REAL ESTATE GUIDE
How to Underwrite a Property Acquisition
Acquisition underwriting connects purchase price, normalized income, capital expenditure, financing and exit assumptions.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Build sources and uses including purchase price, taxes, legal costs, initial capex, fees and reserves. Acquisition price is not the complete cost basis.
Calculation framework
Normalize rent, vacancy and expenses from leases and historical statements. Separate in-place, mark-to-market and value-add assumptions.
Underwriting review
Size financing against value and cash flow, then forecast debt service and maturity. Do not let loan proceeds hide weak unleveraged economics.
How to use the result
Review going-in yield, NOI growth, unleveraged and leveraged IRR, equity multiple, downside value and break-even occupancy before investment approval.