Investment Advisory
How We Underwrite a Value-Add Multifamily Deal
Colton Elliott · July 22, 2026 · 7 min read
The five assumptions that decide whether a renovation program actually clears its cost of capital — and how we stress-test each one before a client wires a deposit.
Most value-add multifamily pro formas fail in the same place: the renovation premium. A spreadsheet can justify almost any basis if you let rent growth do the work. Our underwriting starts by removing that crutch entirely — we solve the deal at today's achievable rents, then treat the premium as upside rather than as the thesis.
The five assumptions that decide the outcome are in-place economic occupancy, true turn cost per unit, downtime between turns, the achievable premium against verified comparables, and exit cap spread to entry. We source each independently: rent rolls and bank statements for the first, contractor bids for the second, on-site management interviews for the third, and shopped units for the fourth.
Exit cap spread is where discipline matters most. We underwrite an exit 50 to 75 basis points wider than entry on any asset held under five years. If the return only works at a flat exit, the deal is a rate bet, not a real estate bet — and we say so plainly.
The output for a client is never a single number. It is a range with the specific assumption that breaks it, so the decision to proceed is made with full sight of the downside as well as the return.
Want this applied to your asset?
We'll run the same analysis against your property and send back the range plus the assumption that breaks it.
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