The 7 Inflations Sellers Always Make (With the Math to Spot Them)

TL;DR

✦ Every pro forma inflates the same 7 numbers — predictably and consistently. ✦ Each inflation has a 5-minute cross-check that exposes it. ✦ The combined inflation typically misstates NOI by 25-50%. ✦ Operators run the cross-checks before underwriting. Hobbyists trust the OM.

Why these specific 7

Sellers, agents, and wholesalers all benefit from a higher offer. The pro forma is the lever they use. The 7 inflations below are the ones that move offers most — so they appear consistently.

Each one is fixable in minutes. None of them require advanced tools. All of them are routinely overlooked.

Inflation 1: Rent (peak rather than average)

How it shows up: the rent column reflects either peak summer rent, asking rent (not collected rent), or a recent increase that hasn't been tested by tenant turnover.

Cross-check: pull median rent for the unit type in the specific zip. Use Zillow Rent Estimate, Rentometer, and HUD FMR. Take the median, not the asking rent on competing listings.

Typical inflation: 8-15%. On a $1,800/mo unit, that's $150-$270/mo of phantom income.

Inflation 2: Vacancy (national average rather than local)

How it shows up: the OM lists "5% vacancy" — pulled from the 2010-2020 national average.

Cross-check: pull HUD or Census ACS local vacancy by zip and class. Class C cashflow markets often run 11-14%.

Typical inflation: 3-9 percentage points. On a 4-unit at $5,800/mo gross, an 8% vacancy delta is $464/mo of phantom income.

Inflation 3: Property tax (seller's frozen basis)

How it shows up: the tax line uses the seller's protected/grandfathered basis (FL homestead, CA Prop 13, TX SB2 cap), not the post-sale reset value.

Cross-check: pull the county assessor. Compute the post-reset bill at sale price × current millage. Compare to the OM's tax line.

Typical inflation: 25-50% in FL/CA/TX, 8-15% elsewhere. On a $300K SFR in Florida, often $1,500-$3,800/yr of under-modeled tax.

Inflation 4: Insurance (seller's grandfathered policy)

How it shows up: insurance line reflects the seller's old policy from a carrier that may have exited the market or tightened terms.

Cross-check: get a binding quote from a local broker on the specific address with lender-spec coverage.

Typical inflation: 30-100% in FL coastal, 50-200% in CA wildfire zones, 20-40% elsewhere. The most movement-prone line in a 2026 pro forma.

Inflation 5: Operating expense ratio (under-counts CapEx, PM, maintenance)

How it shows up: total operating expense line is "22% of rent" or specifies expenses excluding CapEx reserve, PM, and proper maintenance.

Cross-check: rebuild line by line:

• Property mgmt: 8-10% (whether you self-manage or not)
• Maintenance: 5-8% of rent (operating, not CapEx)
• CapEx reserve: 8-12% of rent
• Vacancy: per local data
• Utilities, trash, lawn, snow: line by line

A real total operating expense ratio is closer to 35-50% of rent, depending on class.

Typical inflation in seller's pro forma: 12-18 percentage points. On a $5,800/mo gross rent, that's $700-$1,000/mo of phantom NOI.

Inflation 6: ARV (cherry-picked comps)

How it shows up: the OM lists ARV based on 2-3 favorable comps, often outside the proper radius or condition tier.

Cross-check: pull operator-grade comps yourself. 0.5mi radius. 90-day window. Adjusted for sqft, beds, baths, condition. Take the median, not the high.

Typical inflation: 5-12%. On a $400K ARV, that's $20K-$48K of phantom margin.

Inflation 7: Rehab budget (under-scoped)

How it shows up: "$15K rehab — paint, carpet, basic updates."

Cross-check: get bids from 2-3 actual contractors on a defined scope. Account for: kitchen, bath, paint, floors, HVAC service, roof spot-checks, electrical (especially in pre-1980 properties), plumbing (especially in pre-1965 properties), foundation visible signs.

Typical inflation: 30-60% under-scoped. The seller's $15K rehab is often $25-$30K in reality, before the inspection finds the unknowns.

The compounded effect

These 7 inflations don't add up — they multiply. A property where every inflation is in play:

• Rent inflated 12% → -$216/mo
• Vacancy under-modeled 4 pts → -$232/mo
• Tax post-reset under-counted → -$148/mo
• Insurance under-quoted → -$195/mo
• Operating expense ratio off 14 pts → -$812/mo
• ARV inflated 8% → -$32K (one-time)
• Rehab under-scoped 40% → -$11K (one-time)

Annualized: ~$19,200 of misstated NOI per year, plus $43K of one-time exit/setup misstatement.

On a $400K asset, that's a 4.8% annual NOI delta. A "10% cap rate" listing becomes a 5.2% cap rate after honest math.

The systematic cross-check workflow

Before any underwriting, run the 7 cross-checks:

1. Rent comp pull (10 min)
2. Vacancy lookup (3 min)
3. Tax assessor pull (5 min)
4. Insurance binding quote request (sent, 4-hour wait)
5. Operating expense rebuild (15 min)
6. ARV comp pull (15 min)
7. Rehab bid request (sent, 24-hour wait)

Active time: 50 minutes. Calendar: 1-2 days for full data return.

Worked example

A 6-unit in Indianapolis, listed at $585K, "9.8% cap rate" per the OM.

Cross-checks run:

• Rent: listed $7,800/mo. Market median $6,950/mo. Inflation: 12%.
• Vacancy: listed 5%. Local Class B 4-6 unit: 8%. Inflation: 3 pts.
• Tax: listed $4,200/yr. Post-reset $7,400/yr. Inflation: $267/mo.
• Insurance: listed $185/mo. Binding quote $295/mo. Inflation: 60%.
• Op expenses: listed 24% of rent. Real 41% of rent. Inflation: 17 pts.
• ARV: not relevant (rental, not flip).
• Rehab: listed $0 (turnkey claim). Walkthrough revealed roof at 22 years and HVAC at 18 years → real rehab over 24 months: $18K.

Operator NOI vs seller NOI:

• Seller's NOI: $57,330
• Operator's NOI: $32,800

Operator cap rate: 5.6% on $585K. Asking price doesn't clear cap rate floor. Either negotiate to $410K (8% cap rate target) or walk.

The hobbyist offers $580K based on the OM. The operator either gets it at $420-$440K or moves on.

Run this in Vricko

Vricko runs cross-checks 1, 2, 3, 5, and 6 automatically when you paste an address. The other two (insurance, rehab) require external workflows that Vricko triggers.

Try Vricko →

Keep reading

• Every Seller Pro Forma Is a Marketing Document
• Pro Forma vs Real Numbers: A Side-by-Side Teardown
• Tax Reset at Sale

Get Vricko free

Stop reading pro formas. Start verifying them. Sign up free →