Understanding how to evaluate the risk of a multi-family property purchase or development is vital, and one of the most important parts of the process is underwriting. Underwriting can be complicated, but it is also a crucial part of the property acquisition process.

Underwriting is the backbone of investment decisions in the financial world. It is the process of establishing both the risk and potential return of the multi-family investment, whether it be a cash real estate investor or a bank issuing a loan on the property.

Underwriting can take a number of forms, but the most common in multi-family real estate is the use of financial modeling to project potential cash flows and the likelihood of those cash flows coming to fruition. The inputs for these models will vary depending on the circumstances, but generally variables like income and expenses will be considered, along with more advanced variables like discount rates and likelihoods of success.

The underwriting process is a key step and can be a deciding factor for whether your multi-family property is purchased or not. Unless you are a multi-family expert and have experience with financial modeling, trying to tackle underwriting on your own can be an almost impossible task. The smallest of errors can have a large impact on the accuracy of the projections and result in expensive consequences or no sale at all. For this reason alone, there is no other choice to handle all of your multi-family needs then Cole Leavitt, “The King” of Multi-Family. He gets his deals sold!