Palmetto Trace Apartments is a 96-unit multifamily asset built 1998, underwritten at $10,450,000 (the underwritten price). Neither broken nor mispriced - the income supports the asking price against your own hurdles. At $10,450,000 the deal returns a 18.69% five-year IRR and 2.20x for every $1.00 of equity invested.
| Metric | Min | Strong | This deal | Grade |
|---|---|---|---|---|
| Cap rate, going-in (after reserves) | 5.00% | 6.00% | 6.53% | MEETS |
| Cash-on-cash (in-place) | 4.00% | 9.00% | 5.76% | MONITOR |
| 5-year IRR | 11.00% | 14.00% | 18.69% | MEETS |
| DSCR (going-in) | 1.20x | 1.40x | 1.35x | MONITOR |
MEETS = clears the strong threshold · MONITOR = between minimum and strong · BELOW = misses the minimum · n/m = not measurable on these inputs. "PASS" is used only at deal level and means decline / walk away - never a metric that passes.
| Price point | Price | $/Unit | Cap | Loan proceeds | IRR | EM |
|---|---|---|---|---|---|---|
| OPENING LOIwhere the conversation starts | $8,030,000 | $83,646 | 8.50% | $5,219,500 | 32.80% | 3.54x |
| TARGET / REASONABLE VALUEearns your strong hurdles | $8,279,000 | $86,240 | 8.24% | $5,381,350 | 31.18% | 3.36x |
| MAXIMUM - WALK ABOVEminimum hurdles break above thisPursue with Caution - at your ceiling - this IS the $10,730,000 walk-away - the last dollar your minimum hurdles support; there is no cushion above it | $10,730,000 | $111,771 | 6.36% | $6,974,500 | 17.23% | 2.08x |
Each row is the same deterministic engine re-run at that price, the exit cap held constant, with identical debt and capital-stack assumptions. Coverage enforces through the proceeds column - the loan the same NOI supports at that price - never through a flat sized-to-minimum DSCR.
One assumption was required for this analysis. None of them moves a figure this engine can measure, so none is ranked here - each is stated in full in §18 - Information Gap Register.
Confidential. Prepared for the named recipient only. This analysis is informational and is not investment, legal, tax or brokerage advice; every figure derives from the inputs and assumptions disclosed inside.
21 sections in this analysis.
| Price point | Price | Cap | Loan proceeds | CoC | IRR | Verdict at this price |
|---|---|---|---|---|---|---|
| Purchase price (underwritten)the price you entered - no stated ask backs it | $10,450,000 | 6.53% | $6,792,500 | 5.76% | 18.69% | Pursue with Caution |
| Your target-return priceearns your strong hurdles | $8,279,000 | 8.24% | $5,381,350 | 10.65% | 31.18% | Pursue |
| Your walk-awayminimum hurdles break above this | $10,730,000 | 6.36% | $6,974,500 | 5.27% | 17.23% | Pursue with Caution - at your ceilingthis IS the $10,730,000 walk-away - the last dollar your minimum hurdles support; there is no cushion above it |
Same deterministic engine at each price, exit cap held constant. Details: Offer Range (§15).
One verdict of record. The banner above - Moderate Opportunity - is this report's verdict, graded against your own tier criteria (section 21), and it is what the offer, the LOI gate and every export read. This section grades the same underwrite a second way: against the strategy hurdle table of Grading Spec v2.5, which asks what a Core-plus deal must produce rather than holding every deal to one absolute table. It moved no number above - read it as a second opinion on the same arithmetic. On this deal it does not reach a grade: a material input is outside an acceptable range, so the strategy table withholds its verdict rather than grading numbers it cannot stand behind. That is not a disagreement with the banner above - it is a question about the inputs both standards share.
Verification: 0 of 8 material inputs documented. Management is an estimate. Rent, Occupancy, Other income, Property tax, Insurance, Repairs and the rest of controllable opex, and Rent comps were supplied to the run without a document origin - analyst-supplied, never documented. Uploading the source raises this count.
Risk grade basis: 2 scored of 35 flags checked - 1 hard and 1 combination. 6 curable flags are outstanding and do not score: they measure diligence progress, and unverified is not the same as bad. 32 of 35 checks were assessed; 3 rows could not be (H3b, H4, M12) and are counted neither way. An untested condition is not a failed condition, but it is also not a passed one - so this grade is read off 32 answers, not 35.
