What is a High-Level Property Analysis?

When applying for job, normal protocol is to complete an application and/or submit a resume. The job application or resume are basically the initial screening step that lets the employer quickly determine if we meet the minimum qualifications and decide whether to take the next step in the hiring process.

Why do this? Because interviewing and hiring potential employee candidates takes time and effort. And we don’t want to spend time or effort on candidates that do not even meet the minimum qualifications. Investing in real estate is very similar.

As real estate investors, we’re like the employer above. Our time is valuable and not to be wasted or taken lightly. Thus, when reviewing potential properties for investment, we need a process that will allow us to select the best candidate as quickly as possible. We cannot afford to give the full analysis and due diligence treatment to every “opportunity” that comes across our desk.

Therefore, we need an initial screening process. Like how employers use the application or resume as the initial screening tool, real estate investors also need an initial screening process that can signal when to continue to the next step in the analysis and when to pass and move on.

Fortunately, there is such a process when evaluating multifamily real estate, which we call High Level Analysis. The High Level Analysis is our initial review that will indicate whether we should continue on to the next steps of underwriting and due diligence, or whether we should let this one go and move on.

High Level Analysis involves determining whether the opportunity meets our investment criteria. That is, the minimum requirements that a potential investment opportunity must have in order to keep moving forward with more in-depth analysis. It is these investment criteria that make up our screening tool. Using these investment criteria, we can quickly perform our High Level Analysis by reviewing specific factors about the property and make a “go or no-go” decision.

Here are four factors that can make up our investment criteria in reviewing multifamily real estate:

• Does it align with our Investment Strategy (Distressed, Value-Add, Turnkey)?
• Is it located in our Target Market?
• Is it the right size? How many units?
• How old is the property and what is the property Class (A, B, C, D)?

If given basic information about the property, we can answer the above questions and perform High Level Analysis to quickly qualify or eliminate a property as a potential investment candidate. And as we review more and more properties and gain experience, the High Level Analysis should take little time and minimal effort.

Conclusion

Real estate investors can review literally hundreds of properties when choosing a good candidate for potential investment. As such, we need a set of investment criteria that a property must initially meet to be considered for further analysis, and use these criteria as an initial screen to quickly evaluate the property. In the overall process of evaluating real estate investments, we call this step High Level Analysis.