Multifamily Investment Analysis

[Account Closed]

Hi,

I've been looking at some multifamily deals on market recently. I understand that cap rate is a good way to determine if its a good deal. My question is if the investor was looking to buy out the current tenants, do repairs, and then get higher rents how would you factor all of this into determining an offer price?

[Greg Dickerson]

Originally posted by @Account Closed:

Hi,

I've been looking at some multifamily deals on market recently. I understand that cap rate is a good way to determine if its a good deal. My question is if the investor was looking to buy out the current tenants, do repairs, and then get higher rents how would you factor all of this into determining an offer price?

CAP rates are really only relevant upon exit. What matters at acquisition is the NOI, the returns it will generate during hold period and potential to increase it for sale or long term hold. You do not need to get rid of tenants to renovate. You do it as units turn over or with tenants in place depending on the scope. You can offer existing tenants the option to upgrade their unit for the increased rent while they still occupy the unit.