Underwrite a multi-million dollar apartment complex in 7 steps

[Justin Goodin]

Follow these 7 steps to underwrite any commercial multifamily deal:

1. Determine In-Place Revenue

Using a rent roll, determine the in-place rent amounts the property is collecting.

2. Determine Operating Expenses

These are expenses needed to run the property. Marketing, payroll, and real estate taxes just to name a few.

3. Model Your Business Plan

Are you doing renovations and increasing rents? Are you going to start valet trash in month 6? Accurately model your business plan in the spreadsheet.

4. Capital Expenditures

Also known as capex. This is your rehab or construction budget. Getting this budget right is critical.

5. Growth Rates & Assumptions

Determine year-by-year inflation rate. Input accurate numbers for physical vacancy. Determine the exit cap rate.

6. Debt & Equity

Which loan product is best for this asset and business plan? Where is the equity coming from?

7. Determine Valuation

Based on the level of risk the deal presents and the returns you are seeking, determine the correct purchase price.

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What steps would you add to this list?