Screening Multifamily deals

[Liam Delumpa]

Hello BP!

I am currently building out my funnel of leads for multifamily properties in my market. I understand the basics of underwriting, but I am curious how you screen deals and narrow down leads to a subset of properties worth doing full underwriting for. Is there any tips for determining if something will pencil out before going through the hassle of getting T12 financials from the broker/seller? I want to get my underwriting reps in, but don't necessarily want to intrude or waste the time of brokers to get full financials for every deal I'd like to practice underwriting. Any suggestions?

[Jim Pellerin]

You can do your own virtual underwriting by using the following "guess" method:

1. What's the asking price?

2. What are the typical rents for the area? Determine the gross rents for the property

3. Estimate the expenses based on the age and condition of the property. Use 40% to 60% of gross rents.

4. Calculate the estimated NOI. Gross rents minus estimated expenses.

5. Use the NOI and asking price to calculate the estimated Cap Rate.

6. If the Cap Rate is close to the market Cap Rate for the area, and you are ok with it, ask for the T12s and RR and all information about the property.

But I wouldn't worry about asking for detailed financials all the time. There shouldn't be that many coming your way.