BiggerPockets Real Estate Podcast 571: Is This Deal Worth My Time? The 6 Crucial Steps to Vet a Multifamily Deal
Feb 15, 2022
Andrew Cushman, an expert multifamily investor managing over 2,600 units, shares valuable insights on vetting multifamily deals. He introduces his six-step system that allows investors to quickly triage opportunities in a competitive market. Andrew emphasizes four critical levers to consider before diving into detailed analysis. He discusses the importance of understanding rental growth, cap rates, and realistic revenue projections to avoid common pitfalls. Listeners learn how to transition from residential to commercial investments for greater scale and profit.
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Understanding IRR
- Internal Rate of Return (IRR) considers an investment's profits over time and other factors like loan paydown.
- IRR helps compare different investments, but be cautious, as it can be easily manipulated.
Cap Rate Definition and Use
- Define a cap rate as how quickly an investment returns the initial capital if bought in cash.
- Use cap rates to compare properties and estimate sale price, but remember market sentiment influences them.
Purchase Parameters
- When underwriting, use purchase parameters like price and closing timeframe as initial filters.
- This helps quickly eliminate deals that don't fit your criteria, saving time and effort.
