All Forum Posts by: Justin Goodin

One major mistake is they do not budget enough for capex!

Another big mistake is under estimating the level of detail asset management entails. 

Follow these 7 steps to underwrite any commercial multifamily deal:

1. Determine In-Place Revenue

Using a rent roll, determine the in-place rent amounts the property is collecting.

2. Determine Operating Expenses

These are expenses needed to run the property. Marketing, payroll, and real estate taxes just to name a few.

3. Model Your Business Plan

Are you doing renovations and increasing rents? Are you going to start valet trash in month 6? Accurately model your business plan in the spreadsheet.

4. Capital Expenditures

Also known as capex. This is your rehab or construction budget. Getting this budget right is critical.

5. Growth Rates & Assumptions

Determine year-by-year inflation rate. Input accurate numbers for physical vacancy. Determine the exit cap rate.

6. Debt & Equity

Which loan product is best for this asset and business plan? Where is the equity coming from?

7. Determine Valuation

Based on the level of risk the deal presents and the returns you are seeking, determine the correct purchase price.

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What steps would you add to this list?

Not any time soon.

Quote from @Michael Hill:

Quote from @Justin Goodin:

I spent $16,444 renovating this 3-bedroom apartment at one of my properties.

Here's the breakdown:

- Kitchen faucet: $76
- Thermostat: $30
- Bathroom hardware: $34
- Toilet: $94
- SS stove: $250
- SS microwave: $150
- SS fridge: $781
- SS dishwasher: $349
- 6 MIL LVP flooring: $2,840
- 4 black matte LED ceiling fans: $204
- Bathroom faucet: $77
- Bathroom vanity: $189
- Bathroom mirror: $60
- Lighting fixtures: $150
- White shaker cabinets: $2,142
- Black matte cabinet handles: $36
- Blinds: $88
- Black matte hinges: $51
- Black matte door knobs: $108
- Blanco single bowl sink: $100
- Blanco sink rack: $25
- Quartz countertop & install: $1,100
- Smart lock: $40
- Paint & materials: $565
- Random materials/parts: $259
- Labor: $6,646

Renovation time: 30 days

Previous rent: $575
Signed leased: $1,610

Long term hold strategy.

I'm choosing to renovate every unit to a premium level finish with high quality materials. This should allow me to have less maintenance issues in the long run.

Let me know what questions you have about this interior renovation.

 This is really good stuff.  I appreciate you sharing. 

What's the value add of these improvements?

Also if you don't mind sharing - what is your projected capex for HVAC, water heater, roof, windows, etc ?

 Hey! 

The value add is the rent bump that I received. I didn’t replace the HVAC system in this unit. 

Use this 3-step strategy to buy real estate in ANY market cycle.

Rather than attempting to perfectly time the market (impossible), follow these principles:

1. Location

Only buy in high growth, business friendly markets. 

2. Realistic Projections

Underwrite your projections based on real market data.

3. Smart Debt Terms

Debt is very powerful! Pick the right debt product for every deal.

What would you add to this list?

 Love this!

❌ Previous Rent: $1,100
✅ Post Reno Rent: $2,000 (plus utilities)

Original Underwriting: $1,900

$900 monthly rent increase

$10,800 additional income per year (excluding utilities)

We spent $35,000 for a premium level renovation.

= 30.8% return on investment (ROI)

We target an ROI between 25% - 35%. If below 25%, we think the potential upside is NOT worth the cost.

What ROI do you typically target on your value add deals?

Most local banks will require 20% down.