# Comps vs DCF Reconciliation The sales-comparable approach indicates a value of $4,553,512 ($189,730 per unit), while the DCF model produces a value of $5,172,868, representing a gap of $619,356 or 13.6%. This divergence suggests the DCF model embeds optimistic assumptions that are not fully reflected in recent transaction evidence, particularly the 3.00% annual rent growth assumption and the 8 basis point cap rate compression from 6.08% at acquisition to 6.00% at exit. In the Dallas multifamily market, where population inflows and employment diversification support strong fundamentals, sustained 3% rent growth is achievable in well-located urban assets, but the terminal value of $5,635,185—representing 76% of total DCF value—concentrates significant risk in Year 5 exit assumptions that may not materialize if cap rates expand rather than compress. To justify the asking price of $4,800,000 through the DCF lens, the exit cap rate would need to expand to approximately 6.35%, or rent growth would need to moderate to roughly 2.3% annually, either of which would align model-driven value with observable market pricing. The asking price sits 5.4% above comparable sales evidence but 7.2% below the DCF indication, positioning it within a supportable range assuming the buyer underwrites conservative exit assumptions rather than relying on cap rate compression. Given the strength of Dallas fundamentals and the subject's urban location, the asking price of $4,800,000 is supportable, though buyers should stress-test terminal value sensitivity and negotiate toward the lower end of the range given the premium to sales comps.

# Deal Assessment vs Asking Price The asking price of $4,800,000 sits $372,132 below the DCF-indicated value of $5,172,868, representing a 7.21% discount to modeled fair value and $246,488 above the sales-comp indication of $4,553,512. To justify the asking price under the assignment's required 8.0% discount rate, rent growth would need to run at approximately 2.1% annually rather than the modeled 3.0%, a deceleration that appears unlikely given Dallas's robust population inflows, diversified employment base anchored by corporate relocations, and constrained new supply in established submarkets. Alternatively, to produce the sales-comp value of $4,553,512 if rent growth is held at 3.0%, the discount rate would need to be reduced to approximately 7.3%, a 70-basis-point compression that falls outside reasonable risk-adjusted return parameters for value-add multifamily in secondary Dallas locations. Neither downside scenario appears probable in the current operating environment, particularly given the subject's East Dallas location benefits from ongoing urban core expansion and the asset's value-add runway supports above-market rent growth during the hold period. The asking price therefore represents a **fair-to-light** entry point relative to both intrinsic value and comparable transactions. A negotiated price target of **$4,650,000** ($193,750 per unit) would provide additional downside protection while remaining within reasonable striking distance of the seller's expectations and delivering a 50-basis-point improvement to the going-in cap rate.

# Biggest Assumption & Sensitivity The dominant assumption driving valuation is the 6.00% exit cap rate, which sits 8 basis points below the going-in cap of 6.08% and implies continued cap rate compression in a market where Dallas multifamily fundamentals remain strong due to population inflows and employment diversification. Sensitivity analysis reveals that every 50 basis points of exit cap rate movement translates to approximately 8-9% change in enterprise value, a material swing given that the terminal value of $5.64 million represents 76% of the DCF-derived value of $5.17 million. Under forward-curve scenarios, a 100% NOI pass-through assumption (exit cap of 6.17%) would narrow the discount from asking price to DCF value, while a 50% pass-through scenario maintains the current 6.00% exit cap and preserves the 7.21% discount to asking price. The key upside driver specific to Dallas is accelerated rent growth fueled by continued corporate relocations and net migration from higher-cost markets, which could push annual rent escalation from the modeled 3.00% to 4-5% if employment growth in the Dallas-Fort Worth MSA sustains its recent momentum. To justify the $4.80 million asking price under current cap rate assumptions, rent growth would need to average approximately 4.2-4.5% annually rather than the conservative 3.00% baseline, a scenario that becomes increasingly plausible if Dallas maintains its position as a top-tier destination for both employers and renters seeking affordability relative to coastal gateway markets.