APOD for Listing Multi-Family

[Nick Gibson]

I am a commercial broker and just recently started getting involved with mutli-family. I have been seeing that most APODs created by the Seller's Broker have been excluding management and reserve fees. Is this a common practice in the business? To me this is a marketing ploy since the CAP rates and IRRs will be much higher when you exclude these additional fees. Is this the norm in the business? I have a few listings coming up and on both properties my sellers manage the properties themselves so they technically do not have management fees. Also do I fill out an expense line item for reserves?

The one caveat to all this is that my city is currently seeing a huge influx of California investors. I live in the southwest. California investors are see CAP rates at 7-10% and immediately putting the properties under contract. They seem not to care that the management and reserves are not included.

It seems like this is a common practice in my area, but at the same time it seems borderline unethical. I want to get the most for my client, but these issues are going to come up later anyway.