Shafiq Hirani shows how a 3% difference in vacancy rate can wipe $180,000 off a building's value. Buyers accept expense cuts like fixing leaks or renegotiating contracts, but they're skeptical of projected rent growth. Focus on what you can prove, not what you hope to earn.
Your accountant spent 10 years making this building look as poor as legally possible. Now you need a buyer to believe it is rich. Those 2 jobs were never going to be done by the same set of books. Let me show you what a single assumption is worth. 20-unit building, $1,500 a month per unit. That is $360,000 of gross annual income. You are running 2% vacancy. He underwrites five. That three-point gap removes ten thousand eight hundred dollars of income. At a six percent cap rate, ten thousand eight hundred dollars is one hundred and eighty thousand dollars of value gone from one assumption you never negotiated on a line you cannot really argue with. An owner came to me convinced she had to push rents to sell her building. She did not want to do it. Her tenants were long-term and she liked them. So we looked at expenses instead. We found a water leak running about $600 a month and a trash contract about 40% above market. Fixing those 2 lines lifted her NOI without touching a single lease. And it lifted it in a form the buyer's underwriting actually accepted. Because it was expense reduction, not projected rent growth. Which income line on your building do you think a buyer would refuse to count?
