#236: Do "Cheaper" Properties Actually Offer More Cashflow? Why Premium Assets Actually Generate Higher CoC Returns

The Multifamily Wealth Podcast

Are you making this critical mistake in your underwriting process? Discover why your assumptions need to change when underwriting lower class rentals versus higher class properties in this eye-opening episode of the Multifamily Wealth Podcast.
In this episode, we delve into the significant differences in underwriting lower class (C-class) rentals compared to higher class (A-class) properties. We explore common mistakes investors make in underwriting, such as using the same vacancy rates and maintenance expenses for all properties.
By using the example of buying a cheap house versus an expensive house, we illustrate how adjusting your underwriting assumptions based on the property class can lead to more accurate financial projections and better investment decisions. Tune in to learn why a one-size-fits-all approach to underwriting doesn't work and how to optimize your analysis for different types of multifamily assets.
Key points covered in this episode:
- The importance of adjusting underwriting assumptions for different property classes
- Why is the use of percentage of gross income for repairs and maintenance not the right approach?
- The impact of tenant class on repairs and maintenance expenses in real estate investments
- How does the quality of the property affect repair and maintenance costs, regardless of rent prices?
- The potential for higher cash on cash returns in slightly more premium properties due to incorrect expense assumptions
Are you a new multifamily investor looking to grow your portfolio but don't know where to start? Are you an existing multifamily investor looking to scale your business and master advanced topics such as capital structure, finding off-market deals, and establishing JV partnerships? Click here to learn more about 7-Day Multifamily, a program in which I teach investors the foundational skills they need to start and scale a multifamily portfolio rapidly.
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