A lower basis.
A different outcome.
See how entry price changes the cash you need, the income you keep, and the value a property could create. Then put the assumptions under pressure.
Hypothetical apartment acquisition · not an actual Livli deal or return forecast
Set the assumptions.
Purchase costs, operating income & financing
These inputs apply to both entry prices. The fee allowance is added once, separately from the purchase price. If a fee is already in the price, remove it from this allowance.
Same property, income, improvement plan, and financing rules. Only the two purchase prices differ.
Project cost includes purchase, improvements, closing costs, and the separate fee allowance. Cash reserves are funded in addition.
View chart values
| Cap rate | Value above cost |
|---|---|
| 5.5% | $1,586,000 |
| 6.0% | $1,152,667 |
| 6.5% | $786,000 |
| 7.0% | $471,714 |
| 7.5% | $199,333 |
At the target entry, this model requires $199,369 less buyer cash and produces $16,904 more annual stabilized cash flow than the reference entry.
| Measure | Reference entry | Target entry |
|---|---|---|
| Purchase price | $3,600,000 | $3,200,000 |
| Improvements & contingency | $300,000 | $300,000 |
| Separate fee allowance | $50,000 | $50,000 |
| Closing & financing costs | $72,000 | $64,000 |
| Total project cost | $4,022,000 | $3,614,000 |
| Upfront cash reserves | $75,000 | $75,000 |
| Total funded budget | $4,097,000 | $3,689,000 |
| Modeled acquisition loan | $2,448,631 | $2,240,000 |
| Total buyer cash required | $1,648,369 | $1,449,000 |
| Annual principal & interest | $198,400 | $181,496 |
| In-place annual cash flow | $49,600 | $66,504 |
| Stabilized annual cash flow | $75,600 | $92,504 |
| In-place cash-on-cash | 3.0% | 4.6% |
| Stabilized cash-on-cash | 4.6% | 6.4% |
| In-place debt coverage | 1.25× | 1.37× |
| Stabilized debt coverage | 1.38× | 1.51× |
| Modeled stabilized property value | $4,400,000 | $4,400,000 |
| Modeled property equity | $1,951,369 | $2,160,000 |
| Value above project cost | $378,000 | $786,000 |
Loan sizing constraint: reference — income coverage; target — purchase leverage. Financing is capped by both purchase leverage and in-place income coverage. Actual lender terms and appraisal limits may differ.
A tougher outcome.
Stabilized NOI 10% lower. Renovation budget 20% higher. Valuation cap rate 7.5% (1 percentage point higher). The opening loan stays fixed.
What the model includes.
Default example
Reference price $3,600,000; target price $3,200,000. In-place NOI $260,000; stabilized NOI $286,000. Improvements $300,000, separate fees $50,000, closing costs 2% of price, upfront reserves $75,000, annual replacement reserves $12,000. Financing: up to 70% of purchase price, 6.5% interest, 25-year amortization, 1.25× minimum income coverage. Valuation cap rate 6.5%.
Those inputs are teaching assumptions. They are not Minnesota market averages, an appraisal, available loan terms, or the economics of a completed Livli transaction.
How to read the results
Project cost is purchase + improvements + separate fees + closing costs. Buyer cash adds upfront reserves and subtracts the acquisition loan. Improvements and reserves are fully funded with buyer cash.
Cash-on-cash is annual NOI less debt payments and annual replacement reserves, divided by total buyer cash. Modeled property value is stabilized NOI divided by the valuation cap rate. Value above cost is that value less project cost. It can be negative.
Timing, valuation, and loan assumptions
This is a stabilized snapshot, not a year-one distribution forecast or a full hold-period model. The in-place cash-flow line shows the entered current income at the modeled debt service; it does not model renovation downtime. There is no acquisition-to-stabilization timeline, interim operating shortfall, sale, refinance, tax, promote, or investor waterfall in the calculation. Add property-specific carrying costs to the budget when evaluating a real deal.
Modeled equity is property value less the original loan balance. Upfront cash reserves are held separately and are not counted as property value or equity. No loan paydown or market appreciation is assumed. Unrealized value above cost is not sale profit; selling costs and taxes would reduce proceeds.
The loan is the lesser of the entered purchase leverage and the amount supported by in-place NOI less annual reserves at the entered minimum coverage ratio. This is a simplified sizing rule. Lenders may impose lower appraised-value limits, debt-yield tests, guarantees, or other conditions. Annual reserve treatment must match the income definition to avoid double counting.
The cap-rate chart changes only the valuation cap rate. The downside case reduces stabilized NOI by 10%, increases the improvement budget by 20%, and increases the valuation cap rate by 1 percentage point, capped at 15%; it retains the original acquisition loan. It is one scenario, not the worst possible outcome.
Income capitalization and debt-coverage concepts: OCC Commercial Real Estate Lending handbook, pp. 42–44 ↗. The example’s inputs and outputs are Livli Select teaching assumptions and calculations.
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