Today is Tomorrow is Yesterday
If you are underwriting a property for a proposal and can be flexible in how you calculate your net operating income (NOI), don’t take what the rent roll is today (or was over the trailing 12 months) as written in stone. Instead, look at how the NOI will appear when the buyer actually takes ownership. Odds are that you’ll pick up some rent bumps by doing that, and therefore you’ll get a higher NOI resulting in a higher price, or a more attractive CAP. Projecting three to four months from today should be safe, but always have your senior partner and/or managing director “smell test” it. If you can run it by a lender, that’s even better!
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