An interior budget pencils at 18k a door on a scope that usually runs 24 to 28. Pass or size down.

The number that jumped out at me is the 265 rent bump. Even if the 18k is real, does the bump hold once 62 units in the same property are chasing it? I've only screened tenants for one house and even I know the second identical listing changes the price.

Some terms for anyone following this who hasn't read an offering yet.

Value-add means the sponsor plans to spend money improving the property so it can charge higher rent, then either refinance or sell at the higher income. Interior renovation budgets are usually quoted per door, meaning per apartment, and the quoted figure may or may not include soft costs like permits, design, and construction management fees. The documents define which, and two offerings can quote the same per-door number for different scopes.

Contingency is money set aside for cost overruns, stated as a percentage of the construction budget. If it's exhausted, the shortfall has to come from somewhere. The usual sources are the operating reserve, a reduced scope so fewer units get renovated, or a capital call asking existing investors for more money. The operating agreement sets out whether the sponsor can call capital and what happens to an investor who doesn't contribute, and that language differs deal to deal.

On @gregpowell66's actual question, the disagreement here is real and it's about what diversification can and can't fix. Spreading across many deals reduces how much any single project failure costs you. It does not help if the same estimating optimism runs through most offerings in a given vintage, because then the errors move together. Which of those is happening isn't something anyone can settle from the outside, and it's the reason the room will split. A licensed professional should review the specific documents if you're deciding on real money.

Sizing down to buy information sounds reasonable until you notice you'll have the information in month 24 and the lockup runs to month 60. You're paying for a lesson you can't act on for three more years. If you want to learn how a sponsor reports bad news, ask three of their current investors instead. Cheaper.

Does the sponsor actually get asked about the gap? Genuine question. If you email the platform with "your interiors are 8k a door light and here's my scope math," do you get a real answer or a form reply?

I was embarrassed to ask this, but how would a person without @gregpowell66's background ever catch this? I'd have read 18k a door and had no reaction at all. Which makes me wonder how many deals I've looked at where the one line I could have checked was wrong and I had no way to know.

@paulgrant17 the rent bump is the softer number of the two. Renovated rent estimates tend to come from whatever the nicest comparable building achieved, and that comparable usually has something a renovation can't manufacture, like better parking or a school district line. @gregpowell66's 8k cost gap is worth more weight than a 265 bump that could turn out to be 180. @gregpowell66 pass. A hard error found in the one area of real expertise shouldn't be waved off just to hit a target number of positions.

Twelve positions understood poorly is not obviously safer than four understood well. That is the part of the diversification argument that has never held up.

New here, so mostly reading. But if you're 8k a door off on a scope you've built dozens of times, isn't that also information about everything else in their model you can't check?

@megan_doyle15 that's where the logic lands. The budget line is a test that happens to be gradable. Failing a graded question suggests something about the ungraded ones too.

There's a third possibility nobody has raised. The 18k might be their negotiated number with an in-house crew running volume across several properties, and it could be real for them and impossible for @gregpowell66 as a one-off contractor. Volume pricing on flooring and appliances is not a small effect. That's worth one email before you decide the sponsor is dreaming. If they answer with actual delivered costs from two prior properties, the number gets a lot more credible. If they answer with a paragraph about their experienced team, you have your answer.

@karen_whitfield you're right about that, and it also explains why the answer to @derekj19's question matters so much. The response to the email is the deal.

I've done 1980s cabinet fronts on flips and @gregpowell66 is right that they're a trap. Half the time the boxes are particle board and the hinge screws have nothing to bite. But @karen_whitfield is right too. A crew doing 62 in a row on one property is a different cost structure from me doing two. Ask for delivered per-door cost on their last completed program and the unit count it covered. If they won't give it, pass.

The number worth pulling is the down days per unit. On occupied value-add, seven planned and eleven actual is a common pattern, and every extra day is lost rent that never shows up in the construction budget at all. It shows up as an occupancy miss two years later and gets blamed on the market. A 30 month program on 62 units has plenty of room to bleed there without the hard cost line ever moving.

So even a correct budget can still fail through the schedule. Adding that to my notes, because I'd only been looking at the dollar figures.

Nobody's mentioned what the money does instead. If passing means cash sits idle for months waiting on the next offering, the cost of passing isn't zero and it's higher than it looks. That doesn't change the vote to pass on a scope quoted well below what twenty years of comparable jobs have ever delivered, but the alternative has to be a real alternative and not just cash sitting still.

@gregpowell66 the half-size version is the one worth arguing against hardest, and not for @diane_kowalski's reason. A small check in a deal that looks mispriced still puts a name on a capital call notice, and dilution language applies to a small position exactly the way it applies to a large one. That's the same downside mechanics for a smaller share of an upside already in doubt. Either the sponsor answers @karen_whitfield's question with real delivered costs and a full position makes sense, or it's a pass.