What Underwriters Look for in Successful Multifamily Deals

When investors plan ahead, underwriters can help streamline the process for shared success. 

Underwriters know that success looks different for every investor, especially as they start adding multifamily properties to their portfolio. Every deal is different, however there are a few key details that underwriters look for in every successful deal. As Asset Based Lending expands its DSCR program to include 4-9 unit multifamily housing, we want to ensure our borrowers are prepared for what they have to bring to the table.  

Before you pre-qualify a multifamily property for an ABL loan, let’s take a look at the ins and outs of underwriting requirements and make sure you’re ready for every step of the process. Knowing exactly what to expect and what you need to have will streamline your loan process and get you to closing in as few as 20 days.  

What Do Underwriters Look for in Multifamily Loan Approval?

Underwriters are often very specific when it comes to our multifamily loan program. Unlike single-family properties, multifamily properties tend to have more moving parts that make them more suitable for experienced investors. Because of this, there are a few important boxes that need to be checked off before you get approved.  

Conservative rent projections. When evaluating your property and potential monthly rental income, the numbers matter. Overpromising the amount of rent the property can generate will directly impact your overall profit margin—and could even land you in the red.

Realistic operating expense assumptions. Knowing how much you’re going to make includes knowing exactly how much you’re going to spend. Downplaying the amount of operating expenses can hit just as hard as exaggerating your rent projections.

Adequate cash reserves. It’s crucial to have funds on hand in order to cover short-term financial needs or even in case of an emergency. Especially in the world of renting when you don’t know how quickly you’re going to acquire tenants, cash reserves are a safety net that every successful investor should have.

A strong business plan. In order to prove that you’re prepared to take on a new rental property project, underwriters need to make sure you have a business plan that’s going to perform in today’s market. This includes a plan on how to maintain occupancy under current market conditions and best practices for keeping rents stable.

What Do Underwriters Evaluate?

Market Details

Underwriters take the time to look into the market you want to work in. They consider factors like whether the market is growing or if supply is increasing. They also look into current market patterns, like who’s already renting and if vacancy is rising. The strength of your rental property depends on its neighborhood and surrounding area. The stronger the location, the stronger market—and the stronger the deal.  

Property Details

Along with location, different property details will also be taken into account before your loan is approved. The age of the property and amount of previously deferred maintenance could point to increased costs of repair. The unit size, available parking, and access to laundry will also be considered, along with comparable properties in the area. Whether or not the property is already occupied and current/potential Net Operating Income (NOI) will also play a part in the underwriting process.  

Borrower Details

For underwriters, the investor looking to take out a hard money loan needs to be ready and prepared to partner with ABL. While underwriters don’t require things like income verification or tax documents, there are still key points to look out for. When you apply for a loan with ABL, underwriters will look into things such as your investment experience, credit score, and amount of liquidity you have. They’ll want to make sure you’re prepared with a team of experts in their fields, so the purchase and any potential renovations get done properly.  

Questions that Underwriters Will Ask You

When speaking with your underwriter, it’s important to come prepared. A good place to start is with the following questions. If you’re able to answer these with ease, the underwriting process for your loan application will go much more smoothly.  

• Where will value come from with the acquisition of this property? 
• Do you plan on improving the property with operational or cosmetic renovations? 
• How do you plan on moving forward with property management? Do you intend to self-manage or hire a management company? 
• How will you manage multiple tenants and determine projected rents? 
• What is your plan for improving the property’s NOI? 
• How do you plan to market the property to lease up the units? 
• What are your major operating expenses? 
• How much working capital will remain after closing? 

Note that this may not be every question asked, but this is a great starting point for any investor. Keep in mind that an underwriter’s ultimate goal is to successfully identify loan opportunities for Asset Based Lending. They have to make sure that both the investor and the property are a good fit for ABL to ensure shared success on both ends. Ultimately, the strongest deals combine realistic assumptions with a clear value business plan.  

Pre-Qualify Your Multifamily Property with ABL

Your multifamily investing goals may be easier to reach than you think. At Asset Based Lending, our loan experts are prepared to help you scale your portfolio into multifamily properties. We specialize in helping investors like you turn their real estate visions into reality with fast loans tailored to your project. Whether you’re on your first 5-9 multifamily investment or you’re expanding your portfolio, we’re ready to help you get started. 

If you’ve reviewed our DSCR loan terms and requirements and you have a deal that you think fits, we’d love to hear more. Our pre-qualification form only takes a few minutes to fill out, and we’ll reach out in a day or two to let you know what’s next. 

Ready to work with our professional underwriters and the rest of the ABL team? Let’s get started! Take the first steps toward your next investment and pre-qualify with Asset Based Lending now!