Due from related parties:
Resource Securities	$	3,944	$	—
RAI - self-insurance funds held in escrow		30,081		—
	$	34,025	$	—
Due to related parties:
Advisor
Asset management fees	$	28,456		—
Organization and offering costs		2,272,325	$	—
Operating expense reimbursements		1,145,784		—
Manager
Property management fees		6,391		—
Expense reimbursements		39,592		—
Resource Securities
Selling commissions and dealer-manager fees		358,715		—
	$	3,851,263	$	—
Graphic Images (1)	$	81,424	$	—

(1) Included in Accrued expenses on the consolidated balance sheets.

F-19

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

	Years Ended
	December 31,
	2014		2013
Fees earned / expenses incurred:
Advisor
Acquisition fees(1)	$	1,354,551	$	—
Asset management fees(2)	$	88,253	$	—
Debt financing fees(3)	$	192,700	$	—
Organization and offering costs (4)	$	3,006,819	$	—
Operating expense reimbursement(5)	$	1,115,426	$	—
Interest expense(6)	$	2,242	$	—
Manager
Property management fees(2)	$	39,242	$	—
Operating expense reimbursements (7)	$	54,123	$	—
Resource Securities
Selling commissions and dealer-manager fees(8)	$	4,399,256	$	—
Other
Graphic Images	$	364,972	$	—

(1) Included in Acquisition costs on the consolidated statements of operations and comprehensive (loss) income.

(2) Included in Management fees on the consolidated statements of operations and comprehensive (loss) income.

(3) Included in Deferred financing costs, net on the consolidated balance sheets.

(4) Included in Deferred offering costs on the consolidated balance sheets.

(5) Included in General and administrative on the consolidated statements of operations and comprehensive (loss) income.

(6) Included in Interest expense on the consolidated statements of operations and comprehensive (loss) income.

(7) Included in Due to Related Parties on the consolidated balance sheets.

(8) Included in Stockholders’ equity on the consolidated balance sheets.

F-20

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

NOTE 12 – EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10,000,000 shares of its $0.01 par value preferred stock. As of December 31, 2014, no shares of preferred stock were issued or outstanding.

Convertible Stock

As of December 31, 2014, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 7% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange and, on or after the 31st trading day following the listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 7% return threshold.

Common Stock

As of December 31, 2014, the Company had an aggregate of 4,759,567 shares of $0.01 par value common stock outstanding, including the Advisor’s additional purchase of 117,778 shares of common stock for $1.1 million, as follows:

	Shares Issued		Gross Proceeds
Initial public offering		4,702,399	$	46,748,354
Shares issued through stock distributions		19,554		—
Shares issued through distribution reinvestment plan		22,614		214,833
Advisor’s initial investment, net of 5,000 share conversion		15,000		150,000
		4,759,567	$	47,113,187

Distributions

For the year ended December 31, 2014, the Company paid aggregate distributions of $328,785, including $113,952 of distributions paid in cash and $214,833 of distributions reinvested in shares of common stock through the Company’s distribution reinvestment plan, as follows:

Authorization Date	Per Common Share		Record Date	Distribution Date	Distributions invested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
June 5, 2014	$	0.00068493	July 31, 2014	August 1, 2014	$	5,065	$	5,560	$	10,625
June 5, 2014		0.00068493	August 31, 2014	September 2, 2014		11,086		8,844		19,930
June 5, 2014		0.00068493	September 30, 2014	October 1, 2014		18,497		11,197		29,694
October 6, 2014		0.00082192	October 30, 2014	October 31, 2014		27,143		13,970		41,113
October 30, 2014		0.00068493	November 26, 2014	November 28, 2014		31,213		15,113		46,326
November 13, 2014		0.00164384	December 30, 2014	December 31, 2014		121,829		59,268		181,097
					$	214,833	$	113,952	$	328,785

F-21

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

On November 13, 2014, the Company’s Board of Directors authorized cash distributions of $259,379 ($0.00164384 per common share) to stockholders of record for every day in the period from December 31, 2014 through January 29, 2015, which distributions were paid on January 30, 2015.

On June 5, 2014, the Company’s Board of Directors authorized a stock distribution of 0.00625 shares of common stock, or 0.625% of each outstanding share of common stock to the stockholders of record at the close of business on June 30, 2014. Such stock distribution was issued on July 14, 2014.

On August 14, 2014, the Company’s Board of Directors authorized a stock distribution of 0.01 shares of common stock, or 1.0% of each outstanding share of common stock to the stockholders of record at the close of business on September 30, 2014. Such stock distribution was issued on October 15, 2014.

On November 19, 2014, the Company’s Board of Directors authorized a stock distribution of 0.008333 shares of the Company’s common stock, $0.01 par value per share, or 0.8333% of each outstanding share of common stock to the stockholders of record at the close of business on December 31, 2014. Such distribution was issued January 15, 2015.