The strategy is your confirmed selection.
| Metric | This deal | Min | Strong | Result |
|---|---|---|---|---|
| Going-in cap rate | 6.53% | 6.10% | 7.10% | PASS |
| Avg cash-on-cash* | 8.24% | 6.35% | 8.88% | PASS |
| IRR | 18.69% | 7.00% | 9.50% | PASS |
| DSCR (going-in) | 1.35x | 1.30x | 1.86x | PASS |
| Equity multiple | 2.20x | 1.00x (hard bar) | 1.50x | PASS |
5 PASS · 0 FAIL Conservative requires all 5 at Strong
On rows with a scored minimum, PASS means at or above it; between Min and Strong such a row passes without qualifying for Conservative. A row whose Min column shows an em dash or a hard bar has no scored minimum: it reads NOT GRADED below its Strong threshold - counted in the applicable total, never as a pass - and the equity multiple FAILS outright below its 1.00x hard bar (capital not returned). Colour keys to the metric vocabulary - MEETS green, MONITOR yellow, BELOW red - so the word and the colour never disagree.
| # | Flag | Result |
|---|---|---|
| HARD (10 checked · 1 raised · 2 not assessed) | ||
| H1 | Legacy tax carried into a post-sale model ($118,000) | CLEAR |
| H2 | Insurance below 75% of the regional per-unit floor ($1,150/unit)→ Insurance is carried at $110,400 - $1,150/unit against the FL coastal/Gulf floor of $1,800/unit. Below three-quarters of the regional benchmark a sub-line is almost certainly missing rather than the coverage merely being cheap. Underwritten at the floor the line would be $172,800, $62,400/yr more than modeled - roughly $1,057,627 of value at the market cap rate. Getting to the trigger alone takes $19,200. · $1,057,627 at stake | RAISED |
| H3 | Implied NOI CAGR above 8% (4.89%) | CLEAR |
| H3b | Post-improvement rents exceed marketNot assessed - a rent comp set with unit square footage - C5 carries the same request | NOT ASSESSED |
| H4 | Exit cap at or below the going-in cap (6.40% (derived))Not assessed - an analyst-entered exit cap - once you set the exit yourself, this row tests it against the market anchor and can raise | NOT ASSESSED |
| H5 | Negative cash flow in any year ($226,486) | CLEAR |
| H6 | DSCR below 1.15x at entry (1.35x) | CLEAR |
| H7 | Line items do not tie to stated document totals (0 issues) | CLEAR |
| H8 | Balloon exceeds supportable takeout with no funding source | CLEAR |
| H9 | Hurdle coherence - do the two most binding hurdles agree on the ceiling? (1.11x) | CLEAR |
| CURABLE (10 checked · 6 raised) | ||
| C1 | Neighborhood grade not stated (B) | CLEAR |
| C2 | Property class not stated (B) | CLEAR |
| C3 | No PCA on a pre-1990 asset (1998) | CLEAR |
| C4 | Renovation status unknown→ Read the OM's capital-improvements page (or the roll's classic-vs-renovated rent tiers) and enter the split. | RAISED |
| C5 | No rent comps with named sources (0 of 0 named)→ Pull rent comps and cite each source. Per square foot, never per unit - and enter unit sizes, or the comparison cannot be size-adjusted. | RAISED |
| C6 | No prior sales data→ Pull the county deed / transfer record for the parcel. | RAISED |
| C7 | Property tax record not pulled ($118,000)→ County pull - 24h SLA, 48h above 6 parcels. Bring back the bill AND the assessed value. · not quantified here - the Gap Register measures it by re-run and was not supplied to this check | RAISED |
| C8 | Insurance is an estimate, not a quote ($1,150/unit)→ Enter a bound broker quote at your own deductible and named-storm terms. · not quantified here - the Gap Register measures it by re-run and was not supplied to this check | RAISED |
| C9 | Debt service is not documented (6.35% rate)→ Upload the lender quote, term sheet, or the existing note with its amortization schedule. · not quantified here - the exposure is the spread between the assumed and the quoted structure, which only a quote can state | RAISED |
| C10 | Operating expense convention may differ from the engine assumption | CLEAR |
| COMBINATION (15 checked · 1 raised · 1 not assessed) | ||
| M1 | Negative leverage not resolving by stabilization (-94 bps)→ The loan costs 7.47% a year against a 6.53% yield, so every borrowed dollar reduces the return on equity - and it does not resolve by stabilization. More leverage makes this worse, not better; the fix is price, not structure. Positive leverage begins at $9,132,637 (a 7.47% cap) against the $10,450,000 tested. · $1,317,363 at stake | RAISED |
| M2 | Pre-1990 vintage with a stated renovation (1998) | CLEAR |
| M3 | Break-even occupancy cushion below 5 points (18.2 pts) | CLEAR |
| M4 | Expense ratio outside 40-55% (40.76%) | CLEAR |
| M5 | Rent growth above 5% but below the 8% hard bar (3.00%) | CLEAR |
| M6 | Neighborhood stated and below B- (B) | CLEAR |
| M7 | Subsidy concentration above 40% of units (0%) | CLEAR |
| M8 | Deferred maintenance identified | CLEAR |
| M9 | Negative cash flow before stabilization (n/a) | CLEAR |
| M10 | Entry DSCR below 1.15x (1.35x) | CLEAR |
| M11 | Refinance cushion below 15% | CLEAR |
| M12 | Rate cap expires before loan maturityNot assessed - the rate type - fixed or floating. A fixed rate clears this row; a floating one needs the cap expiry year beside it | NOT ASSESSED |
| M13 | Extension test not met at the modeled trajectory | CLEAR |
| M14 | Stabilization runway consumes most of the hold | CLEAR |
| M15 | Debt maturity before the planned exit | CLEAR |
Scoring: 1 hard · 1 combination - ceiling for Conservative is 2. Open: 6 curable - listed for action, not counted in the grade.
