The model only works because the exit cap equals the entry cap

Ask them how the $255k replacement cost was built. If it's hard costs plus soft costs plus a land number from 2019, the gap is smaller than the deck says. Land in outer-ring Sun Belt submarkets moved a lot and not always up. I'd want the number broken into dirt, sticks, and everything else, priced this quarter, from someone who actually bid a job there.

The $215 premium is the line I'd chase first. Not the projection, the evidence. Have they already renovated units at this property or one within a couple of miles, and if so, what are the signed leases showing, renovated versus classic, same floorplan, same month? If the answer is "comparable assets in the submarket" you're being handed a broker's guess.

Also ask how many units a month they can actually turn. 190 doors at, say, 10 a month is 19 months of downtime and disruption baked into years one and two. The model probably shows it faster than the crew can do it.

The whole story sits in the NOI line. At a 5.04 going in and a 5.0 exit, nobody is asking you to believe in cap compression. They're asking you to believe in $1.16M of NOI growth, $2.94M to $4.1M, in five years.

Split it. 190 doors at $215 is about $490k of gross annual rent at full burn-in. Take out vacancy, credit loss, and the expense drag on that revenue and call it $400k to $430k of NOI. That leaves roughly $730k that has to come from market growth. Your revenue base is around $4.9M. If operating expenses grow 4 percent a year, they add about $420k of cost over the hold, so revenue has to grow roughly $1.15M organically, call it 4.3 percent compounding for five straight years. That is the number the deal depends on, and it is a real possibility in a submarket where the pipeline is contracting. It is also not a given.

Sensitivity: equity looks like $28M or so including capex and closing. Move the exit cap 50bp wider and $4.1M capitalizes at $74.5M instead of $82M. That $7.5M is about 27 percent of your equity. Ask for the model with the exit at entry plus 50.

Things to get in writing rather than in the deck: the actual insurance renewal quote, and how property taxes get reassessed on a sale in that state, because reassessment practice varies by state and in some it resets hard at transfer. Get the promote hurdle and the fee schedule too, since 14.5 percent net depends on what's coming off the top. Whether this specific offering is suitable for you is a question for your own attorney and tax adviser.

If new leases are getting a month free, what is the in-place NOI actually built on? Asking rents with a concession netted out, or asking rents with the concession sitting in a footnote? Those are different deals. And who's managing it after close, the sponsor's own shop or a third party.

$19k a door for 190 units is $3.6M of work in a market where every operator in a five mile radius is doing the same interior scope. Ask who the crew is and whether they're already committed elsewhere. My experience with labor pricing is that quotes for repetitive multi-unit work hold for about a quarter and then they don't.

91 percent physical with a month free on new leases is probably 85 or 86 percent economic. On the T-3 you want net effective, plus the concession line, the loss to lease line, and bad debt broken out separately. Bad debt is where I've seen the biggest gap between what a T-12 shows and what a property actually collects, because some managers book it against revenue and some park it below the line.

Also, windlass, ask for the last three months of collections rather than billings. Billed rent and collected rent can be four points apart on a property like that and nobody mentions it until you're in due diligence.

What does "below replacement cost" actually protect me from? I get that nobody can build a new one at $193k, so new supply stops coming. But if the correction shows up in occupancy in 2027 and my hold is five years, am I selling into the good part or the part after it? Buying under replacement cost seems to help whoever owns it in year 10, and I want to know if that's me.

On my 12 unit, a $200 premium took eleven months to show up in collected rent, because of turn timing, one unit that sat, and a resident who renewed at the old rate because we didn't want the vacancy. Scale that to 190 doors and the burn-in curve in the model is the thing I'd want to see month by month, not annually. windlass, if their year one shows more than a third of the premium collected, ask them to walk you through the turn schedule.