Simple Multifamily Acquisitions Model

For a straightforward and efficient multifamily acquisitions model tailored to smaller deals (4-20 units), you might want to focus on a simplified pro forma that captures the essentials without overcomplicating the process. Based on the most helpful WSO content, here’s what you can consider:

1. Key Inputs:

   • Purchase Price: The agreed or estimated acquisition cost.
   • Down Payment: Percentage of the purchase price you plan to finance with equity.
   • Loan Terms: Interest rate, amortization period, and loan-to-value (LTV) ratio.
   • Gross Rental Income: Total expected income from rents.
   • Vacancy Rate: A conservative estimate for unoccupied units.
   • Operating Expenses: Include property management, maintenance, taxes, insurance, and utilities.
   • CapEx Reserve: A buffer for capital expenditures like roofing, HVAC, or other major repairs.

2. Outputs:

   • Net Operating Income (NOI): $$NOI = Gross Rental Income - Operating Expenses$$
   • Debt Service: Monthly or annual loan payments.
   • Cash Flow: $$Cash Flow = NOI - Debt Service$$
   • Cap Rate: $$Cap Rate = NOI / Purchase Price$$
   • Cash-on-Cash Return: $$Cash-on-Cash = Cash Flow / Equity Invested$$

3. Simplified Model Structure:

   • Use a single Excel sheet with sections for inputs, calculations, and outputs.
   • Avoid monthly cash flow breakdowns; instead, focus on annualized figures.
   • Include a sensitivity table for key variables like vacancy rate and rent growth.

4. Resources:

   • WSO offers 27 financial modeling templates that might include a basic multifamily underwriting model. These templates are designed by experienced professionals and can save you time.
   • The WSO Real Estate Modeling Crash Course provides lessons on underwriting multifamily properties, including how to handle incomplete data during the screening phase.

This approach keeps things simple and effective for sub-institutional deals, especially when detailed reports like T-12s or rent rolls aren’t available. If you’re raising capital, this model can also serve as a clear and concise tool to communicate with potential investors.

Sources: Purchase Multifamily Property as first investment, Lunch & Learn -Ins and Outs of Multifamily, Scaling A Single-Family Rental Acquisition Strategy, Multifamily Development vs Acquisition Fees, WSO's FREE Real Estate Modeling Crash Course Just Released