1 combination flag scored of 14 assessed (15 rows exist; M12 could not be assessed and score zero - which is what a CLEAR row also scores, so the ceiling cannot tell them apart). Hard flags are a gate and do not accumulate; curable flags measure diligence progress and never touch the grade.
Palmetto Trace Apartments, 4400 Palmetto Trace Blvd, Ocala, FL 34471, is a 96-unit multifamily asset built in 1998, underwritten at $10,450,000, or $108,854 per unit. Our recommendation is PURSUE WITH CAUTION - 4 of 4 return metrics meet at least the minimum hurdle; value-add or execution is required to hit your strong targets. 4 of 4 return metrics meet at least the minimum hurdle; risk is manageable but execution is required. We recommend opening at $8,030,000 and holding a ceiling of $10,450,000 (the income supports up to $10,730,000, headroom for a competitive best-and-final only). The LOI ships in PRICED mode.
| Floor plan | Units | % of total | In-place ($/mo) |
|---|---|---|---|
| 1BR/1BA | 32 | 33% | $940 |
| 2BR/1BA | 24 | 25% | $1,050 |
| 2BR/2BA | 28 | 29% | $1,140 |
| 3BR/2BA | 12 | 13% | $1,290 |
| Total / weighted avg | 96 | 100% | $1,070 |
Stabilized reflects market rents and a 5.00% vacancy, in today's dollars. The pro forma below models the lease-up to market over 3 years.
One bar, three destinations. The cents are out of every dollar the property could collect if it were completely full and everyone paid.
Start with $1.36M of possible rent, end with $682K of profit - about 50¢ of every possible dollar. Each bar picks up where the last one left off.
| Gross Potential Rent | $1,359,360 |
| Less: Loss to Lease | ($127,200) |
| Gross Scheduled Rent | $1,232,160 |
| Less: Vacancy (7.00%) | ($95,155) |
| Less: Concessions (0.00%) | $0 |
| Less: Bad Debt (0.50%) | ($6,797) |
| Total economic loss (7.50% of GPR) | ($101,952) |
| Plus: Other Income | $62,000 |
| Effective Gross Income | $1,192,208 |
| Less: Total Operating Expenses | ($486,000) |
| NOI (pre-reserve) | $706,208 |
| Less: Replacement Reserves ($250/unit) | ($24,000) |
| NOI (after reserves) | $682,208 |
Operating expenses - taxes $118,000, insurance $110,400, management $35,766, other $221,834.
| Year | EGI | OpEx | NOI (after res.) | Debt Service | Cash Flow | Cumulative |
|---|---|---|---|---|---|---|
| Year 1 | $1,243,670 | $486,000 | $733,670 | $507,184 | $226,486 | $226,486 |
| Year 2 | $1,332,127 | $510,300 | $796,627 | $507,184 | $289,442 | $515,929 |
| Year 3 | $1,424,827 | $535,815 | $862,552 | $507,184 | $355,368 | $871,296 |
| Year 4 | $1,465,712 | $562,606 | $875,323 | $507,184 | $368,139 | $1,239,435 |
| Year 5 | $1,507,823 | $590,736 | $887,915 | $507,184 | $380,731 | $1,620,166 |
At $10,450,000 this deal carries negative leverage - the loan costs 7.47% a year against a 6.53% going-in cap (NOI after reserves of $682,208 over $10,450,000), a spread of -94 bps. Every borrowed dollar subtracts from the return on equity, and more leverage makes it worse, not better.
