Whether to underwrite a RUBS recovery on a master metered 8 unit running 52 percent expenses.

Underwrite it at zero. A lender sizing your loan will use the trailing expenses and add management and reserves whether you like it or not, so if your equity check depends on the recovery you'll find out at term sheet. The mechanism worth understanding: value is NOI over cap rate, so if you eventually recover even 8k of the 18k in gas and water, that's about 115k of value at a 7 cap. That's a real prize and it's a reason to buy the building. It just isn't a reason to pay for it today. Whether you can bill utilities back at all and how the allocation has to be calculated vary by state and sometimes by city, as does the notice you owe existing tenants, and a few places restrict ratio billing outright. That's a question for a local attorney before you write it into a lease, and it isn't a modeling question.

The staggered lease ends work in your favor here. You phase it in at renewal, one unit at a time, and each renewal is a separate negotiation where the tenant compares their new total cost against the cost of moving. At 775, in a market where comps are likely higher, there is room. What kills these conversions is doing all eight at once in a soft leasing season and getting four notices back. On the boiler: 11.2k of gas across eight units is 1,400 a unit, and that is a 1962 system. Have it scoped. If the boiler is at end of life, the capital number dwarfs the RUBS upside, and that belongs in the price conversation rather than the utility conversation.

52 percent with no management line is really 60 percent, and a 6.2 cap on a 1962 boiler building is thin. What would you pay?