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.5% Vacancy Estimate ...Crazy??
A new crowdfunding deal (I will not name so I will not have to deals with lawyers etc., again) is for a fund to buy up 24 multifamily units located in Drexel Hill/Upper Darby, Pennsylvania. 12% preferred, then 60/40 split (60 to investor)
- Internal rate of return in excess of 15%
- Minimum cash-on-cash return of 10%
- 1- to 6-unit multifamily buildings
- 5% loan at 70% LTV, amort over 25years
- Trailing Cap Rate 8.63%
These are a few of the assumptions that I am I am having a problem with:
1. Economic Occupancy is 99% for the next 5 years. (.5% for bad debt and .5% for vacancy)
2. Rent Growth 2.5% a year
2. Expense growth 1% a year
To anyone that owns or manages small multifamily units, do these assumptions ring true to you?