Positive leverage begins at $9,132,637 - a 7.47% cap, which is the loan constant itself. The fix is price, not structure.
Every net operating income figure in this file, capitalized at four plausible market rates. They span $154,387 (21.90% between the highest and the lowest) - which is the actual disagreement in this deal.
| # | NOI figure | NOI | $/unit | Cap at asking price |
|---|---|---|---|---|
| 1 | Blue Tag underwritten Yr-1 (pre-reserve)This analysis's first year as lived - lease-up in progress when a market rent exists - with expenses normalized and taxes at the buyer's basis. | $757,670 | $7,892 | 7.25% |
| 2 | Blue Tag underwritten Yr-1 (after reserves)The same year, after replacement reserves - the number Year-1 cash flow is measured from. | $733,670 | $7,642 | 7.02% |
| 3 | Blue Tag going-in (in-place)Today's rents at today's losses, pre-reserve - the going-in cap-rate basis; coverage and loan sizing read this same in-place year after reserves. | $706,208 | $7,356 | 6.76% |
| 4 | Blue Tag stabilized (market rents achieved)Assumes the mark-to-market case is executed - upside to be earned, not bought. | $860,595 | $8,965 | 8.24% |
| Valued at cap | #1 | #2 | #3 | #4 |
|---|---|---|---|---|
| At 4.90% | $15,462,661 | $14,972,865 | $14,412,408 | $17,563,167 |
| At 5.40% | $14,030,933 | $13,586,489 | $13,077,926 | $15,936,948 |
| At 5.90% | $12,841,871 | $12,435,092 | $11,969,627 | $14,586,359 |
| At 6.40% | $11,838,600 | $11,463,600 | $11,034,500 | $13,446,800 |
Column numbers refer to the NOI figures in the table above; the bolded figure is the fairest basis.
Which row to believe. Blue Tag underwritten Yr-1 (pre-reserve) is the fairest single test: it is computed on the buyer's tax basis with expenses normalized account by account, it is the first year the buyer will actually operate, and it is the year the offer's cash-on-cash and IRR hurdles price. The 21.90% spread between the highest and lowest NOI here ($154,387) is the real argument in this deal - not the cap rate. These are capitalizations of stated income figures, not an appraisal and not a statement of value - the price this analysis stands behind is the offer range, which is solved from your own return hurdles.
Each cell is a full re-run of the deterministic engine with one input changed.
A higher exit cap means you sell for less, so DOWN the page is worse. Darker = a higher return. Boxed = the case this report underwrites (18.69%). ✓ marks every combination that still clears your 11.00% target.
| Exit cap ↓ / Rent growth → | 0% | 2% | 3% | 5% |
|---|---|---|---|---|
| 5.90% | 10.06% | 18.21% | 21.75% | 28.13% |
| 6.40% | 6.43% | 15.02% | 18.69% | 25.24% |
| 6.90% | 2.85% | 11.96% | 15.79% | 22.54% |
| 7.40% | (0.74%) | 8.99% | 13.00% | 19.97% |
A dash means no IRR exists at that combination: the deal returns no cash there, so there is no rate of return to solve for.
| Offer vs asking | Price | Cap | Loan proceeds | Cash-on-cash | IRR |
|---|---|---|---|---|---|
| -10% | $9,405,000 | 7.25% | $6,113,250 | 7.83% | 24.40% |
| -5% | $9,927,500 | 6.87% | $6,452,875 | 6.74% | 21.49% |
| Asking | $10,450,000 | 6.53% | $6,792,500 | 5.76% | 18.69% |
| +5% | $10,972,500 | 6.22% | $7,132,125 | 4.87% | 15.99% |
| +10% | $11,495,000 | 5.93% | $7,309,213 | 4.19% | 13.15% |
| Scenario | Change | Loan proceeds | IRR |
|---|---|---|---|
| Base case | As underwritten | $6,792,500 | 18.69% |
| Vacancy +3% | Applied vacancy 7% → 10% (floors +3 pts, incl. stabilized) | $6,792,500 | 15.70% |
| Exit cap +0.50% | Exit cap 6.4% → 6.9% | $6,792,500 | 15.79% |
| Interest rate +1.00% | Rate 6.35% → 7.35% | $6,601,215 | 17.00% |
| Rent growth 0% | No rent growth assumed | $6,792,500 | 6.43% |
| Expense growth +2% | Expense growth 5% → 7% | $6,792,500 | 15.40% |
The engine carries no FL-specific rent-regulation or inspection overlay. That is not a statement that none exists - local ordinances are common and are not modeled here. Confirm the city and county rules directly, particularly if the plan depends on raising rents or delivering units vacant.
