View this email in your browser

The Capital Stack

 Underwriting Deep Dive #2

As promised this week's newsletter will feature an instructional step by step video and inside information on how we analyze a multifamily deal. In the video at the link below we dive into our full model and how we determine good vs bad deal and what we should offer for a property. 

Click Photo Below to View Video

Full underwriting of a deal we passed on

Major Market News

Real Estate Lab

The model you saw in the video and the one we use daily was developed by David Toupin's company Real Estate Lab. We find the model provides us with the accurate and necessary information we need in order to confidently purchase multifamily properties. 

Tips and Tricks

Terms:

Cap Rate-

Net income / Purchase Price. In the underwriting video above the listing is at a 6.01% cap rate and the asking price is $1,100,000. Using these numbers we know the net income is $66,110. We also look further and there are many costs left out of the expense list which is why in the video I say "6.01% cap rate allegedly" because if we pull market rate costs in for items like property management, maintenance, and others the price is not as great. 

Cash on Cash Return-

This calculates the annual distribution vs the amount of actual cash into a deal. For example with simple numbers we will typically have a loan of 75% and only 25% of cash down payment. Let's use $1m property with an interest only loan of 75%. 

Purchase price $1,000,000

Loan amount $750,000

Down payment $250,000 (cash out)

Annual net income $50,000

Annual loan payment (5%) $37,500

Annual cash return (NOI - Debt) $12,500

Cash on Cash return $12,500 / $250,000 = 5%

Thank you for reading and for your interest in Sheffer Capital. We look forward to having you follow along. Feel free to reach out anytime with questions and connect with us further using the button below. 

Use the icons below to visit our website and connect with us on social

DisclaimerNothing in this communication shall be construed as an offer for investment in Sheffer Capital, LLC (the “Company”). Solicitations for investments by the Company will only be made through a Published Investment Opportunity in the Company's investor portal provided by the Company to potential investors for such purpose.

Copyright © 2021 Sheffer Capital, All rights reserved.*You are receiving this email because you expressed interest in real estate with Tory Sheffer*Our mailing address is:40600 Ann Arbor Rd E Suite 201 Plymouth MI 48170Want to change how you receive these emails?You can update your preferences or unsubscribe from this list.