RCV_Underwriting_Assumptions_Library.docx
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How to use:
These are the firm's standard underwriting defaults. Open this alongside the UW template and refer to each section as you complete the corresponding tab. Defaults reflect stabilized operations — adjust as noted for turnaround and renovation phases.
Collect and confirm every item below. Gaps here compound downstream.
- Contact Greg Miller (preferred broker) and provide: PSA, deal overview, timeline, completed questionnaire, SOV, current policy, and loss runs.
- Input the broker's high-end range on Tab 2 while awaiting final quotes. Schedule a follow-up and update the model once hard numbers are in.
- Confirm final projections with the Director of Property Management after the walkthrough. Provide: unit types, square footage, photos, and final renovation numbers from the Director of CapEx.
- Enter projections into Tab 3 (Market Rent cells). Unit type text must match Tab 4 exactly — character for character, including spacing and capitalization.
- Review Tab → Units Rolled New Terms, Row 25 (Rollable Units). Assess vacancy and lease expirations by month.
- Account for current CapEx/Maintenance team bandwidth. Align on a turn schedule with the Director of PM before finalizing Year 1 vacancy.
- Confirm quotes from the Director of CapEx/Maintenance before inputting into the model.
- Review every line. Clarify ambiguous items with the broker and get specifics on what each category includes.
- Confirm whether units are individually metered or if ownership pays utilities.
- Call the county assessor's office. Understand their methodology and ask about reassessment triggers post-acquisition.
Required:
Input the anticipated projection on Tab 2. Always document the worst-case scenario in the notes cell — final assessed value at new purchase price, using whichever tax rate is higher (current or projected).
Use the links below when building Tab 1 (Market Research). Start with the market folder, then cross-reference the target map.
When underwriting renovated product, position rents just below new construction to maximize perceived value, leasing velocity, and NOI stability. The goal is not to chase the ceiling — it's to protect occupancy and capture durable rent growth.
New construction in our core markets sets the ceiling. Renovated product should offer a clear value gap — not compete directly.
| Unit Type |
New Construction |
Renovated Target |
Ceiling |
| 1 Bedroom |
$1,250 – $1,400 |
$1,150 – $1,225 |
~$1,250 |
| 2 Bedroom |
$1,500 – $1,700 |
$1,325 – $1,425 |
~$1,450 |
NOI principle:
Once rents push within roughly $200 of new construction pricing, prospects begin comparing directly to those communities — slowing leasing velocity and increasing vacancy loss. Protecting occupancy and leasing speed produces stronger NOI than capturing the last $50–$75 in rent.
- LVP flooring throughout
- Updated cabinets or cabinet fronts with modern hardware
- Quartz, granite, or upgraded laminate countertops with a modern edge profile
- Stainless or black appliance package
- Updated lighting and plumbing fixtures
- Modern paint scheme
- Updated bathroom vanity and mirrors
- Washer/dryer or hookups where possible
- Exterior curb appeal: paint, siding repairs, landscaping
- Updated signage and property branding
- Parking lot repairs and striping
- Improved exterior lighting and safety
- Clean, well-maintained common areas
- Basic resident amenities — grilling areas, dog areas, or seating spaces where feasible
Phasing strategy:
Phase rent increases as renovated units come online and allow the market to guide where the true ceiling sits. This captures rent growth while protecting occupancy and maintaining stable NOI performance.
Formatting errors in this tab cascade through the entire model. Complete this before anything else.
- Strip the rent roll to exactly these columns, in this exact order:
- Apt # & Size · Unit Mix · Resident · Lease End Date · Rent · Deposit · Last Month
- Remove all other columns — fees, notes, or any supplemental data.
- Last Month format: Month 'YY (e.g., August '26)
- Unit Mix entries must match Tab 3 exactly — the model will silently miscalculate if they differ.
Critical:
Delete all rows containing 'Missing' or 'VACANT' from both Tab 4 and the Rent Roll Schedule tab. Leaving them in prevents Row 9 of the Units Rolled New Terms tab from populating correctly.
Year 1: Align with Director of PM based on confirmed turn schedule
Stabilized (ongoing): 5%
Turnaround phase: 2% default — adjust if historical data is available
Stabilized (ongoing): 1.5%
Turnaround phase: Align to actual leasing performance
Year 1 of stabilization onward: 0.025% of gross rental income
- Turnaround phase: Adjust based on whether interior renovations are in the CapEx budget. If turns are built in, adjust the turnover expense accordingly.
- Stabilized (ongoing): 30–35% annual turnover. Allocate $1,200–$1,500 per turn.
- Override manually on the (Base) Proforma beginning in Year 1 of stabilization. Confirm Years 3–10 are pulling the correct projected annual expense growth rate.