Value-add: Low Estimated annual NOI upside: $145,483
| Lever | Est. annual upside | Est. cost | Return on cost | Confidence | Note |
|---|---|---|---|---|---|
| Capture loss-to-lease (mark rents to market) | $118,296 | $96,000 | 123%/yr | Moderate | Bring in-place rents to the stated market rent on turnover/renewal. Cost assumes a ~$1,000/unit light turn across the roll. Source: the market rent as entered - verify with comps. |
| Stabilize occupancy | $27,187 | $2,139 | 1271%/yr | Moderate | Reduce vacancy from 7.0% toward a stabilized 5%. This is vacancy net of the concessions and write-offs the statement books separately, so it is empty doors. Cost assumes ~one month's rent per door filled (2 doors) in marketing and concessions. |
Yield on cost does not apply to core-plus: there is no renovation program, so total basis is the price plus closing costs and the measure collapses into the cap rate already reported .
A stabilization timeline does not apply to core-plus: the asset is stabilized at acquisition, so year 1 is the stabilized year (the stabilization-point hierarchy).
These prices are back-solved from your return hurdles, not discounted off the asking price. Conservative is the disciplined opening - it earns your target returns. Aggressive is your ceiling: the most you'd pay and still clear your minimum returns. Moderate sits between. We never go above the ceiling.
Open at $8,030,000, aim for $8,279,000, walk away past $10,730,000. Green is buy, amber is a stretch, red is decline.
| Offer | Price | Price / unit | Implied cap | Loan proceeds | Vs ask |
|---|---|---|---|---|---|
| Conservative - open here ★ | $8,030,000 | $83,646 | 8.50% | $5,219,500 | -23.2% |
| Moderate | $9,240,000 | $96,250 | 7.38% | $6,006,000 | -11.6% |
| Ceiling in this negotiation (never above the ask) | $10,450,000 | $108,854 | 6.53% | $6,792,500 | 0.0% |
| Only if bid up in a best-and-final - max supportable (min returns) | $10,730,000 | $111,771 | 6.36% | $6,974,500 | +2.7% |
| Asking price (reference) | $10,450,000 | $108,854 | 6.53% | $6,792,500 | 0.0% |
Margin of safety: opening is 3.01% below target and 25.16% below walk-away. Target is bound by cash-on-cash (in-place). Walk-away is bound by cash-on-cash (in-place) (4.00% against the 4.00% minimum - tight at this ceiling).
| Hurdle | Max supportable price | Binds? |
|---|---|---|
| Cap ≥ 5% | $13,657,000 | |
| Cash-on-cash (in-place) ≥ 4% | $10,730,000 | ← binding |
| IRR ≥ 11% | $11,900,000 | |
| DSCR ≥ 1.2x | enforced through loan sizing - at a higher price it shrinks proceeds instead of capping the price (see Financing) | excluded |
| Debt yield ≥ 8% | enforced through loan sizing - shrinks proceeds instead of capping the price | excluded |
The ceiling is the lowest computed row, capped at the asking price. An excluded hurdle is named, never treated as zero.
Submit at $8,030,000 with a stated ceiling of $10,450,000 ($10,730,000 at the very outside, only if a best-and-final forces it). If the price cannot land at or below $10,730,000, walk away - above that the income does not clear your minimum returns.
The asking price clears your minimum but not your full target returns. Open at $8,030,000 (target-return price ≈ $8,279,000); your ceiling in this negotiation is $10,450,000 ($10,730,000 at the outside if bid up). Exit cap 6.40% = 5.90% stated market cap + 0.50 aging spread, held constant at every price above. Hurdle agreement: the two lowest hurdle prices sit within a 1.11 ratio of each other across 3 computed hurdles - inside the 1.35 coherence limit. Two leverage facts, neither of which caps this offer: above $10,751,798 the going-in cap falls below your 6.35% interest rate - that is true negative leverage, where the debt costs more than the building earns; above $9,138,651 it falls below the 7.47% loan constant, which means year-one cash-on-cash dips under the cap rate because you are paying down principal - that is equity you keep, not money you lose. In-place rents trail market: the offer above is priced on today's in-place rents. Once stabilized at market rents, the same hurdles support up to $11,900,000 - the gap is upside you'd have to execute, not a reason to pay it today.
LOI MODE: PRICED — Reconciliation clean and every material input supplied - a dollar price at the recommended opening.
