“Conservative UW is Dead”

[Justin Goodin]

“Conservative underwriting is dead.”

Rob Beardsley brings up a great point. It’s extremely difficult to be an active real estate investor in this market if you are using extremely conservative underwriting techniques.

📈Values are inflated and deals are being listed for crazy prices. But yet, deals are still being bought and sold all around.

There are times deals do not pencil out to provide our required return metrics but then months later, I will see that deal being closed on LinkedIn and the buyers are projecting a 19% IRR. 🤔

📌Anyone else have thoughts on this? How is your team adapting to this competitive market and underwriting deals? 👇

Check out Rob’s video HERE

[Jillian Sidoti]

It's fake. Don't buy. If you can't underwrite it conservatively, then don't buy. The deal has to work. It has to have at least potential to cash flow. Wait. There will be plenty of opportunities. Maybe it won't be the same level of opportunity as 2010 because of the lending and fluctuations with interest rates, but there will be an opportunity nonetheless. This is not sustainable as renters don't have the money to have "rents pushed" on them over and over again. You can push your rents all you want, but if renters can't afford it, what good does it do? 

Also, the claim is that there is a shortage of available properties. This is true and not true. Our population growth is less than 1% per year and has been going down since about 1998. prior to that, it wasn't more than 2% per year.