I’m looking into a value add deal I could potentially pitch to some LPs I know pretty well and I’m beginning to realize that most assumptions that brokers make when underwriting are fucking worthless. What do you typically keep from an OM?
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Property address, rent roll, and square footage (in most cases).
Do you typically keep anything expense related?
I was joking around.
always depends on the brokerage as far as assumptions go but typically an IS team will have access to the property financials. The taxes you will likely need to at least check yourself.
From well known brokerages I think you can trust their expenses more, but at the end of the day they're directly from the owner and maybe verified but other times not. I worked at lesser known brokerages who didn't even check the expenses provided and owners would give an excel sheet with "Taxes $x, Water $y" with no other backup just hardcoded numbers so be careful there.
You want to get your own sale/lease comps through Costar or can maybe get an idea for rents on other sites that are free like apartments.com, streeteasy, loopnet, etc as a check.
Many a time I’ve plugged in an address to look up taxes and it turns out the brokers had it wrong.
Happens very often! And I've seen multiple cases where the broker has overstated the tax rate which blows my mind
Pretty much none - I like to just start from scratch when underwriting. But broker OMs are helpful for providing comps, location overview and pretty pictures
The only assumption you should keep from an OM is the one that isn't explicitly laid out - that these people are actively lying to you, and if they're not, they're too incompetent to find accurate information in the first place.
There is a reason IS brokers put that nice little blurb at the end where they outright say that nothing that comes out of their mouth should be trusted or considered accurate. And these people get paid as if they do some important job! You're better off trusting the local psychic doing a crystal ball reading - at least you get song and dance out of that.
If you align with the broker assumptions too closely, at least you know something is wrong
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