The $408 Lie That’s Costing You Millions

I nearly spit out my coffee when I saw it.
Repairs & Maintenance: $408 per unit. On a 1970s property.
If you’ve been around multifamily long enough, you know that number is complete fantasy. But there it was, bold as day in a broker package from a “respected” firm.
Here’s the thing—this isn’t some rookie mistake. I see garbage like this all the time. Brokers have been pulling this stunt for decades, and somehow investors keep falling for it.
Why Brokers Cook the Books (And Why You Should Care)
Let’s be honest about what’s happening here. Brokers get paid when deals close. Period. They’re not holding these properties for five years. They’re not dealing with the broken HVAC units, leaky roofs, or surprise electrical issues that come with older buildings.
So when they slap together their pro formas, everything gets rosier than a sunset in Hawaii. Repairs drop to laughably low numbers. Insurance stays frozen in time. Property taxes somehow never go up (spoiler alert: they always do).
How We Actually Underwrite Deals
While brokers are busy creating fairy tales, here’s what real underwriting looks like:
Start with the comps. Forget their rent roll—what are similar units actually getting? Where’s the upside hiding? Fee income opportunities they missed?
Break down every payroll line. Don’t just accept their salary number. What about overtime? Benefits? That load factor they conveniently forgot? We grid this stuff out because details matter.
Trust but verify utilities. We use the seller’s actual utility costs, but only after we’ve confirmed they’re real. You’d be amazed how often these numbers are “estimates.”
Factor in the weird stuff. Every property has quirks. Special security systems, unique maintenance contracts, that one elevator that breaks down monthly. If it costs money, it goes in the model.
Get real about taxes and insurance. Show me a broker package with accurate tax and insurance projections, and I’ll show you a unicorn. They’re always light. Always.
Calculate R&M based on reality. Not wishful thinking. We look at the property’s age, when it was last renovated, and its actual condition. A 1970s building needs more than $408 per unit unless it’s been completely gut-renovated (and if it has been, prove it).
Speed Up Your Underwriting (Without Cutting Corners)
Here’s where AI for multifamily underwriting actually makes sense: the grunt work.
We’ve started using QuickData.ai to automatically extract rent rolls and T12 data straight into our Excel underwriting models. What used to take an hour of manual data entry now happens in minutes.
But…and this is crucial…AI in commercial real estate should make you more efficient, not replace your brain. The AI pulls the numbers, but you still need to question every line item. Still need to verify those comps. Still need to catch the $408 repair budgets that make zero sense.
Think of it like having a really fast assistant who can type perfectly but has no common sense. Great for data extraction and multifamily financial modeling, terrible for actual decision-making.
The Math That’ll Keep You Up at Night
Here’s the part that should terrify you: every dollar of excess operating expense kills $16-18 of value when you sell (depending on cap rates).
That innocent-looking $5 per unit monthly expense the broker “forgot”? It’s actually costing you over $1,000 per unit at exit.
Multiply that across 100 units, and suddenly that “great deal” just became a wealth destroyer.
The Lobster Pot Problem
Real estate deals are like lobster traps…super easy to get into, nearly impossible to escape without getting cooked.
Once you’ve closed, you’re stuck with reality. That $408 R&M budget becomes $800+ real quick when your 50-year-old boilers start acting up. Those “stable” rents drop when tenants realize the neighboring building offers better value.
Bad markets make everything worse. When cap rates expand, all those underwriting sins get magnified. What looked like a small mistake in year one becomes a catastrophic loss by year five.
Build Your Own Models
I don’t blame brokers for this stuff. They’re doing their job—making deals happen. But if you’re the one writing checks, your underwriting better be bulletproof.
Build your models line by line. Use your numbers, not theirs. Question everything, especially the stuff that looks too good to be true.
The gap between broker packages and reality will shock you. But better to be shocked during due diligence than broke at your exit.
Trust me, your future self will thank you for being paranoid today.