Date: September 1, 2026
Buyer: [Buyer Entity Name] Seller: [Seller Entity Name]
Re: Proposed acquisition of 4400 Palmetto Trace Blvd, Ocala, FL 34471 (96 units) (the "Property")
This non-binding Letter of Intent ("LOI") sets forth the principal terms under which [Buyer Entity Name] ("Buyer") proposes to purchase the Property from [Seller Entity Name] ("Seller"). It is intended solely as a basis for further discussion and is not a binding agreement except as expressly stated in Section 9.
The Property located at 4400 Palmetto Trace Blvd, Ocala, FL 34471, comprising approximately 96 residential units, together with all improvements, fixtures, and appurtenances, with a complete legal description to be confirmed in the definitive purchase and sale agreement (the "PSA").
Buyer proposes a purchase price of $8,030,000 ($83,646 per unit), reflecting an implied going-in capitalization rate of 8.50% on Buyer's underwritten net operating income at that price.
Within three (3) business days after mutual execution of the PSA, Buyer shall deposit $120,450 (approximately 1.5% of the purchase price) into escrow with a mutually acceptable title or escrow company, refundable during the Due Diligence Period.
Buyer shall have 45 days from PSA execution to complete due diligence. Within five (5) business days of execution, Seller shall deliver: (1) the current certified rent roll; (2) trailing-12-month operating statements with the general ledger export; (3) all leases and amendments; (4) service contracts; (5) property tax bills and any assessment notices; (6) insurance policies and loss runs; (7) utility records; and (8) any existing lender, engineering, or environmental reports in Seller's possession. Buyer shall have the right to inspect the Property and all units.
Buyer intends to finance the acquisition with institutional debt and expects to fund the balance with equity under Buyer's control. This LOI and the PSA shall be contingent on Buyer obtaining acceptable financing within the Due Diligence Period.
Closing shall occur on or before 30 days following expiration of the Due Diligence Period, subject to customary closing conditions.
Buyer's obligations are subject to verification of the rent roll and trailing-12 operating statements against bank deposits and underlying leases; confirmation of property tax and insurance figures; and satisfactory physical, environmental, and title review.
In addition to the general conditions above, Buyer may terminate with full return of the deposit upon: (1) any county reassessment indication that materially increases the underwritten tax expense.
The parties shall keep the terms of this LOI and all due-diligence materials confidential and shall not disclose them except to their respective advisors on a need-to-know basis.
Except for the confidentiality obligations in Section 8, this LOI is non-binding, creates no obligation to proceed, and is subject in all respects to the negotiation and execution of a mutually acceptable PSA. No binding obligation shall arise unless and until a PSA is fully executed.
Buyer: _______________________________ Date: ____________
Seller: ______________________________ Date: ____________
DISCLAIMER: This draft is provided for business-discussion purposes only and is not legal advice. All LOIs and transaction documents should be reviewed by qualified legal counsel and relevant transaction professionals before use.
The data room contained the figures entered by hand for this run. It did not contain tax-assessed value (reassessment basis). Where information was missing we made an assumption and state it below alongside the consequence of being wrong. Every conclusion in this report is conditional on these items.
| # | Missing item | What we assumed, and why it matters | Dollars at stake |
|---|---|---|---|
| 1 | Tax-assessed value (reassessment basis) ← the least supported number in this report | Taxes are carried at the seller's $118,000 bill; reassessment on sale is not modeled. The county assessor's roll shows the assessed value behind that bill; the gap between it and your purchase price is what the county chases after closing. At 0.85% of the purchase price the bill lands within $29,175 of what the seller already pays, so no step-up is modeled. | Not quantified |
These figures are measured, not estimated: the engine re-ran this deal with each assumption replaced by a named plausible alternative. An income or expense gap is stated as value - its swing in net operating income capitalized at the market cap rate (never at the going-in cap, which is itself derived from the seller's price). A financing gap is stated as loan proceeds, which comes out of the equity cheque dollar for dollar. Those are different quantities, so each figure names its own; an item that moves no measurable number is listed without one rather than padded with a guess.
Everything below is either a file you uploaded or a rule this engine applied. There is no third category - no purchased data, no scraped listings, no figures from a market feed.