- Review the T-12 and adjust to reflect the actual laundry situation at the property.
Expense: $32 per unit turn — align with monthly rent roll / units rolled new turns
Income: $64 per unit/month (2× the expense)
- Internet is mandatory for all units. Phase in with unit turns and renewals. Verify formula is populating correctly.
Default: 10% of tenants incur a $75 late fee
- Adjust if historical data supports a different rate.
Default: 10% of tenants at $50/month — aligned with renewals and new leases
- Adjust if historical data supports a different rate.
- Determine projected per-unit utility cost and phase in to align with unit turns.
- RUBs apply to all utilities currently paid by ownership, starting at renewal. RUBs is 2 months in arrears.
Vacancy absorption (stabilized): 5% of utility expenses retained by ownership
- Expense line: $0. Individual properties carry no renters insurance expense — RAM holds the company-wide limit liability policy.
How it works:
Resident pays $15/month. $10.50 goes to RAM for the policy cost. $4.50 is an admin fee recorded as property income. Factor 50% absorption at renewal.
Tab 3 / Other Income inputs: $15/month income · $10.50/month expense · 50% absorption
- Override manually on the (Base) Proforma to align with unit turns and renewals.
Quick-reference defaults below. Detailed guidance follows for items requiring additional context.
| Item | Default | Notes |
|---|
| Property Management Fee | 4% | |
| Asset Management | 3% | |
| Repairs & Maintenance | 7% | |
| Supplies | 3% | |
| CapEx Reserve | $200 / door / year | |
| Accounting | $1,500 / year | |
| Turnover (stabilized) | 30–35% × $1,200–$1,500 / unit | Override manually — Year 1 stabilized+ |
| Capital Reserves | $350 / unit | Start once stabilized — set date in Tab 3 |
| Legal / Prof. (≤50 units) | $1,500 / year | Increase for high eviction probability |
| Legal / Prof. (≤100 units) | $3,000 / year | |
| Renters Insurance Expense | $0 | RAM pays company-wide policy |
- Properties 50 units or fewer: Use our flex account on Apartments.com ($100–$200/month).
- Scale up based on vacancy and how aggressively the business plan needs to lease up:
- Standard — $300/month
- Next tier — $620/month
- Gold — $895/month
- Platinum (highest urgency) — $1,200/month
Default annual budget: $3,600 — adjust based on property size, vacancy, and business plan
New lease: $500 per unit
Renewal: $200 per unit
- Apply a 70/30 renewal ratio when projecting commission volume.
- Turns in renovation budget (first 12–24 months): Budget common areas only during stabilization.
- Post-stabilization formula: Main area cleaning costs + (35% × total units × $150). Override manually in Tab 2 beginning in the year following stabilization.
- No interior renovations planned: apply the full formula from Year 1.
Year 1: Assume current owner's tax basis
Year 2: Model new calculation based on acquisition price + assessor guidance
- Always document the worst-case scenario in the notes/comments cell.
| Item | Default | Notes |
|---|
| Acquisition Fee | 3.5% of purchase price | |
| Construction Management Fee | 10% of projected CapEx | e.g., $100K CapEx → $10K fee to RCV |
| Construction Fee (Proforma) | 20% of total estimated renovation cost | Set in Tab 3 — Proforma Assumptions |
| Closing Costs — Legal (small) | $5,000–$10,000 | |
| Closing Costs — Legal (medium) | $10,000–$20,000 | |
| Closing Costs — Legal (large) | $25,000–$50,000 | |
| Closing Costs — Appraisal | $2,500–$5,000 | |
Default loan-to-cost: 75% of purchase price, including CapEx / renovation total
- Set in Tab 3 → Proforma Assumptions → Financing Terms.
- Confirm debt paydown is populating correctly.
- Confirm loan balance after refi is populating correctly.
- Update Tab 3 → Financing Terms → Loans with the final locked rate and mortgage amount as soon as the lender confirms.
- Pull comps from similar-class properties in the immediate area. Start with the market folders and target maps in Section 01.
- For each comp: compare amenities, assess location, and explain why they're priced where they are. Document your reasoning — don't just list numbers.
- Cross-reference Apartments.com for current listings and vacancy signals.
- Reference Section 01B for rent positioning strategy and renovation scope when evaluating where to target rents.
- Update the insurance line item on Tab 2 once the hard quote is finalized. No estimates in the final package.
- Update Tab 3 → Financing Terms → Loans with the final locked rate and mortgage amount as soon as the lender confirms.
- Update Tab 3 → Proforma Assumptions → Attorney/Legal with final totals once confirmed.
Final package sign-off:
No placeholders. Insurance, financing, and legal costs must all reflect final confirmed numbers.