Just ditched my old way of underwriting multi-family deals

For years I looked at DSCR and cap rate first on every apartment deal that came across my desk. Figured if those numbers weren't there, nothing else mattered. Then last November a guy in Denver showed me his underwriting for a 12-unit property that barely hit a 1.15 DSCR. He talked about the local job growth, the fact rents were 15% below market, and a major infrastructure project breaking ground nearby. I ran the numbers his way on my next deal and it got me a loan that cash flowed from month one. Now I spend more time on the market story than the hard ratios. Anyone else shift their focus from pure math to location story?

2 comments

2 Comments

rivera.jake2d ago

Brother just discovered the ancient art of "telling a story to the bank" - next you'll tell me comps are more important than vibes.

jones.mason2d ago

So what's the "story" you're telling them exactly?