BUYER NAVIGATOR · FREE DEAL STRESS TEST

Stress test the deal before your offer is due

The offering memorandum shows the seller’s numbers. The Deal Stress Test rebuilds them as the new owner: rents you can verify, a vacancy allowance of at least 5 percent, a management fee, a current insurance quote and reserves. Then it shows the loan your NOI supports and what you would bring to closing. Start with the 10-minute screen tonight.

  • A 10-minute screen: six questions on page one
  • A 6-step test, from the records request to go, counter or walk
  • A records-request message ready to send to the broker
  • A worksheet that ends in value, maximum loan and cash needed

Built for buyers of small apartment buildings with an offering memorandum open and an offer deadline. Written by Shafiq Hirani, CCIM, MBA, PE, broker in DC, Virginia, and Maryland.

Get the Deal Stress Test

On your screen the moment you press the button. The calculator below needs no form.

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What you get

Four parts, built to work in 10 minutes tonight and in a week of diligence.

  1. The 10-minute screen

    Six questions on page one. Cut the seller’s NOI by 10 percent, check the rents against the rent roll, look for the missing lines, count the units against the public record, ask who pays the utilities, and check for TOPA and rent stabilization. You know tonight whether the deal earns a full test.

  2. The 6-step test

    Request the records, stress the income, reprice every expense as the new owner, run the financing check, price the deal and size your cash, then decide: go, counter or walk.

  3. The records-request message

    One email to the listing broker, ready to copy. It asks for the T12, the rent roll, the leases, the bank statements, the utility bills and the other records on the list. Fill in the brackets and send it.

  4. The worksheet

    A seller column, a stressed column, the change and the source for every line. It ends in your stressed value, the gap to the asking price, the maximum loan and the cash needed.

THE CALCULATOR

Run the stress test on your deal

Fill in what you have. Results update as you type. The calculator runs in your browser. Nothing you enter is sent or saved.

1. Income, as you would underwrite it

Rent if every unit were rented, from the current rent roll. Not projected market rents.

Use 5 or higher, even if the building is full.

Laundry, parking, fees. Count it only if bank records support it.

2. Expenses, as the new owner

Total expenses on the seller’s T12 or offering memorandum.

Add a professional fee if the seller left it out. Get local quotes.

Your current quote minus the seller’s premium. Use a minus sign if it is lower.

Taxes after reassessment, utilities, repairs, payroll. Positive numbers add expense.

Commonly $250 to $350 per unit per year. Confirm with your lender.

3. Price and financing

The price in the offering memorandum.

The cap rate you need to buy this building. This field has no default. You set it.

Confirm the rate with your lender.

The number of years the payment is spread over.

NOI divided by the yearly loan payments. Lenders commonly require 1.20x to 1.25x. Confirm current terms with your lender.

Used only for the go, counter or walk read.

Your stress test

Enter gross potential rent and expenses to begin.

Stressed NOI
n/a
Stressed value
n/a
Gap to asking price
n/a
Maximum annual debt service
n/a
Loan constant
n/a
Maximum loan
n/a
Equity needed at the asking price
n/a
Equity needed at the stressed value
n/a

Go, counter or walk

Enter the asking price and your target cap rate to get the go, counter or walk read.

Equity is before closing costs and your reserve. The loan constant is the year-one payment per $1 of loan. Results are illustrative arithmetic, not an appraisal or lending advice.

The Buyer Navigator video series

Eleven short videos walk the test step by step. They are coming soon. The Deal Stress Test and the calculator work without them.

Before you offer

  1. The Seller’s Pro Forma Is FictionComing soon
  2. Your Buy Box: Why the Best Deal on Paper Can Be the Wrong Building for YouComing soon
  3. Financing Sets Your Price, Not the SellerComing soon

Underwriting the building

  1. Reading the T12 and Rent Roll: What the Seller Hopes You SkipComing soon
  2. The Expense Reset: Costs You Inherit the Day You CloseComing soon
  3. TOPA and Rent Control: DC’s Rules That Change Your DealComing soon
  4. What Value-Add Is Actually WorthComing soon

Making the deal and owning it

  1. Offer Strategy: The Terms That Matter More Than PriceComing soon
  2. Due Diligence: 30 to 60 Days That Decide the DealComing soon
  3. Your First 90 Days as an OwnerComing soon
  4. Buy With the Exit in MindComing soon

Bring your offering memorandum

Want a second set of eyes on a deal? Book a free Buyer Consultation. Bring the offering memorandum and Shafiq stress tests it with you. Any engagement after the first call is scoped and quoted in writing before work starts.

Book a free Buyer Consultation

Buyer Navigator service: how Shafiq represents buyers of apartment buildings of 4 to 50 units.

Frequently asked questions

How long does the Deal Stress Test take?

The screen takes about 10 minutes with the offering memorandum open. The full test fits a week of diligence. If the offer is due in days, run the screen tonight, send the records request tomorrow morning, and run the worksheet the day the records arrive.

Does the calculator store or send my numbers?

No. The calculator runs in your browser. Nothing you type into it is sent or saved, and it clears when you close the page. The form at the top of the page is separate and sends only what you enter in it.

What is a stressed NOI?

It is net operating income rebuilt the way you would run the building. Rents come from the current rent roll, vacancy is at least 5 percent, and expenses carry a management fee, a current insurance quote and replacement reserves. The seller’s number shows what the seller hopes for. The stressed number is closer to the one a lender sizes your loan from.

Why does the loan matter as much as the price?

The lender sizes your loan from NOI, then caps it at a share of the price or the appraised value. Maximum annual debt service is stressed NOI divided by the required debt service coverage ratio. The coverage-based maximum loan is that figure divided by the loan constant. If the loan comes in smaller than you planned, you bring the difference to closing as equity.

Is this only for Washington DC buildings?

The test works for small apartment buildings in Washington DC, Virginia, and Maryland, where Shafiq is licensed. The screen asks about TOPA and rent stabilization because DC has them. Rules differ by city, county and state, so have a professional licensed where the property is located review your deal.

What does the Buyer Consultation cost?

Nothing. The first call is free. Bring the offering memorandum and Shafiq stress tests the deal with you. Any engagement after that is scoped and quoted in writing before work starts.

Is this investment, legal, tax or lending advice?

No. The Deal Stress Test and the calculator are educational tools. Consult your attorney, CPA and lender before you make a purchase decision.

Stress test the deal before your offer is due.

Six questions. 10 minutes. Know tonight whether the deal earns a full test.

Get the Deal Stress Test

This page and the Deal Stress Test are for educational purposes only and are not investment, legal, tax or lending advice. Rules differ by city, county and state. Have a professional licensed where the property is located review your deal. Consult your attorney, CPA and lender before you make a purchase decision.

Get the free Deal Stress Test