The interior budget said 18k a unit and I've never done one under 26. 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 @girder'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 @girder'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.

@wren the bump is the softer number of the two. My six units taught me that renovated rent estimates come from whatever the nicest comparable building achieved, and the comparable building usually has something you can't renovate into existence, like better parking or a school district line. I'd take @girder's 8k gap over a 265 bump that turns out to be 180.

@girder pass. You found a hard error in the one place you have real expertise, and the fix isn't to ignore your expertise so you can hit twelve positions.

Twelve positions you understand poorly isn't obviously safer than four you understand well. That's the part of the diversification argument I've never bought.

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?

@rigging that's where I land. The budget line is a test you happened to be able to grade. Failing a graded question suggests something about the ungraded ones.

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 @girder 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.

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

I've done 1980s cabinet fronts on flips and @girder is right that they're a trap. Half the time the boxes are particle board and the hinge screws have nothing to bite. But @orchard 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 I'd want is the down days per unit. On occupied value-add we plan seven and average eleven, 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 the cash sits for five months waiting on the next offering, the cost of passing isn't zero and it's higher than it looks. Doesn't change my vote, I'd pass, but the alternative has to be a real alternative and not just cash.

@girder the half-size version is the one I'd argue against hardest, and not for @arbor's reason. A small check in a deal you think is mispriced still puts your name on a capital call notice, and the dilution language applies to a 2k position exactly the way it applies to a 10k one. You get the same downside mechanics for a smaller share of an upside you already doubt. Either the sponsor answers @orchard's question with real delivered costs and you take a full position, or you're out.