Every seller's pro forma shows the same thing: full occupancy, peak rents, minimal expenses.

That's not what you're buying. You're buying the actual performance of the property — with real vacancy, real turnover, and real costs. The gap between what the seller shows you and what you actually own is where most bad deals live.

I've run deal analysis sessions with investors across NH and New England for years. The single most common underwriting mistake I see isn't missing a cost or misreading a market. It's using the seller's income number as the starting point.

Here's what I use instead — and why.

Start With HUD, Not the Listing

HUD publishes Fair Market Rents (FMRs) annually by zip code and bedroom count. These are the numbers I use as my baseline — not what the seller says the units rent for, not what the listing agent tells me is achievable.

HUD's FMRs are conservative and jurisdiction-specific. They reflect what's actually happening in the rental market, not what a landlord is trying to get.

But I don't use 100% of the HUD number. I use 90%.

That 10% buffer accounts for vacancy, below-market renewals, a slow turn between tenants, or a unit that sits for a month after a renovation. These things happen. They're not catastrophic. But if you're modeling at 100% occupancy with every unit at peak rent — and the deal only pencils at that number — it doesn't really work.

If your deal only works at 100% occupancy and full market rent, it doesn't really work.

Model at 90% of HUD. Build from there.

Underwrite on Actuals, Not Potential

Most sellers price on what the building could make. You need to know what it actually makes — and then decide if the gap between those two numbers represents opportunity or risk.

A property with approved development permits for additional units is exciting. But those units don't exist yet. I underwrite the deal on what's there today — current rent, current condition, current operating costs. The permitted potential is a separate conversation about whether the upside is worth the execution risk.

This matters especially in NH's current market, where sellers are often pricing on pro forma potential in appreciating areas. The market may support that optimism eventually. But you're writing a check today based on what the property does today.

Underwrite the actual. Evaluate the potential separately. Don't blend them.

The 1% Rule as a Gate, Not a Valuation Tool

The 1% rule — monthly rent should equal 1% of the purchase price — is not a valuation method. It's a 30-second filter.

If you can't get close to 1% of the purchase price in monthly rent, you're going to be working very hard to make a return work. That doesn't mean every deal needs to hit 1% — in NH's higher-priced markets, you'll rarely find it. But it does mean you need to know going in how far below that threshold you are, and whether the other factors (appreciation potential, development upside, house hacking opportunity) justify the gap.

If you're below 0.7% with no compelling upside argument, you're clawing for reasons to make it work. That's usually a sign to move on.

The Bottom Line

The discipline of underwriting on actuals instead of potential isn't pessimism. It's precision.

Sellers present the best case. Your job is to understand the realistic case. When those two pictures are far apart, that's information. Sometimes it tells you the deal is overpriced. Sometimes it tells you there's a motivated seller who just needs the right buyer. Either way, you need to know the difference before you offer.

Pull the HUD data. Apply 90%. Build the real expense stack. Then make your decision.