Underwriting a 40-unit Multifamily Value-Add Deal

Free Multifamily Analysis Template: www.tacticares.com/blog-feed/...
Value-Add Model: www.tacticares.com/multifamil...
Tutorial Video (Part I): • "Back of the Envelope"...
Scrubbing and Orgnanzing P&L Tutorial Video: • Scrubbing & Organizing...
Rent Comp Model: www.tacticares.com/multifamil...
A thorough proforma underwriting exercise for a 40-unit multifamily value-add opportunity.
0:00 Intro
1:00 Investment Summary Assumptions
3:12 Analyzing the Rent Roll
4:45 Putting Rental Data into the Model
5:12 Rent Comp Analysis
7:25 Rental Premium and Capital Assumptions
9:15 Property Tax Assumptions
11:45 Inputting Profit & Loss Statement into the Model
18:54 Proforma Financial Assumptions
23:15 Reviewing the Return Metrics
24:10 Adding RUBS Revenue
25:00 Reassess Return Metrics
26:20 Conclusion
Disclaimer: The information presented in this video is intended solely for educational and learning purposes. It is not to be construed as professional investment advice. The content provided in this video is based on hypothetical scenarios, general market trends, and analytical techniques commonly used in real estate analysis. Any examples, case studies, or projections discussed are for illustrative purposes only and should not be considered as guarantees of future performance or outcomes.

[@tyzoebrown]

I appreciate you, Ike! Thanks for sharing your expertise with the community

[@tacticares]

Thanks for watching, Tyzoe!

[@chrismaresca1446]

Great video! Little confused as to how you derived the "average premium rent" @ 8:24

[@tacticares]

Thanks, Chris! The blended average premium potential is $89 (calculated in Q68). However, it will take time to phase in these premiums. I set the renovation timeline to two years. Rent premiums are technically paid in arrears. Therefore, we will see the full premium potential in Year 3 (after all renos have been completed). In Year 3, the "average premium rent" hits $89. I explain the renovation logic in-depth here: www.tacticares.com/blog-feed/the-ultimate-guide-to-multifamily-value-add-underwriting#renovations

[@francissandico9661]

Hi, can you share your underwriting spreadsheet? Great job and very detailed.

[@tacticares]

Hi Francis, It's linked in the description. I appreciate it!

[@LiveInOC]

I've noticed that some underwriters combine all "other income", including RUBS, into their Gross Potential Rent (GPR), then deduct economic vacancy losses. In your spreadsheet, "other income" is added in after subtracting economic vacancy losses. I'm curious about the rationale behind this approach.

[@tacticares]

There's no wrong or right way to do this. I actually offer free, "back of the envelope" type tools that apply a blanket vacancy rate to all the revenue line items. However, I don't think of RUBS (or any ancillary income) as a contributor to the true effective rent at the property. Therefore, I like to keep them separate in the "other income" section. I'll most commonly underwrite "other income" from historicals (using a 3% escalator over T12 as an example). When there's an elevated vacancy at the property, it gets more tricky. I posted a video this week where I do a more thoughtful underwriting with "other income." While it's a different model, the financial inputs are exactly the same as in this video. You can see that here: kzbin.info/www/bejne/m5m5gYJoi8qboKc At 30 minutes and 54 seconds of the link above, I underwrite other income tied to the vacancy. I hope that helps.

[@LiveInOC]

Thank you for the feedback. I'll check out the video. @@tacticares