In this episode, Craig McGrouther and I dive deep into the nuances of "above the line" and "below the line" expenses in multifamily underwriting. We explain how the "line" is Net Operating Income (NOI), with operating expenses like payroll and insurance sitting above, while CapEx and debt service fall below. I reveal the art behind these classifications and how a unit renovation could be coded as either R&M (above) or CapEx (below) depending on interpretation, affecting the property's apparent NOI and cap rate.

Using their current deal as an example, they show why contract services dropped from $127K to $57K and how they're handling bulk WiFi implementation.

The key insight: every sponsor underwrites differently, and sophisticated buyers/lenders understand these financials are normalized to each party's standards. This is essential knowledge for anyone evaluating multifamily investments.

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