Look for areas with steady or increasing household migration to ensure a strong tenant pool.Financials:Rent Roll: Ensure accurate current rents and assess potential for increases to market rates upon turnover.T-12 Statements: Analyze the past 12 months of income and expenses to understand historical performance and identify anomalies.Operating Expenses: Go beyond the T-12 and create a detailed expense budget based on realistic projections and market comps, not just what the seller reports.Property Evaluation:Physical Inspection: Don't skip a detailed inspection to assess condition and identify necessary capital expenditures (CapEx) to avoid unexpected costs post-acquisition.Cap Rate Analysis: Compare the property's cap rate to recently sold similar properties to gauge its value and potential return.Financing: Explore different loan options (conventional, Fannie Mae, etc.) to secure competitive rates and terms, ensuring your debt service coverage ratio (DSCR) is strong.Value-add tip: Consider potential value-add opportunities like unit renovations or amenity upgrades to boost rents and NOI, but only if they align with the local market and target demographics.

That 9% is made up of two components:👉 Cap Rate (your income return),👉 Appreciation (your equity growth),= Total Return (~9%)So if you're investing in a market like San Diego, where average cap rates are around 4%, that implies long-term appreciation of ~5%, bringing the total return to ~9%.But if you're investing in a city where the cap rate is 8%, that suggests the property is likely to appreciate just 1% per year, if at all.Why does this matter?

Our construction edge gives us real cost control, but we’re pressure testing the fund model before going live.High level: 3-tier equity stack, 8–12% preferred returns, bonus equity participation, and full refi payback before we start waterfalling splits.Here’s what I’d love insight on from experienced LPs and GPs:Does this align with what’s actually working right now?

I've been working with foreclosures in South Florida for years, and I’m seeing the same pattern: a slow but steady rise in distressed properties, even among owners with significant equity.What you’re describing aligns exactly with what I’ve found in my own research.

Can you help us understand your apprehension for the fee component you're wanting to avoid?  

Because, first it needs to be an asset class I generally believe in to create strong returns with minimal risk.Then it has to be a group that is both professionally run, with a clear focus, and also strong alignment of interest.Within the alignment: it gets to what Michael was alluding to: the groups that are run to make the sponsors rich right away with copious fees, no true co-invest, egregious waterfalls, etc.  

Inspect each component and decide what truly needs replacing. 

In my experience with doing real estate financial modeling for developers and commercial building acquisitions there are 4 basic profit return components which are Cash flow, Appreciation, Loan Amortization, and Tax Shelter.In your case, I think the key focus should be on the commercial mortgage or loan amortization structure and rate.

Know there will be times that market sentiment aligns with your thesis and times when things will get really slow and lean. 

Not keen on seller financing component.