CalculateRealEstateROI

Multifamily · Guide

Multifamily Underwriting Framework

T-12 verification, expense normalization, exit cap rate, and IRR modeling — the core process.

Reviewed by Keiron Brown, Founder & Editor, CalculateRealEstateROI · Educational estimates only — not investment, financial, tax, or legal advice

Key takeaways

  • T-12 line-by-line.
  • Normalize expenses to 45–55%.
  • Exit cap = entry + 50 bps.
  • Stress test rents.
  • Five-year IRR target 15–22%.

Core concepts

T-12 verification

Tied to bank + tax.

Expense normalization

Industry standards + comps.

Exit cap

Conservative = 50 bps over entry.

Step-by-step framework

  1. 1Request T-12 + bank + tax.
  2. 2Normalize line items.
  3. 3Model 5-yr cash flow.
  4. 4Compute IRR + equity multiple.

Common mistakes to avoid

  • Trusting seller normalized.
  • Aggressive exit cap.
  • Skipping rent comps.

Frequently asked questions

IRR target?

15–22% for value-add.

Equity multiple?

1.8–2.5x in 5 years.

Exit cap spread?

50 bps conservative.

Sensitivity range?

Cap rate +/- 100 bps.

Action checklist

  • ☐T-12 verified.
  • ☐Expenses normalized.
  • ☐5-yr model.
  • ☐Sensitivity tested.

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