How are you guys making offers on properties without pricing in the upside potential. I want to start making offers quickly based on how the asset is performing currently while minimizing how much of my effort I am including in that offer. Once I project renovation needs, rent premiums, etc.. the property starts to look more appealing but that is my upside and I want to avoid pre-paying for the potential. I have some decent models that I can share if someone has a very vanilla model to show as example. Hope that makes sense and can try to elaborate if not.
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Good luck buying value add based on in place income only. If brokers think you are wasting their time, you would stop seeing deals or getting tours!
You might want to put some deals in your model and see if they pencil based on in place cap rate. i recommend looking at cap on cost than cap rate because rent lift and cap ex to get proforma rents drive IRR than cap rate unless you are FAT FINGERING your exit cap rate to get a sexy time IRR that will blow up in your face during a downturn.
I agree. Thank you.
Never heard of FAT FINGERING, lol. Lay it on me as to what this means. Great reply with "sexy time" lol.
I’ve heard the term used as just quickly entering something incorrectly. I.e in this case putting expansion at 10bps instead of 100bps
Last sentence was exhilarating.
Can someone give some color on proper way to value these deals? How is it fair to price in all of the upside when that involves the potential buyer to invest in the property? Any insight?
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