How I Underwrite a Deal (and What I Won’t Compromise On)
When I underwrite a new multifamily deal, I’m not just asking, “Can this work?”
I’m asking, “What has to be true for this to work—and is that realistic?”
Underwriting is part math, part art, and part discipline. It’s where excitement meets execution. And if you want to invest wisely, understanding a sponsor’s underwriting approach is critical.
Here’s a behind-the-scenes look at how I approach deals—and what I never compromise on.
1. I Start With the Market
Before looking at any property, I vet the submarket:
Population and job growth
Supply pipeline (new units coming online)
Local legislation (rent control, taxes, eviction laws)
Historical rent trends and absorption rates
A great deal in a weak market is still a risky deal.
2. I Stress Test Every Scenario
I don’t assume smooth sailing. I build in:
Vacancy buffers (minimum 5–7%)
Conservative rent growth (often under market forecasts)
Exit cap rate expansion (higher than entry cap)
If a deal only works in the best-case scenario, it doesn’t work for me.
3. I Focus on Real, In-Place Cash Flow
Pro forma numbers are projections. What matters is what the property is doing right now.
How much income is it truly generating? Where are the operational inefficiencies we can correct?
Stabilized NOI is the foundation of every solid investment.
4. I Partner With Strong Operators
Even the best underwriting can be undone by poor execution. I only work with experienced property managers and operators who can manage day-to-day details and resident experience while protecting NOI.
5. I Won’t Compromise On These:
Debt coverage ratio of at least 1.25x
Realistic rent comps
Enough capital reserves for the full business plan
A margin of safety in pricing
Final Thought
Smart underwriting isn’t about chasing the biggest projected return. It’s about reducing downside risk, staying grounded in the fundamentals, and setting the business plan up for success—not stress.
That’s the difference between a flashy deal—and a durable one.