No documents were uploaded - this run was underwritten from figures entered directly.
| Calculation | Formula | Inputs | Result |
|---|---|---|---|
| Gross Scheduled Rent | Avg rent/unit × units × 12 | $1,070 × 96 × 12 | $1,232,160 |
| Loss to Lease | max(0, (market − in-place) × units × 12) | ($1,180 − $1,070) × 96 × 12 | $127,200 |
| Gross Potential Rent | GSR + loss to lease | $1,232,160 + $127,200 | $1,359,360 |
| Effective Gross Income | GSR − vacancy − concessions − bad debt + other income | $1,232,160 − $95,155 − $0 − $6,797 + $62,000 | $1,192,208 |
| NOI - going-in (pre-reserve) | EGI − Total OpEx | $1,192,208 − $486,000 | $706,208 |
| NOI - going-in (after reserves) | NOI − replacement reserves | $706,208 − $24,000 | $682,208 |
| Going-in Cap Rate | NOI (after reserves) ÷ price | $682,208 ÷ $10,450,000 | 6.53% |
| Going-in Cap Rate (broker basis) | NOI (pre-reserve) ÷ price | $706,208 ÷ $10,450,000 | 6.76% |
| Loan Amount | MIN(NOI ÷ minDSCR ÷ debt constant, price × max LTV, NOI ÷ min debt yield) | min($7,309,213 @1.25x, $6,792,500 @65%, $8,527,600 @8%) - LTV-constrained | $6,792,500 |
| Annual Debt Service (Yr 1) | 6.35% / 30yr amortization | fully amortizing | $507,184 |
| DSCR (going-in, underwritten) | NOI (after reserves) ÷ annual debt service at the UNDERWRITING rate | $682,208 ÷ $507,184 @ 6.35% | 1.35x |
| NOI - stabilized (pre-reserve) | EGI at market rents & stabilized vacancy − OpEx | $1,346,595 − $486,000 | $860,595 |
| DSCR (stabilized) | Stabilized NOI (after reserves) ÷ amortizing debt service | $836,595 ÷ $507,184 | 1.65x |
| Equity at Close | Down payment + closing costs + loan fees | $3,657,500 + $209,000 + $67,925 | $3,934,425 |
| Cash-on-Cash (Yr 1) | Year-1 cash flow (pro forma Yr 1) ÷ equity | $226,486 ÷ $3,934,425 | 5.76% |
| Cash-on-Cash (going-in, in-place) | Going-in cash flow (in-place NOI after reserves − Yr-1 debt service) ÷ equity | $175,024 ÷ $3,934,425 | 4.45% |
| Cash-on-Cash (average over hold - the verdict gate) | Mean of each operating year's cash flow ÷ equity (exit proceeds excluded - they belong to IRR) | 5 operating years ÷ $3,934,425 equity | 8.24% |
| NOI - Year 1 (after reserves) | Pro forma Year 1 - lease-up in progress, rent and vacancy blending toward stabilized | vs going-in $682,208 | $733,670 |
| Gross Sale Price | Exit-year NOI (after reserves) ÷ exit cap | $900,294 ÷ 6.40% | $14,067,099 |
| Net Sale Proceeds | Sale price − sale costs − loan payoff | $14,067,099 − $703,355 − $6,347,444 | $7,016,300 |
| IRR (5-yr) | Rate where NPV of equity + cash flows + sale = 0 | equity ($3,934,425), CFs, sale $7,016,300 | 18.69% |
| Equity Multiple | (Total cash flow + net sale proceeds) ÷ equity | ($1,620,166 + $7,016,300) ÷ $3,934,425 | 2.20x |
Key assumptions - hold 5 yrs, rent growth 3.00%, expense growth 5.00%, exit cap 6.40% (market+spread), reserves $250/unit, sale costs 5.00%.
Implied NOI CAGR over the full hold is 4.89% - NOI moves from $757,670 in year 1 to $917,087 in year 5, pre-reserve. A real value-add plan. The lever must be named.
This figure is derived from the projection, never entered: it captures rent growth, occupancy gains and expense reductions in one number, which is why it catches a stack of individually defensible inputs that only add up to a 20% IRR together.
Stabilization is year 1 on core-plus, so the rate hard flag H3 tests is this same full-hold figure - unchanged behaviour, stated so no reader has to assume it.
