Multi-Family Acquisition: Purchase Price & Acquisition Costs

Purpose

The purpose of this post is to explain how to use the Purchase Price and Acquisition Costs in CREModels’ Multifamily Acquisition Model. This post will address how to properly input the Purchase Price and Closing Costs and how they flow through the model. As well as cover how the returns and values within the Purchase Assumptions are calculated.

Acquisition Uses

a) Purchase Price and Acquisition Fee

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The estimated Purchase Price for the Property must be entered in the first line of the Acquisition Uses table of the Acquisition Assumptions section. An Acquisition Fee can be entered as a percentage of the Purchase Price in the line below Purchase Price. The Acquisition Fee will be added to the Total Acquisition Uses.

b) Property Costs

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The default Property Acquisition Costs lines include the following: Utility Deposit, Pre-Stabilization Working Capital, ALTA Survey, Phase 1, Property Condition Report, Zoning Compliance Report, Ancillary Property reports, Internet Consultant, Owner and Lender Title Policy, Title and Recording Fees, Travel and Lodging, Due Diligence Fee, and Legal. All lines of the Property Acquisition Costs can be renamed as needed. These costs will be added to the loan Origination Fee to calculate the Property Subtotal of Acquisition Uses.

c) Lender Costs

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The default Lender Acquisition Costs include the following: Appraisal, Lender, Floating Cap Rate, and Application Fee. The final two lines of Lender Acquisition Costs are placeholders. All lines of the Lender Acquisition Costs can be renamed as needed. The total of these costs will be the Lender Subtotal of Acquisition Uses.

Going in Replacement Reserve

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If applicable, the user may enter the Going in Replacement Reserve per unit. This value will be displayed on the reports (including the Executive Dashboard) but will not be used in any calculations within the model.

SUMMARY: