How to underwrite core deals in this environment

[Dan Bowe]

Seeing the market in reading the big brokerages reports on the main metros I invest in, everyone estimate rent growth at 0% for at least a year or two. Expenses naturally rise with inflation - insurance, property tax, utilities...

Those two factors, by definition, result in lower NOI down the road than in-place/year 1 NOI. Meaning that even with cap rate expansion set to 0%, the sale price is lower than the going in purchase price. resulting in negative/low yields.

Am I missing something here? Do core deals not pencil in this environment at all?