Looking for underwriting feedback on a stabilized 5‑unit portfolio in Blue Springs, M
Key Numbers:
• Purchase price: $1,060,000
• Gross income: $92,100
• Expenses (tax + insurance): $14,000
• Cap rate: 7.37%
• 100% occupancy
• Tenants pay all utilities + lawn
• Leases locked through early–mid 2027
Property Condition:
• Updated interiors (flooring, carpet, paint)
• New roof on one building (2023)
• Exterior paint on another (2025)
• Long‑term tenants, one at 17 years
Market Context:
Blue Springs is a strong rental submarket with low vacancy and high tenant stability. Curious how others would evaluate this package given current interest rates and investor sentiment in September.
Questions:
• Does a 7.37 cap feel competitive in your market?
• How would you underwrite long‑term tenants with low turnover?
• Are you seeing similar expense ratios in tenant‑paid‑utility portfolios?
Appreciate any insights or comps from similar Midwest deals.
Most Popular Reply
Hi Kalene, leases locked through 2027 give you decent near-term visibility. A few underwriting items:
Expenses. The $14k covers only taxes and insurance. Even with tenant-paid utilities and lawn, a small portfolio still carries management, maintenance, and capital reserves. Load those in and operating expenses usually run 30 to 40 percent of gross, toward the lower end here because tenants cover utilities. On this deal that pulls NOI closer to $60k and the real cap to around 5.6 percent, not 7.37. The 7.37 is a taxes-and-insurance-only number.
The 17-year tenant. Long tenancies often sit below market because owners keep annual bumps small to avoid turnover. Pull the actual rent versus market on that unit. It is either upside on rollover or a rent that resets down if the tenant leaves and the unit needs work.
Basis. $1.06M on five units is $212k per door. Check that against recent local trades and confirm current rents support it.
One question back: is the $92,100 gross scheduled rent, or effective after vacancy and credit loss? That changes the NOI.
Otherwise, solid package. Rebuild the pro forma with normalized expenses and you will see the true cash flow.