underwrite-to-in-place-noi

name	underwrite-to-in-place-noi
description	Build a CRE base case on contractual in-place income before any pro-forma step-up — separating real income from assumed growth so the return rests on something sourced. Reach for this when a deal is being sold on stabilized rents.

Skill: Underwrite to in-place NOI

The fastest way to overpay is to underwrite the seller's pro-forma. This runs the base case on in-place income first, then layers each step-up as an explicit, sourced assumption.

Step 1 — Pin in-place NOI

Build NOI from the actual rent roll and trailing opex — contractual rent, current occupancy, real recoveries. This is the base case (§3 #1).

Step 2 — Layer step-ups as explicit assumptions

Every mark-to-market, lease-up, and bump becomes a named line with a source and a probability, not baked into a blended growth rate.

Step 3 — Separate going-in cap from IRR

Show today's income yield and the hold-period levered IRR side by side — they answer different questions (§3 #2).

Step 4 — Stress the down case

Re-run with the step-ups removed and a wider exit cap; if the deal only works on the pro-forma, say so plainly.

Output

An in-place base case, a sourced step-up bridge to the pro-forma, and the going-in-cap-vs-IRR pair with a down case.