| Tier | What earns it | What it means |
|---|---|---|
| Conservative Buy | At least 3 of the 4 return metrics clear your STRONG hurdles - cap 6.00%, cash-on-cash 9.00% (averaged over the hold), IRR 14.00%, DSCR 1.40x - with DSCR itself at or above 1.40x, no asset-risk factor tripped at all, and the neighborhood STATED and inside B- to A+. | Clears with cushion. |
| Moderate OpportunityThis deal, at $10,450,000 | At least 3 of the 4 return metrics meet your MINIMUM hurdles - cap 5.00%, cash-on-cash 4.00%, IRR 11.00%, DSCR 1.20x - coverage at or above the 1.20x minimum, and fewer than two asset-risk factors. A blank neighborhood grade, or one in your caution band (C+), caps the tier here even when every strong hurdle clears. | Acceptable, thinner. |
| Aggressive / High Risk | Neither bar above is met: a return metric sits below your minimum, or two or more asset-risk factors are present - pre-1990 vintage with no renovation noted, a neighborhood outside B- to A+, a property class below C+, vacancy above 10.00%, NOI margin below 40.00%, DSCR below 1.20x, or a rent-growth assumption above 5.00%. When the below-minimum return does not recover on a stabilized basis (stabilized DSCR back to at least 1.20x), the recommendation at that price reads Pass - the tier stays Aggressive / High Risk because asset risk does not move with price; the offer ladder carries the price that works. | Risky but doable. |
| PASS (decline) | An automatic disqualifier, and that form cannot be edited away: DSCR below 1.15x on the BETTER of the going-in and stabilized cases, or a base case relying on 8.00% or more annual rent growth without support. A deal is ALSO recommended Pass at a specific price - with no automatic disqualifier - when any return metric (cap, average cash-on-cash over the hold, IRR or DSCR) sits below your minimum at that price and the stabilized case does not recover coverage to at least 1.20x. Unlike the automatic disqualifier, that Pass moves with price - the offer ladder carries the price that works. | Walk away. |
Every threshold above is read from the criteria this run used, not retyped - change a hurdle in the app and this table changes with it. Return metrics are the cap rate, cash-on-cash (graded on the average over the hold), IRR and DSCR; asset-risk factors are vintage, neighborhood, property class, vacancy, NOI margin, coverage and the rent-growth assumption. The cover's recommendation is graded at the cover's price: a deal-level Pass arrives either by automatic disqualifier or by price, and the price-qualified words elsewhere in this report - "Decline at this price" (equity multiple under 1.00x) and "Walk away at this price" (above the walk-away ceiling) - are the same discipline applied to a single price point.
| Strategy | Where it fits | Typical going-in cap | Typical IRR | What you're buying |
|---|---|---|---|---|
| Core | A location, stabilized, newer | 4.5-5.5% | Low double digits at most | Durability - you accept less yield for a tenant base that holds in a downturn. |
| Core-plusThis deal | B location, light upside | 5.5-6.5% | 11-14% | A little execution for a little more return. |
| Value-addPriced here (6.76% going-in cap) | B-/C+ location, a real lift to execute | 6.5-8% | 14-18% | You're paid for the work and the risk. |
| Opportunistic | Distress, heavy repositioning | 8%+ or broken | 18%+ | You're paid for taking on what others won't. |
These are typical market expectations, printed for orientation. They are NOT this app's hurdles. The hurdles are the tier table above. A strategy band tells you what return the market normally pays for that kind of risk, which is what makes it useful next to your own numbers: a 5% cap is expensive for Value-add work and ordinary for Core, and neither statement can be made from the 5% alone.
Why an absolute cap-rate hurdle stops working above a certain quality of location. A cap rate is a price for risk, so the same number means different things in different submarkets. Asking an A- block to yield the cap an aging C+ asset pays is asking for two incompatible things at once, and the search comes back empty - not because the hurdle is wrong, but because it is being applied across strategies that were never priced the same way. Professional shops segment first and set the return expectation per strategy, and they judge every cap against its own market rather than against a fixed number. This report does the second half of that today: it names the strategy and reads the cap against the market cap whenever one is supplied. Whether your OWN hurdles should be split by strategy is your call to make, and nothing in this section has made it for you - the tier table above is still the only standard this report graded against.
This deal reads Core-plus from what was stated: B neighborhood - inside the band you accept; B property class - solid building, not premium; 1998 vintage - inside your 1990 line but not new stock; Vacancy 7.00% - stabilized against the 5.00% target; Market rent $1,180 against $1,070 in place - a mark-to-market lift to earn. The read is descriptive - it did not set the tier, the hurdles, the risk factors or the offer.
This report is provided for informational and educational purposes only. It is not financial, investment, legal, tax, accounting, lending, brokerage, or valuation advice. All projections are based on user-provided information and assumptions that may prove inaccurate. Blue Tag, Inc. does not guarantee investment performance, market rents, sale prices, financing availability, tax treatment, or exit outcomes. Independently verify all information and consult qualified professionals before making any decision.
Projected returns, IRR, equity multiple, cash-on-cash return, and sale proceeds are estimates only. Actual results may vary materially. Rent and market data should be independently verified using sources such as Rentometer, CoStar, local MLS, broker data, or direct market surveys.
Most deals don't die from bad assets. They die from bad underwriting. Every figure in this report names where it came from - a document, the analyst, or a stated assumption - so nothing is a guess you can't see.