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Value-Add Acquisition

Underwrite a real value-add business plan from a near-blank sheet: loss-to-lease, a unit-by-unit renovation program, a rent roll marked to market as units turn, a full debt amortization schedule, and the levered MoIC and IRR that come out the other side.

REPE · Advanced · about 120 minutes · 44 guided steps

Lesson outline

In-Place Underwriting Bridge

  1. Step 1: In-Place Gross Potential Rent
  2. Step 2: In-Place Effective Gross Income
  3. Step 3: In-Place Operating Expenses
  4. Step 4: In-Place NOI
  5. Step 5: Going-In Cap Rate

The Value-Add Thesis

  1. Step 6: Monthly Rent Gap per Unit
  2. Step 7: Loss-to-Lease
  3. Step 8: Total Renovation Budget
  4. Step 9: Return on Renovation Cost

Financing & Debt Schedule

  1. Step 10: Loan Amount
  2. Step 11: Annual Debt Service
  3. Step 12: Total Uses
  4. Step 13: Initial Equity
  5. Step 14: Loan: Opening Balance
  6. Step 15: Loan: Interest
  7. Step 16: Loan: Principal Amortization
  8. Step 17: Loan: Ending Balance

Renovation Program

  1. Step 18: Units Renovated (Funded This Year)
  2. Step 19: Cumulative Units Renovated
  3. Step 20: Units Earning Market Rent
  4. Step 21: Renovation CapEx
  5. Step 22: Total Renovation Capital

Rent Roll & Operating Pro Forma

  1. Step 23: In-Place Rent / Unit / Mo
  2. Step 24: Post-Renovation Rent / Unit / Mo
  3. Step 25: Blended Rent / Unit / Mo
  4. Step 26: Gross Potential Rent
  5. Step 27: Effective Gross Income
  6. Step 28: Operating Expenses
  7. Step 29: Net Operating Income
  8. Step 30: Less: CapEx Reserve
  9. Step 31: Levered Cash Flow

Value Creation & Exit

  1. Step 32: All-In Basis
  2. Step 33: Stabilized Yield on Cost
  3. Step 34: Forward (Year 6) Gross Potential Rent
  4. Step 35: Forward (Year 6) Effective Gross Income
  5. Step 36: Forward (Year 6) Operating Expenses
  6. Step 37: Forward (Year 6) NOI
  7. Step 38: Gross Sale Price
  8. Step 39: Net Sale Proceeds

Returns

  1. Step 40: Exit Equity
  2. Step 41: Total Operating Distributions
  3. Step 42: Levered MoIC

Equity Cash Flow & Levered IRR

  1. Step 43: Equity Cash Flow
  2. Step 44: Levered IRR