Acquisitions
Underwriting a Multifamily Acquisition in South Florida: A Step-by-Step Walkthrough
From rent roll to offer price, the exact sequence the Price Capital Group acquisitions team walks through on every multifamily opportunity we evaluate.
Step 1: The Rent Roll Audit
We start with a unit-by-unit audit of the rent roll. For each unit we record contract rent, market rent (from our internal comp set), lease end date, length of tenancy, and any concessions. The variance between contract rent and market rent (the loss-to-lease) is one of the most important numbers in the underwriting.
We also flag units with month-to-month tenancies, units with multiple roommates or non-standard leases, and units showing artificially high turnover. Each of those signals a leasing-process issue we may inherit.
Step 2: Reconstruct Trailing-12 Income
We rebuild T-12 income from bank deposits, not just the seller's P&L. Differences between collected and reported income usually point to bad debt that has been written through as other adjustments. We want to see it explicitly.
Other income (laundry, pet rent, parking, storage, RUBS or Ratio Utility Billing System) gets validated against the actual contracts and meter data, not assumed at a percentage of base rent.
Step 3: Operating Expense Build
We model post-sale taxes at current millage applied to the purchase price. We get a fresh insurance quote, because Florida coastal insurance has moved enough that an expiring policy is not a guide to next year's premium.
Repairs, turn costs, contract services, payroll, marketing, administrative, and management are benchmarked against our own portfolio data on comparable assets. Reserves are set at $300 to $400 per unit minimum.
Step 4: Build the Stabilized Year
Stabilized NOI is what the property produces after the business plan plays out: rents marked to market, occupancy normalized, expenses controlled. The path from in-place to stabilized has to be specific: how many units, on what timeline, at what cost, with what disruption.
The honest version of the stabilized year includes downtime, capex, and concessions. The dishonest version skips them. We model the honest version.
Step 5: Cap, Comp, and Replacement-Cost Triangulation
We value the asset three ways: capitalized stabilized NOI at our target exit cap, price per door against recent comparable sales, and discount to replacement cost. When the three valuations converge, we have confidence in our offer range.
When they diverge (for example, when price-per-door comps suggest a higher value than cap rate analysis) we go back and figure out which approach is missing context the others are not.
Step 6: Debt, Leverage, and Return
We size debt against debt yield and DSCR at our acquisition cap, not at a stabilized cap. Real lenders do the same. Leverage that only works on stabilized numbers is not real leverage. It is a refinance promise.
Levered IRR, cash-on-cash by year, and equity multiple come out of the model. If the deal hits our return targets on the honest version of the stabilized year, we sharpen the pencil and move to offer.
Step 7: Offer and Letter of Intent
Our LOI states a clean price, the financing assumption, deposit structure, due diligence timeline, and closing window. We do not lead with the most aggressive number and then retrade. We lead with a number we can honor at closing.
If you have a South Florida multifamily property under consideration for sale, we are glad to walk you through how we would underwrite it specifically.
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