Multifamily Value-Add with ADU Development - California
Underwriting and financial modeling for a single-family rental portfolio acquisition with planned ADU development. Modeled phased construction, rental stabilization, and long-term hold scenarios.
Client
Individual Investor
Time Spanned
3 Days
About Project
Project Overview
A client engaged Mayer Property Group to evaluate a multifamily acquisition with planned ADU additions as part of the long-term strategy. The project required underwriting both the existing asset and the phased introduction of new units, with a focus on stabilized operations and debt service coverage.
Objective
To build a clean, lender-ready financial model that supported acquisition, renovation, and ADU development — all structured around achieving a minimum debt service coverage ratio (DSCR) for long-term financing.
Scope of Work
Our engagement included:
1. Full Financial Model
We created a complete project model that incorporated acquisition costs, renovation budgets, ADU development timing, and a multi-phase lease-up schedule. The model structured permanent financing to align with a target DSCR and underwrote returns accordingly.
2. Rent and Expense Comps
To support underwriting assumptions, we conducted a simplified rent and expense comp analysis using local comparable assets. This informed revenue projections, stabilized operating expense ratios, and property tax estimates post-renovation.
3. Sensitivity Testing
Scenario modeling was included to evaluate changes in ADU delivery timing, rental absorption, and debt service metrics — allowing the client to test downside performance and financing flexibility.
Outcome
The completed model allowed the client to confidently evaluate returns and financing outcomes based on DSCR-driven debt sizing. It also helped clarify the long-term impact of ADU additions on overall asset performance, supporting investment decisions and early lender conversations.
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