❌ The Truth About the “90-Unit, 100% Cash-on-Cash” Deal — And Why the 85/45/24 Model Still Wins

Written by Jai Thompson

Intro

I manage a private equity platform deploying $13–18 million per quarter across multiple real estate asset classes. Our model is asset-based, escrow-directed, and execution-driven, allowing us to close in 23 days or less with certainty and clean title flow.

We acquire and operate across:

• Luxury estates

• Single-family residential portfolios

• Multifamily communities

• Hospitality and hotels

• Mixed-use properties

• RV parks and mobile home communities

• Golf resorts and destination assets

• Specialized housing and income portfolios

Capital is structured, operators are paid, reserves are built in, and all disbursements are controlled through escrow. We deploy with discipline, transparency, and speed—while tithing back to the communities we serve.

Let’s break down another popular “guru-style” deal and compare it to how professionals actually structure risk.

The Deal Presented (Traditional / Guru Model)

Property

• 90-Unit Multifamily (distressed, 30+ vacant units, heavy repairs, mismanaged)

Purchase Price

• $3,060,000

Financing Stack

• $1,860,000 Hard Money 1st Mortgage

• $1,200,000 Seller-Held 2nd Mortgage (4%, no payments for 6 months)

Cash In

• $346,085 (from retirement savings)

Value-Add Plan

• Renovate 30+ vacant units

• Increase rents across the property

Claimed Outcome

• Stabilized Value: $6,000,000

• Cap Rate: 14%

• Cash Flow: $19,000 / month

• 100% Cash-on-Cash after refi in year 2

Step 1: Is This a Good Deal?

Answer: NO (for us)

This deal worked, but it is not repeatable, scalable, or defensible.

Let’s be clear why.

Step 2: The Hidden Risks (What They Don’t Teach)

1. Retirement money at risk

• $346K of personal, protected capital

• One construction delay, lease-up issue, or market shift = permanent damage

2. Stack is fragile

• Hard money + seller second

• Short-term pressure

• Execution risk stacked on execution risk

3. Cash-flow-funded renovations

• If leasing stalls, rehab stalls

• If rehab stalls, value stalls

• Circular dependency

4. Refinance dependency

• Deal only works if refi hits perfectly

• Market rates, agency appetite, DSCR tests all must cooperate

This is operator heroics, not asset dominance.

Step 3: Traditional Deal Math (3rd-Grade Simple)

Claimed Cash Flow

$19,000 × 12 = $228,000 / year

Cash Invested

$346,085

Yield (Cash-on-Cash)

$228,000 ÷ $346,085 = 65.8%

Looks insane — but remember:

• Only after stabilization

• Only after surviving distress

• Only after refinancing

Step 4: DSCR Reality (Pre-Refi)

Let’s estimate debt service before refinance.

Hard money + seller second combined ≈ $3,060,000 total debt

Assume blended interest ≈ 7% (conservative):

$3,060,000 × 7% = $214,200 / year debt service

DSCR

$228,000 ÷ $214,200 = 1.06 DSCR

That is razor thin.

One vacancy spike and the deal bleeds.

Step 5: The Refi Is the Exit — Not the Bonus

Refinance:

• $3,900,000 Fannie Mae loan

• 4.75%, 30-year amortization

This is where the deal finally becomes safe, but only after 2 years of execution risk.

Professionals don’t confuse survival with strategy.

Now Let’s Run the SAME Asset Through the 85 / 45 / 24 Model

Same building.
Same $6M stabilized value.
Different intelligence.

Step 6: Asset-Based Pricing

Stabilized FMV

• $6,000,000

Offer (85%)

• $6,000,000 × 85% = $5,100,000

Recorded Price (45%)

• $6,000,000 × 45% = $2,700,000

Lender Position (24%)

• $6,000,000 × 24% = $1,440,000

Step 7: Seller Legacy Payoff (Non-Negotiable)

Seller Legacy Payoff = Offer − Lender

$5,100,000 − $1,440,000 = $3,660,000

✔ Paid through escrow
✔ Title-directed
✔ No seller carry
✔ No retirement funds
✔ No personal cash

Step 8: Why Lenders LOVE This Version

True LTV

$1,440,000 ÷ $6,000,000 = 24% LTV

That’s bulletproof collateral.

Step 9: DSCR (Why Banks Say Yes Fast)

Using same NOI:

• $228,000 / year (conservative)

Debt service on $1,440,000 at 6%:

• ≈ $86,400 / year

DSCR

$228,000 ÷ $86,400 = 2.64 DSCR

That passes every institutional screen.

Step 10: Yield (Day-1, Not After Trauma)

There is:

• No retirement money

• No forced refinance

• No execution cliff

Yield is created through:

• Built-in cash back

• Buyer salary

• Reserves

• Trust allocation

Day-1 positive structure, not delayed relief.

Final Comparison

Traditional 90-Unit Deal

❌ Works only if:

• Operator performs perfectly

• Market cooperates

• Refi is available

• Personal capital survives

85 / 45 / 24 Model

✅ Works because:

• Asset carries the risk

• Lender is insulated

• Seller is paid clean

• Buyer stays liquid

• Escrow controls every dollar

This is why serious lenders, title companies, and family offices prefer our structure.

Contact

Structure over sacrifice.
Stewardship over struggle.
Every deal builds legacy.