What is Underwriting?

Underwriting is the most important aspect of analyzing any deal in Real Estate. The purpose of underwriting deals is to determine if a deal makes sense financially. My goal is to ensure the property cash flows in the end for it to make financial sense. I do not follow what is for sale out there with the price, cap rate, or what a seller/realtor tells me the market is doing. There are also many buyers out there buying up properties just because they have the money, yet they are losing money because they do not know how to properly underwrite a deal. Just because someone has money does not mean they are a seasoned investor who understands how to underwrite a deal. It can be the difference between making money or losing money!!!

Here are a few things I look at while analyzing my deals:
– Gross rent
– Tax
– Insurance
– HOA fees if any
– Property Management
– Vacancy Rates
– Repairs
– Mortgage payments

I check the numbers to the current asking price and the market cap rate to determine if it makes sense financially. It can be a valuable tool in my negotiations to make sure everyone is being realistic with the numbers. If it does not work, I walk away from the deal. I focus on facts when making sound financial decisions, not with my emotions or because other people are doing it. Many people have lost money in Real Estate because they do not understand how to properly underwrite a deal or because they follow what other people are doing or their emotions.

***Be an Overcomer!!!***