Immediate Value add Underwriting.

[Mallikarjun Reddy Pateel]

Hi, I'm currently Underwriting a deal. Rents are below market value. I don't have to do any rehab I can Increase the rents as is. My question is do i still underwrite the NOI, Cap rate for current rents or Market rents(which increase my NOI 20%)? How does lenders see it for LTV purpose

[Taylor L.]

Originally posted by @Mallikarjun Reddy Pateel:

@Taylor L. so there is no exceptions even if the Appraiser comes with the Fair Market rents?

Fair market is your potential upside, but if the property is valued based on actual earnings it wouldn't make sense for the lender to value it based on what it could be. You may find someone willing to do the deal, but it's not prudent underwriting to take potential rents as a fait accompli.