A deal package arrives as sixty pages. An experienced reviewer reads five of them in the first hour, in a particular order, and usually knows by the end of that hour whether the other fifty-five are worth opening.
The order matters because each page tests the one before it. What follows is that sequence, using a hypothetical 16-unit building in Orange County to make the numbers concrete. The figures are an illustration, not a description of any offering.
First Hour, Page One: Sources and Uses
Skip the photographs and the market overview. Go to the sources and uses table, which is the one page in the package where every dollar has to appear twice: once as where it came from, once as where it goes.
On our illustrative building the uses side reads: purchase price $4,800,000, closing costs $95,000, renovation budget $480,000, operating and lender reserves $120,000, total $5,495,000. The sources side reads: senior loan $2,300,000, investor equity $3,195,000. If those two totals do not match to the dollar, something has been left off one side, and the reviewer wants to know what before reading anything else.
Three things get checked on this page. Is the renovation budget a real per-unit number ($30,000 a unit here) or a round figure that looks backed into? Are reserves on the page at all, and are they sized to the plan rather than to a lender minimum? And do the sponsor’s fees appear as a use of proceeds, or have they been left for a later page?
Page Two: The Debt Page Decides Whether the Plan Can Fail Gracefully
The loan terms are the second read, before the rent roll, because debt is the part of the structure that cannot be renegotiated once the building underperforms.
Four numbers matter. Loan-to-value (LTV), the loan as a share of the purchase price: $2,300,000 against $4,800,000 is 48%. The rate and whether it is fixed: 6.4% fixed for five years is a different risk from a floating rate with a cap that expires in year two. The amortization, and whether there is an interest-only period. And the debt-service coverage ratio (DSCR), the property’s net operating income divided by its annual loan payments, which a reviewer wants to see calculated on in-place income rather than on the projected rents.
At 6.4% on a 30-year schedule our loan costs roughly $172,600 a year. If the building’s current net operating income (NOI, rent collected less operating costs before debt) is $233,000, coverage is 1.35x today. That is the number to hold onto, because it tells you how far income can fall before the loan is at risk, without assuming any of the renovation works. VisionWise Capital’s own discipline is sub-50% loan-to-value on every property for exactly this reason, and the coverage ratio is where that discipline shows up in a package.
Pages Three and Four: The Rent Roll Summary Against the Assumptions Page
These two pages are read together, because the assumptions page is a claim about what the rent roll will become, and the rent roll is the only evidence in the package of what it is now.
The summary for our 16 units shows an average in-place rent of $1,850 and two vacancies. The assumptions page projects $2,400 per unit after renovation, a 30% lift, with units turned three at a time over eight weeks each. The reviewer’s questions are mechanical: does the package include rent comparables for renovated units in the same submarket that actually support $2,400? How many of the 16 leases expire in the first year, since a tenant on a lease cannot be renovated around? And if the building was built before 2005, which of these units fall under California’s AB 1482 rent cap, where the lift comes only on turnover, not on renewal?
Then the arithmetic. Fourteen occupied units at $1,850 is $310,800 a year of contracted rent. Sixteen units at $2,400 is $460,800. The entire investment thesis is the $150,000 gap between those two lines, and the assumptions page should say plainly how long it takes to close and what happens to distributions in the meantime. For the line-by-line method, see our guide to reading a multifamily rent roll during property review.
The fee table comes last in the hour, not because it is least important but because it only makes sense once you know the size of the equity and the size of the plan. Acquisition fee, asset management fee, construction management fee, disposition fee: each should state what it is calculated on. A 1.5% acquisition fee on the $4,800,000 purchase price is $72,000; a 5% construction management fee on a $480,000 budget is $24,000. Add them up and compare the total to the sources and uses page. If the fees on this table are larger than the fee line on page one, the package disagrees with itself.
The Three Things That End the Hour Early
Most packages survive the first hour and go on to full diligence. Three findings reliably do not.
The first is a loan maturity inside the projected hold with no page addressing the refinance. A five-year business plan on a three-year loan is a plan that depends on a lender who has not been identified, at a rate nobody knows, and a package that does not say so is either unaware of the problem or hoping you are.
The second is projected rent that exceeds the package’s own comparables. Sponsors sometimes include a rent comp page showing renovated units at $2,200 and then model $2,400, on the theory that their finish level will be better. Occasionally that is true. It is never a basis for the entire return, and a reviewer who sees it stops trusting every other assumption on the page.
The third is a fee table that cannot be reconciled to the sources and uses. Fees charged on gross purchase price rather than equity, a construction fee calculated on a budget that differs from the one on page one, or a fee that appears on neither page but is mentioned in the operating agreement. None of these are necessarily improper. All of them mean the numbers you were given were not built carefully, and careless numbers on the cover pages are not usually offset by careful ones deeper in.
When a package clears all three, the second hour begins: the trailing twelve months of operating statements, the property condition report, and the operating agreement itself. That work takes days rather than an hour, and it is worth doing only on packages whose first five pages agree with each other.
Reviewing a multifamily deal package and want a second set of eyes on the debt page? Talk to VisionWise Capital →
This content is for informational purposes only and does not constitute investment, legal, or tax advice. Real estate transactions and private placements involve significant risk, including potential loss of principal. Always consult qualified legal, financial, and tax professionals before making investment decisions.
Related Reading
- How to Review Multifamily Operating Expenses Before Investing
- How to Test Multifamily Operating Assumptions
- Understanding Leverage and LTV in Real Estate Offerings
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