NOTE 13 - FAIR VALUE MEASURES AND DISCLOSURES

In analyzing the fair value of its investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair values of cash, tenant receivables and accounts payable, approximate their carrying values due to their short nature. The hierarchy followed defines three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

The fair value of rental properties is usually estimated based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases and the value of tenant relationships, based in each case on their fair values.

Derivatives (interest rate caps) which are reported at fair value in the consolidated balance sheets are valued by a third party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2)

F-22

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

The following table presents information about the Company’s assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as follows:

	Level 1		Level 2		Level 3		Total
December 31, 2014
Assets:
Interest rate caps	$	—	$	53,002	$	—	$	53,002
	$	—	$	53,002	$	—	$	53,002
	Level 1		Level 2		Level 3		Total
December 31, 2013
Assets:
Interest rate caps	$	—	$	—	$	—	$	—
	$	—	$	—	$	—	$	—

The carrying amount and fair value of the Company’s mortgage notes payable are as follows:

	December 31, 2014
	Carrying Amount		Fair Value
Mortgage notes payable	$	38,540,000	$	38,540,000

Since the interest rate is variable, the fair value of the mortgage notes payable is equal to the carrying amount.

NOTE 14 - DERIVATIVES AND HEDGING ACTIVITIES

As of December 31, 2014, the Company had the following outstanding interest rate derivatives that were designated as a cash flow hedges of interest rate risk:

Interest Rate Derivative	Number of Instruments		Notional Amount		Maturity Dates
Interest rate cap		2	$	38,540,000		November 1, 2018 and January 1, 2018

Tabular Disclosure of Fair Value of Derivative Instrument on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments, which is included in prepaid expenses and other assets on the consolidated balance sheet as of December 31, 2014:

Asset Derivatives				Liabilities Derivatives
December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Balance Sheet	Fair Value	Balance Sheet	Fair Value	Balance Sheet	Fair Value	Balance Sheet	Fair Value
Interest rate cap	$    53,002	Interest rate cap	$             —	NA	$            —	NA	$            —

F-23

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2014

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During 2015, the Company estimates that $552 will be reclassified as an increase to interest expense.

NOTE 15 - OPERATING EXPENSE LIMITATION

As defined under the Company’s charter, commencing four fiscal quarters ending June 30, 2015, the Advisor must reimburse the Company the amount by which the aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the average invested assets or 25% of net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of assets invested, directly or indirectly, in equity interests in 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, as determined under GAAP, that are in any way related to operations, including advisory 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, registration and stock exchange listing of 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 assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

NOTE 16 – SUBSEQUENT EVENTS

On January 26, 2015, the Company’s Board of Directors authorized cash distributions to the stockholders of record at the close of business each day in the period commencing January 30, 2015 through March 30, 2015 equal to a daily amount of $0.00164384 per share of common stock, payable on February 27, 2015 and March 31, 2015.

On February 19, 2015, the Company’s Board of Directors authorized a stock distribution of 0.005 shares of the Company’s common stock, or 0.5% of each outstanding share of common stock, to the stockholders of record at the close of business on March 31, 2015. Such distribution is to be issued on April 15, 2015.

On March 30, 2015, the Company, through its operating partnership, purchased a 216 unit multifamily community located in Atlanta, Georgia from an unaffiliated seller for $32.5 million.

On March 24, 2015, the Company’s Board of Directors authorized a cash distribution to the stockholders of record at the close of business each day in the period commencing March 31, 2015 through and including June 29, 2015 equal to a daily amount of $0.000164384 per share of common stock, payable on April 30, 2015, May 29, 2015 and June 30, 2015.

The Company has evaluated subsequent events and determined that no events have occurred, other than those disclosed above, which would require an adjustment to the consolidated financial statements.

F-24

Resource Real Estate Opportunity REIT II, Inc.

SCHEDULE III

Real Estate and Accumulated Depreciation

December 31, 2014

Column A	Column B		Column C		Column D			Column E		Column F			Column G		Column H
Description	Encumbrances		Initial cost to Company		Cost capitalized subsequent to acquisition			Gross Amount at which carried at close of period		Accumulated Depreciation			Date of Construction		Date Acquired
Real estate owned:
Residential Dallas, Texas	$	—	$	9,148,637	$	(94,229	)	$	9,054,408	$	(179,695	)		1980		6/4/2014
Residential Fort Worth, Texas		—		45,823,939		4,653			45,828,592		—			1999		12/19/2014
	$	—	$	54,972,576	$	(89,576	)	$	54,883,000	$	(179,695	)

	Years Ended December 31,
	2014			2013
Investments in real estate:
Balance at beginning of the year	$	—		$	—
Additions during the period:		—			—
Acquisitions		54,972,576			—
Improvements, etc.		109,264			—
Dispositions during the period:		(198,840	)		—
Balance at end of year	$	54,883,000		$	—
Accumulated Depreciation:
Balance at beginning of year	$	—		$	—
Additions charged to expenses		179,695			—
Balance at the end of year	$	179,695		$	—

F-25