I’ve been investing for 12 yrs with single family homes. This would be my first multi unit purchase. I can’t tell if it’s a good deal or not. 700k purchase. 6.5% cap rate. Needs 200k in upgrades and Reno. Current NOI is -$139, proforma about $3750/month NOI. What is proforma value? Will I get stuck with my money in this deal? Will it put me in a stall while I’m trying to grow portfolio fast? My returns on single family homes is 30%+ using BRRR method. Open to all advice. I just can’t tell how this deal compares to what’s “typical” in this commercial world. Thanks!
Property Manager · Michigan Ctr, MI · Member since 2016 · 661 posts · 581 votes
11mo
Hey Joe,
Congrats on leveling up — going from SFHs to an 8-unit is a big step, and your questions are the right ones to be asking. Let’s break it down:
1. The basics — what you’ve got here:
Purchase: $700k
Cap rate (current): 6.5%
Renovations: $200k
Pro forma NOI: ~$45k/year ($3,750/month)
If you hit that NOI after rehab, your stabilized value at a 6.5% cap would be about $692k ($45k ÷ 0.065) — which means you'd be all-in for $900k ($700k + $200k) on something worth $692k today. You’d need rents or market cap rates to improve significantly to force value and make that spread work.
2. Where your money gets stuck:
Right now, the deal eats your BRRR-style velocity. In single-family, you're used to forcing equity and refi'ing out. Here, you're front-loading $200k into CapEx and not creating much "instant equity." Until NOI rises or cap rates compress, you're parking capital more than recycling it.
3. What to look at deeper:
Post-reno rents: Are you confident that $3,750 NOI is realistic and sustainable? Run rent comps hard.
Exit cap rate: If you can hit, say, a 7% cap with $60k NOI (which would mean serious rent growth), your building could be worth ~$860k — still tight, but better.
Financing: Is the loan interest-only during renovation? Can you get bridge financing to carry you through the upgrade period? The hold costs could eat your margins if you’re using standard commercial terms.
4. Compare to your SFH model:
If your BRRRs are pulling 30%+ returns, this building will feel slow and heavy in comparison. That's not necessarily bad — multifamily shines in scale and stability, not speed. Just don't expect BRRR velocity here.
My advice: this doesn’t look like a home-run “value add” deal unless you can either buy closer to $600k or push rents significantly after rehab. Otherwise, your money’s probably tied up for a while before it spins back out; Joe I really hope this helps you out, I sent you DM on BP and hope you can assist, it's one of the reasons I do this, thank you.
I’ve been investing for 12 yrs with single family homes. This would be my first multi unit purchase. I can’t tell if it’s a good deal or not. 700k purchase. 6.5% cap rate. Needs 200k in upgrades and Reno. Current NOI is -$139, proforma about $3750/month NOI. What is proforma value? Will I get stuck with my money in this deal? Will it put me in a stall while I’m trying to grow portfolio fast? My returns on single family homes is 30%+ using BRRR method. Open to all advice. I just can’t tell how this deal compares to what’s “typical” in this commercial world. Thanks!
Hey @Joe Doucette, welcome to the BP Forum! How long will the reno take to complete and how much rent will you charge for each unit once it's done?