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How to Build a CapEx Budget for a Multifamily Acquisition

Every value-add multifamily deal comes down to the same question. How much will it cost to fix up the property, and does the return justify that cost. The capex budget is where that question gets answered.

A capex budget is not a guess. It is a structured estimate of every dollar you plan to spend improving the property after you close, built line by line so the total holds up when a lender, partner, or your own underwriting model asks where the number came from.

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Start with interior capex, broken out by unit type and condition

Interior renovation costs are almost always the largest piece of a multifamily capex budget, and they are also the piece most often underestimated because investors price it as one flat number per unit.

A more accurate approach starts with your unit mix. List out every unit type in the building, then within each unit type, break the units out by their current condition. A common way to do this is three tiers:

• Classic units that have not been touched and need a full renovation
• Light reno units that need cosmetic work but not a full gut
• Renovated units that are already at or near market finish

For each unit type and condition combination, enter the unit count and a per unit renovation cost. A 20 unit, 2 bedroom mix might have 8 classic units at $12,000 each, 6 light reno units at $6,000 each, and 6 renovated units that need little or nothing. Multiply count by cost per unit for each row, then sum the rows to get your total interior capex.

This matters because pricing every unit the same way, regardless of condition, either overstates your budget on units that barely need work or understates it on units that need a full renovation. Breaking it out by condition keeps the number honest. The other half of that equation is knowing what the renovation actually buys you in rent. That premium comes from real rent comps, not a guess, since only actual data on renovated versus classic units in your market tells you if the cost is worth it.

Build out exterior and common area capex as an itemized list

Exterior and common area work covers everything outside the units themselves. Roof, parking lot, landscaping, siding, signage, fencing, and common area amenities all fall into this bucket.

The mistake to avoid here is estimating exterior capex as one number, something like "$400,000 for exterior work." That number is hard to defend and even harder to check against contractor bids once you are under contract.

Instead, list each exterior item on its own line, with its own cost estimate:

• Roof
• Parking lot
• Landscaping
• Siding or exterior paint
• Signage
• Fencing
• Common area amenities

Even rough estimates on each line, pulled from a walk through or comparable projects, will hold up better than a single guessed total. It also makes it much easier to update the budget later once you have real bids, since you are replacing one line at a time instead of rebuilding the whole number.

Add a contingency buffer

Once you have your interior and exterior subtotals, add a contingency percentage on top of the combined total. Ten percent is a reasonable starting point for most value-add deals, though older properties or heavier scopes may call for more.

This is not a formality. Capex budgets are estimates built before demolition starts, before every wall is opened up, and before every contractor bid is in hand. A contingency line is what keeps a normal scope surprise from turning into a budget shortfall.

Put it together in a summary

With interior, exterior, and contingency calculated, the final step is a summary that shows:

• Total interior capex
• Total exterior capex
• Contingency amount
• Total capex budget
• Total capex per unit

That per unit figure is worth watching closely. It is the number you will compare against market benchmarks and against what your lender or partners expect to see for a project of this scope. If it looks unusually low or high relative to the renovation you are describing, that is often the first sign a line item further up needs a second look.

From capex budget to underwriting model

Once your capex budget is built, the total becomes an input into your full acquisition underwriting, where it affects your sources and uses, your loan sizing, and your return projections.

Our free Multifamily CapEx Budget Template is built around this exact structure: interior costs by unit type and condition, an itemized exterior list, and a built in contingency buffer, all rolling up into a clean summary. Download it, plug in your own numbers, and use the total in your underwriting model.