Why Small Deals Think Small — and How the 85/45/24 Model Scales From Five Units to Mega Assets

Written by Jai Thompson

I manage a private equity platform deploying thirteen to eighteen million dollars per quarter across multiple real estate asset classes.
Our model is asset-based, escrow-directed, and execution-driven, allowing us to close in twenty-three 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.
All disbursements are controlled through escrow.

We deploy with discipline, transparency, and speed — while tithing back to the communities we serve.

The Problem With “Small-Only” Thinking

Most BRRRR education stops at small multifamily and teaches people to:

• Raise capital

• Use personal credit

• Inject cash

• Refinance just to survive

• Repeat with partners and pressure

That model works, but it caps you.

It creates:

• Partner risk

• Capital calls

• Refinance dependency

• Lifestyle friction

The mistake isn’t NOI thinking — that part is correct.
The mistake is who supplies the capital and how it’s controlled.

That’s where 85/45/24 comes in.

The 85/45/24 Institutional Model (Simple Math)

Here’s the framework we use on small assets and mega assets alike.

Step One — True Value (FMV)

This is what the asset is actually worth based on income.

Step Two — Offer at 85%

We don’t overpay.

• It protects cash flow

• It protects DSCR

• It protects exit options

Step Three — Recorded Price at 45%

This is the number that goes on title.

• Keeps taxes light

• Keeps liability low

• Keeps refinance clean

Step Four — Lender Position at 24%

The lender is over-secured.

• Strong DSCR

• Low risk

• Predictable yield

No partners.
No capital raising.
No personal cash.
All funds move through escrow.

What These Metrics Mean (Plain English)

DSCR (Debt Service Coverage Ratio)

This answers one question:

Does the property make more money than the loan payment?

If income is two dollars and debt is one dollar:

• DSCR = 2.0
  That’s safe.

Yield

This answers:

How hard does the asset work?

Higher yield = more protection in bad markets.

Recorded Price

This is not market value.
It is a risk-management tool.

We keep the recorded price stable so:

• Title is clean

• Taxes stay low

• Liability stays controlled

The lender still values the asset at true income value.

Four Mega-Asset Examples (Third-Grade Math)

Example 1 — 72-Unit Multifamily

• Asking Price: $12,000,000

• FMV (Income-Based): $11,500,000

Offer (85%)
11.5M × 0.85 = $9,775,000

Recorded Price (45%)
11.5M × 0.45 = $5,175,000

Lender Position (24%)
11.5M × 0.24 = $2,760,000

Why it works

• Low recorded leverage

• DSCR above 2.0

• Day-one cash flow

• No partners

Refinance Later
If NOI grows and value becomes 14M:

• 65% refi = $9.1M

• Old loan pays off

• Excess capital rolls forward

• Still no sale

Example 2 — Boutique Hotel (84 Keys)

• Asking Price: $28,000,000

• FMV: $26,000,000

Offer (85%)
26M × 0.85 = $22,100,000

Recorded Price (45%)
26M × 0.45 = $11,700,000

Lender Position (24%)
26M × 0.24 = $6,240,000

DSCR
Hospitality NOI supports debt at 2.3×.

Why it matters

• Hospitality income fluctuates

• Low recorded debt = survival margin

Example 3 — RV Park Resort

• Asking Price: $9,000,000

• FMV: $8,500,000

Offer (85%)
8.5M × 0.85 = $7,225,000

Recorded Price (45%)
8.5M × 0.45 = $3,825,000

Lender Position (24%)
8.5M × 0.24 = $2,040,000

Yield
RV parks produce strong yield with low expenses.

Why it works

• High margin

• Simple operations

• Strong refinance potential

Example 4 — Mixed-Use (Retail + Residential)

• Asking Price: $15,000,000

• FMV: $14,000,000

Offer (85%)
14M × 0.85 = $11,900,000

Recorded Price (45%)
14M × 0.45 = $6,300,000

Lender Position (24%)
14M × 0.24 = $3,360,000

DSCR
Residential stabilizes retail risk.

How Refinance Looks (Very Simple)

Think of refinance like this:

1. Income goes up

2. Value goes up

3. Bank lends on value

4. Debt replaces old debt

5. Extra capital comes back tax-free

Not income.
Not profit.
Debt — paid by tenants.

Why This Beats Small Deals With Partners

Small BRRRR deals:

• Depend on refi timing

• Require partners

• Create friction

• Limit scale

85/45/24:

• Works on five units or five hundred

• Keeps control centralized

• Eliminates capital calls

• Protects downside

This is institutional discipline without institutional bureaucracy.

When and Who to Deploy This Article To

1. Buyers Agents

Use when:

• They don’t understand recorded price

• They think offers are “too low”

2. Brokers With Large Assets

Use when:

• Seller needs certainty

• Capital stack matters more than ego

3. Lenders

Use when:

• Positioning safety

• Explaining why leverage is conservative

4. Sellers With Legacy Concerns

Use when:

• They want clean execution

• They want certainty over hype

5. Internal Training

Use to:

• Teach juniors

• Align operators

• Standardize language

Closing

This is not about buying small or big.
It’s about controlling risk, income, and execution.

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