Back-of-envelope (BOE) is a quick approximation of a multifamily investment — rough cap rate math, rule-of-thumb cost estimates, approximate return calculations. Used for initial screening before detailed underwriting.
A BOE model might include: GSR estimate, 35% OpEx assumption, NOI derivation, cap rate application to reach value, rough comparison to asking price. Not a substitute for detailed underwriting but useful for quick deal filtering.
Experienced LA multifamily investors can BOE a deal in 5-10 minutes to determine whether it warrants deeper underwriting. Sellers should expect buyers to apply BOE screening; initial pricing should survive this first pass.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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