Learning to Underwrite Multifamily Deals

[Sameer Sharma]

I'm in the process of doing my first multifamily syndication. What's the best way to learn how to underwrite multifamily deals? I own residential rentals and understand the basics of of a P&L statement. However, I am looking at larger (50 units or more) out of state deals and don't know what assumptions to use for my own analysis. Any advice is much appreciated. Thanks!

[Mark Mosch]

Sameer, you shouldn't be underwriting with assumptions - you should be finding out the exact numbers.  Don't assume you can get a certain insurance rate until you have an actual quote.  Don't assume  mortgage rates and terms until you have a lender giving you some ballpark numbers after seeing some preliminary details on the property.  Don't assume anything about expenses until you've seen 12-months trailing numbers.  Since this is out of state you will have a local property manager involved.  Don't assume anything as to expenses - have the property manager walk the property with you and give you a pro-forma as to what they think it would cost to run, and what vacancy and rental rates they would be able to expect there.  You really should not be assuming anything if you can avoid it.  Take the brokers pro-forma P&L and then rebuild it with the facts as you see them, not the rosy ones that the broker wants you to think about.

It's all very doable with a little work.  Good luck!!