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Deal Journey — Sample Multifamily Deal

The Answer

Sample Multifamily Deal

400 units · 306,886 SF · Built 1981 · multifamily

Cactus valuation

$36.0M – $39.0M

Midpoint $37.4M · 6.25% going-in cap

Critical assumptions

Chosen for what each one moves the value, how certain it is, and any changes you made.

  • Current Market Cap RateAt 6.5%, value moves $1.4M; levered IRR moves 183 bps6.25%Low confidence; material valuation or return sensitivity
  • Property Tax GrowthAt 3.5%, value is unchanged; levered IRR moves 38 bps3%Low confidence; model sensitivity tested
  • Annual Rent GrowthAt 3.5%, value is unchanged; levered IRR moves 157 bps3%Low confidence; material valuation or return sensitivity
  • ConcessionsAt 1.7%, value moves $356.0K; levered IRR moves 1 bps1.2%Low confidence; material valuation or return sensitivity
  • Other Income GrowthAt 3%, value is unchanged; levered IRR moves 23 bps2.5%Low confidence; model sensitivity tested
  • Tax Assessment RatioAt 99.5%, value and levered IRR are unchanged100%Low confidence; model sensitivity tested
  • Property Tax RateAt 2.5%, value and levered IRR are unchanged2%Low confidence; model sensitivity tested

The deal in brief

One finding per chapter. Select a line to read the chapter.

Chapter 1 · Where does the income come from?

The Income Story

$12.5K a year

: 1 of 9 plans rent below target, and the underwriting closes the gap over 24 months.

A3 has the widest gap to target, at $10.95 a month

Each plan's gap to target rent, per unit per month. Together the plans add $12.5K a year.

See the comparables

Today is what tenants pay now. Target (as-is) is the achievable rent this underwriting uses.

A1
600 SF
Units
81
Today
$770
Target (as-is)
$770
$1.28/SF
Monthly gap to target, per unit
At target
A2
700 SF
Units
52
Today
$837
Target (as-is)
$837
$1.20/SF
Monthly gap to target, per unit
At target
A3
750 SF
Units
95
Today
$902
Target (as-is)
$913
$1.22/SF
Monthly gap to target, per unit
+$10.95+1.2%
A4TH
523 SF
Units
20
Today
$776
Target (as-is)
$776
$1.48/SF
Monthly gap to target, per unit
At target
A5TH
780 SF
Units
12
Today
$1,001
Target (as-is)
$1,001
$1.28/SF
Monthly gap to target, per unit
At target
B1
900 SF
Units
48
Today
$1,127
Target (as-is)
$1,127
$1.25/SF
Monthly gap to target, per unit
At target
B2TH
854 SF
Units
24
Today
$1,117
Target (as-is)
$1,117
$1.31/SF
Monthly gap to target, per unit
At target
B3TH
956 SF
Units
20
Today
$1,231
Target (as-is)
$1,231
$1.29/SF
Monthly gap to target, per unit
At target
B4
1,000 SF
Units
48
Today
$1,193
Target (as-is)
$1,193
$1.19/SF
Monthly gap to target, per unit
At target
Total400$955 avg$12.5K a year

The market benchmark is $770 to $1,240, depending on the plan.

