All Forum Posts by: Kate Sugars

Assuming you don't need to do renovations or anything like that to get to the $800-895 rents, there's still some lease-up/timing risk associated with turning the whole rent roll to market rents. Since the property isn't "stable", I'd look at as a discounted CF UW vs. just capping an NOI. If you know cap rates are 7% today, you can project an exit cap somewhere north of that (50bps?+) depending on your hold period and solve for what you need for returns. At the end of the day your desired returns is what will drive what you're willing to pay. I usually look at value-add deals, so I'd expect my untrended return on cost (based on market rents today) to be higher than cap rates today to ensure I'm getting enough pick up in value from raising rents to get to my required returns.