What’s the First Number You Look at in a Deal?

[Stevan Stojakovic]

When you size up an opportunity, what do you check first — ARV, DSCR, cap rate, or total cash required?

[Patrick Lismon]

Great question. Honestly, the first thing I look at totally depends on the story the property is telling me.

If it looks like a project with lazy management (a value-add play), I go straight to the rent roll. I'm looking for a big mess—huge differences in rent for the same kind of unit. That mess is where the profit is. We just analyzed an 8-unit where that gap was over $21k a year... that's the number I care about first.

But if the property is already clean and supposedly making good money (turnkey), then the first thing I need to see is the real Net Operating Income (NOI) from the T12. I don't trust the broker's marketing numbers. I need to see the real profit to calculate the real cap rate.

So yeah, it's not always one number; it's about finding the number that proves the strategy.