Rental comparables — 10 selected

Comparables used to set market rent

The Archer
376 units · Used in underwriting
Plan
1BR/1BA
Avg size
634 SF
Observed rent
$764
Rent / SF
$1.21
The Archer
376 units · Used in underwriting
Plan
2BR/1.5BA
Avg size
819 SF
Observed rent
$1,068
Rent / SF
$1.30
The Archer
376 units · Used in underwriting
Plan
2BR/2BA
Avg size
1,018 SF
Observed rent
$1,168
Rent / SF
$1.15
Broadstone Medical
384 units · Used in underwriting
Plan
1BR/1BA
Avg size
643 SF
Observed rent
$827
Rent / SF
$1.29
Broadstone Medical
384 units · Market context · not used in rent conclusion
Plan
2BR/2BA
Avg size
943 SF
Observed rent
$929
Rent / SF
$0.99
The Branch at Medical Center
426 units · Used in underwriting
Plan
1BR/1BA
Avg size
622 SF
Observed rent
$716
Rent / SF
$1.15
The Branch at Medical Center
426 units · Used in underwriting
Plan
2BR/2BA
Avg size
982 SF
Observed rent
$959
Rent / SF
$0.98
The Clara
300 units · Used in underwriting
Plan
1BR/1BA
Avg size
595 SF
Observed rent
$778
Rent / SF
$1.31
The Clara
300 units · Used in underwriting
Plan
2BR/2BA
Avg size
761 SF
Observed rent
$1,101
Rent / SF
$1.45
The Rowan
360 units · Market context · not used in rent conclusion
Plan
1BR/1.5BA
Avg size
1,046 SF
Observed rent
$1,175
Rent / SF
$1.12

Chapter 2 · What reduces that income?

Revenue Reality

$4.61M

in Year 1. The property is 88.5% occupied today; the underwriting assumes 92.0% once stabilized.

Vacancy takes the most rent, $408.9K; other income adds back $576.8K

Year 1, from the rent the property could bill to the income it collects.

  • Gross potential rent$4,585,764
  • Renovation downtime$0
  • Vacancy-$408,887
  • Bad debt-$91,715
  • Concessions-$55,029
  • Net rental income$4,030,133
  • Other income$576,848
  • Dated income changes$0
  • Effective gross income$4,606,981

Chapter 3 · What does it cost to operate?

The Cost Story

$2.41M

. Cactus kept all 12 T-12 expense lines as reported.

Property Tax is the largest cost at $659.1K, then payroll & benefits at $431.5K

T-12 operating expenses, Jun 2024 – May 2025

  1. Property Tax$659.1K
  2. Payroll & Benefits$431.5K
  3. Property Insurance$344.8K
  4. Utilities$297.6K
  5. Management Fee$136.7K
  6. Contract Services$127.8K
  7. General & Administrative$57.8K
  8. Repairs & Maintenance$38.2K
  9. Professional Fees$37.0K
  10. Turnover / Make Ready$36.2K
  11. Advertising & Marketing$31.5K
  12. Other Operating Expenses$86
Total operating expenses$2.20M

Chapter 4 · Why does Cactus believe this valuation?

Why This Value

$2,338,524 ÷ 6.25% = $37.4M

divided by the . That is $93,541 per unit and $122 per square foot.

At a 6.50% cap, the value is $36.0M

Value at each cap rate in the range, on the same $2.34M valuation NOI

  1. 6.50% cap$36.0M
  2. 6.25% capmidpoint$37.4M
  3. 6.00% cap$39.0M

Sale comparable evidence was not available for this property, so the value rests on the NOI and cap rate above.

Chapter 5 · What does a buyer earn at this price?

The Buyer's Math

7.57%

at the valuation midpoint over a 7-year hold, with a 1.58× equity multiple.

The buyer's deal at the modeled price

Saved price and returns from the current analysis.

Modeled purchase price

$37,416,383

Valuation midpoint

$37,416,383

The price matches the valuation

Capital stack

Loan
$24.32M
Buyer's cash at close
$13.71M

Gross exit value $41.14M at a 6.75% exit cap

Return profile

Returns at $37,416,383

Levered IRR

7.57%

Equity multiple

1.58×

Minimum DSCR

1.19×

Debt yield

9.62%

Chapter 6 · What could affect this deal?

Risk & Market Watch

6 of 13

area indexes run above the national average around the property. They describe the area, not this parcel, and do not change the underwriting.

Larceny is highest at 1.55×; wind is lowest at 0.24×

Area index for the subject area, as a multiple of the national average

  1. Larceny1.55×
  2. Tornado1.40×
  3. Motor Vehicle Theft1.39×
  4. Burglary1.29×
  5. Murder1.28×
  6. Crime1.18×
  7. Hail0.95×
  8. Particulate Matter0.93×
  9. Air Pollution0.82×
  10. Ozone0.81×
  11. Hurricane0.66×
  12. Earthquake0.27×
  13. Wind0.24×