After three years in multifamily operations and underwriting over $250M in potential acquisitions, I wanted to share some of my observations and perspectives. I am not claiming to know everything about this stuff, because I certainly do not. I’m still learning every day, but I hope these insights prove useful and spark conversation about important topics in the multifamily world. Here is the thought I will be unpacking today: There is often a noticeable pricing and cap rate gap between 1970s vintage product and late 80s / early 90s vintage assets, even when they sit in the same submarket. For seasoned investors this may seem obvious, but I think it’s worth breaking down the underlying reasons. If you feel I missed anything feel free to comment and let me know. Below are some of the biggest reasons I believe this gap exists, along with a few things I personally look for when underwriting and touring these types of assets. TLDR: 1970s multifamily properties often trade at higher cap rates because they carry more operational and capital risk. Aging/out-dated plumbing, environmental considerations, insurance friction, and dated layouts all contribute to the discount compared to late-80s or early-90s product. But with careful diligence and the right business plan, that discount can also create opportunity. --- Why the market discounts 1970s product 1. Major systems are closer to the end of their life Many 1970s properties are approaching replacement cycles on multiple systems at once: Roofs Plumbing Electrical panels Parking lots HVAC systems When several of these items hit their replacement window at the same time, buyers must underwrite meaningful near-term CapEx. That risk gets priced directly into the purchase price. This can be the case with 80’s and 90’s product as well, but you may be going on even ANOTHER replacement cycle for some of these systems. 2. Plumbing systems and repipe risk One of the biggest dividing lines between vintages is plumbing materials.