The scenario

The acquisitions team has been screening a number of multifamily lease-up deals. During today's weekly call they mentioned one in a market your fund is targeting — with an equity check size in the $35M–$40M range that works for the remaining investor capital your fund has left to deploy.

Your boss asks the acquisitions team if they have an Excel model they can share, but they say they're still working on it and should have something by end of week. As soon as you hear this, you know what's next — your boss pings you and asks if you can put something quick together based on the preliminary screener information.

Your boss wants to understand the unlevered IRR and the average cash-on-cash over a 10-year hold. You download the PDF with the screener information and open a fresh Excel to get started.

Partway through you're unsure what to use as a purchase price. The Senior Associate nearby offers a key hint: use the discount rate to solve for an NPV via XNPV(), and use the terminal cap rate as a going-in year-one cap rate. Leave purchase price as an input so your boss can adjust it — but show the Year 1 valuation and NPV alongside it. Also make sure your cash-on-cash doesn't include sales proceeds in the average, and add equity multiple and net profit even though your boss forgot to ask.

Key assumptions

Property

Units100
Rent / Unit$3,150
Growth Rate3.00%
Vacancy (Yrs 1–2)7.00%
Vacancy (Yrs 3+)4.50%
Expenses / Unit$1,150
Management Fee2.50% of EGI

Capital Markets

Terminal Cap Rate5.50%
Discount Rate8.50%
Transaction Costs1.25%
Purchase DateMar 31, 2025
Hold Period10 Years

Step-by-step walkthrough

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