Underwriting multifamily deals can feel overwhelming at first, but breaking it down into a step-by-step process makes it manageable. Whether you’re new to underwriting or refining your skills, here’s a 5-step checklist to get you started:
1. Define Your Focus: Market, Asset Type, and Class
One of the biggest mistakes new underwriters make is trying to analyze every deal that comes their way. Successful investors specialize. Pick a specific market, asset type, and asset class so you can develop expertise.
For example, instead of saying, “I underwrite multifamily deals anywhere in the U.S.”, you might focus on Class B/C+ 100-unit apartments in Orlando. This focus allows you to:
· Develop a deeper understanding of local rents, expenses, and cap rates
· Build relationships with brokers who specialize in your target properties
· Spot anomalies and opportunities faster
If you’re unsure where to start, research job growth, population trends, and landlord-friendly regulations—these factors often point to strong markets. Ask yourself, what asset class I am familiar with or would enjoy learning more about.
2. Choose and Master Your Underwriting Model
Underwriting is both an art and a science. While there are many underwriting models available, pick one and master it before jumping between different ones. The same property can look slightly different depending on the model you use.
In your underwriting model:
· Understand key KPIs (Net Operating Income, Debt Service Coverage Ratio, Cap Rate, Cash-on-Cash Return, IRR, etc.)
· Perform sensitivity analysis to test different scenarios (rent growth, interest rates, vacancy rates)
· Identify red flags and deal-breakers before wasting time on bad deals
Don’t get stuck constantly tweaking your model—focus on understanding the numbers behind it. Once you master one model, you’ll have the foundation to adjust as needed (or build your own).
3. Build Key Relationships to Validate Numbers
Real estate is a team sport. Here’s what you need:
· A mentor – Someone who has done what you want to do & can guide you along the way.
· The right relationships – Brokers, lenders, property managers, and investors.
· Local knowledge is crucial – Example: A contact I had in Tampa gave me insight that
completely changed my perspective, and they were right over the broker I initially trusted.
Your underwriting is only as good as the assumptions you use. To ensure accuracy, build a trusted network of third-party experts who can validate your numbers:
Pro Tip: Have at least 2-3 trusted contacts per category. Relying on a single lender or property manager could leave you vulnerable to biased or outdated information.
4. Understand the Risks and How They Impact the Deal
If you’re looking to get rich quick, this is NOT for you.
· Every deal carries risk—it’s your job to identify, measure, and mitigate those risks.
· Underwriting is one step you can take to help mitigate risk.
· Proper analysis protects the money you’ve worked years to save from your job.
Run sensitivity analyses to see how these risks impact cash flow and valuation. For example:
- If vacancy rises to 10%, does the deal still cash flow?
- If interest rates increase by 1%, does the DSCR still meet lender requirements?
- If expenses are underestimated by 5%, does the deal still meet your return targets?
The best underwriters don’t just look at best-case scenarios—they stress test deals so they’re prepared for any market condition.
5. Get Your Reps In – Repetition is Power
Underwriting is like going to the gym—the more reps you put in, the stronger you get. The best way to improve is to analyze as many deals as possible.
· Start with 1-2 deals per day – even if you don’t plan to buy, this builds your underwriting muscle
· Compare your assumptions to actuals – after deals close, track how they perform vs. your projections
· Join underwriting groups or masterminds – reviewing deals with others speeds up your learning curve
Don’t worry about being perfect—just get started, refine as you go, and let experience sharpen your instincts.
Want to take your underwriting to the next level?
My underwriting coaching program teaches a proven 5-step blueprint to help you confidently underwrite multifamily deals. Plus, for a limited time, you’ll get exclusive access to my private community.
👉 Tap here to learn more or DM me to connect one on one!
P.S. Have questions? Let’s chat—grab virtual coffee with me! ☕