@mannyawasom: A 50 bps change in your exit cap can erase $1.46 MILLION in value. Same property. Same NOI. Same business plan. The only thing that changed in this illustration? Exit cap: 5.00% → 5.50%. This is why I don’t like underwriting a deal that depends on cap rate compression to generate returns. Instead, one approach is to deliberately build cap rate expansion into your exit assumptions. For example: 5.00% going-in cap * 10 bps/year × 5-year hold = 5.50% exit cap Is 5.50% exactly where the market will be five years from now? Of course not. That’s not the point. The point is to introduce discipline into an assumption we ultimately can’t control and understand what happens to our returns when the exit environment isn’t as favorable as we hoped. Underwriting isn’t about predicting the future perfectly. It’s about making sure the deal doesn’t require a perfect future to work. 🎓 Want to see us walk through the math? Join us in the FREE MSA Deal Room as we continue our discussion on cap rates and break down cap rate expansion per year live. 📍 For more underwriting tips, visit: 🔗 msadatainsights.com/dealroom 🚨 For our latest investment opportunity, visit: 🔗 xsitecapital.com/montrose #Multifamily #Underwriting #CapRate #RealEstateInvesting #CommercialRealEstate

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