Burkhardt Underwriting & Deal Memo (Closing Date: 3/31/2025)

Muhan Zhang -

Deal Abstract

https://drive.google.com/drive/folders/1wIVRLcNo9uzsX8agZu4_ZSP0fxCTKGz6?usp=drive_link

Burned out CA out of state investor is offloading a 35 unit apartment building in Cincinnati, OH. There's high incentive on the property management team to perform. Building also relatively new.

Part 1. The Basics

Question Notes
1. Property Name: Burkhardt
2. Property Full Address: Available upon request
3. Property Listing URL: https://drive.google.com/drive/folders/1wIVRLcNo9uzsX8agZu4_ZSP0fxCTKGz6?usp=drive_link
4. Property Year Built: 1969
5. Property Number of Units/Doors: 35

Part 2. Quantitative, Numbers, and Financials ("Sow Passion, Not easy mediocrity", or S2 P6 N18)

Criteria Amount/Comment
1. Link to Underwriting Google Sheet: https://docs.google.com/spreadsheets/d/1Z0guPNTw-rupv_Mpyrj2H7-XpR829RY-KGu0-IPbm5s/edit?usp=sharing: UNDERWRITING COMMENT
2. Asking Price: $1895000: PRICE COMMENT
3. FFEIC Median Income: $47184: INCOME COMMENT
4. Last Year's Annual Rent: $211350: RENT COMMENT
5. Last Year's Annual Expense: $-147092.5: EXPENSE COMMENT
6. Last Year's Net Operating Income (NOI): $71022.5: NOI COMMENT
7. 5 Year Internal Rate of Return (IRR): 14: IRR COMMENT
8. Yearly Cash on Cash (CoC) Rate of Return: 16: COC COMMENT
9. Debt Service Coverage Ratio (DSCR): 1.13: DSCR COMMENT
From my undewriting exercise, as-is numbers on the left, pro forma on the right.

Part 3. Qualitative, Pre-Mortem, and Investor Fit (Every Time Man Profits, Don't Dismiss Serendipity)

Question Score Notes
1. Why is the seller now? TIMING SCORE Out-of-state owner (CA) facing management challenges
2. Am I the right buyer for this deal? FIT SCORE 1. My friend is the Co-GP, 2. I have a soft spot for Ohio and Dayton (first in flight!), 3. Honestly this would be the type of deal I'd like to be running
3. What has to go right for this deal to work out? Right Rating
4. People?
5. Distribution?
6. Durability?
7. Secret?

What has to go right for the startup to return money on investment:

1. Complete renovations/make sure the preexisting renovations are actually good for obtaining market value, 2. Converting basement into revenue generating asset, 3. Property management team adding value through extra alignment

What the Risks Are

1. More delayed maintenance, see the sewer line, 2. Economically depressed area with limited growth (household median income only $47k), 3. Section 8 tenants are guaranteed rent but also high wear and tear on the property

Bonus Muhan's Notes

Underwriting this deal and going into the T12 has been highly educational for me

Updates

This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.

Review these deal memos every time the startup raises a new round

Test if original thesis still applies

So, did I invest?

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Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.