Underwriting Consulting

Multifamily Underwriting and Personal Growth

I am super excited to tell my story today. I am very proud of the story I’m about to tell you, and I think there are meaningful lessons to be had here for all of us.

What I’ve Been Up To

I’ve been a little silent as of late. I am sure you noticed. The thing is, I’ve been growing. I’ve been evolving. I’ve been asking some tough questions of myself, and I’ve needed to take some time to internalize and put things into perspective. I’ve accomplished some things in life, but I’ve not been entirely happy with my direction as of late. It seems to me that life and evolution is a one-way street, which is to say that we are either growing, or we’re dying. It is this question of growth that’s been on my mind lately…

Upon taking some time to think, I realized is that while I love to teach, I love to learn even more. Resting on one’s laurels only feeds the soul for a short time, and then one has to climb to new heights. So, long story short, as this relates to real estate investing, I’ve taken some time to focus on syndication, and it’s been a trip!

I was under contract on an apartment community only to fall out days before closing. It’s a story I’ll tell someday, as there are many lessons to be had, some of which are not what you’d expect. For now simply this – do you guys know what it feels like to wire back a million dollars of investor capital?! I do, and it sucks! So close…

Following that, I’ve been underwriting like mad and writing LOIs and after a couple of months I was in the highest and best on 153 units. This one started out with 23 offers, of which 7 were invited into the highest and best.
We did not get it. I have reason to believe that we had one of if not the best offer on this single asset, but it traded as a portfolio. I think there might be a lesson in there somewhere…lol

What do I do with JustAskBenWhy…?!

So obviously, I’ve been busy sharpening my REI sword. Sitting there for days on in with my head buried in financials. Underwriting deals. Talking to brokers, bank underwriters, and property managers. The learning curve is tremendous and my intellectual worth absolutely exploded over the last 6 months, which makes me very happy indeed! In this respect, I feel “alive”!

JustAskBenWhy is a bit of a different story. I have been unsure of what to do about JustAskBenWhy. A website like mine is a living thing, and just like anything else it either grows, or it dies. For it to function as intended there needs to be constant communication and interaction, and guess whose job that is? Guess whose job it is to help the website grow…

Well, I’ve been busy with other things. And besides, while it seems that lots of people in the real estate investing blogosphere feel perfectly fine to regurgitate the same old crap day in and day out, I can’t do it. I can’t write about same old stuff every day. I have too much respect for you, and frankly, I have too much self-respect.

Thus, I’ve been sort of MIA; unsure of what to do next for JustAskBenWhy. I’ve made this site about passing along what I’ve learned, but the things I am learning lately are not the kind of things you can easily write about or put into a course. There’s too much information. The information is too involved. Believe me, I’ve wanted to talk to you about it, but I’ve not been able to figure out how. I’ve wanted to be helpful, which is what JustAskBenWhy is all about, but haven’t been able to figure out the appropriate way to approach this very high-level conversation.

This inability to communicate compounded over time, and my frustration grew over time. And that kind of describes the mental space I found myself in relative to JustAskBenWhy.

And then it happened!

The Breakthrough

I was sitting at the dining room table. My wife has appropriated the office upstairs for her business, you see. Patrisha is an agent in Phoenix with EXP, which, by the way, is a hell of a cloud broker and a heck of a deal for agents, and if you haven’t heard of EXP feel free to reach out – I’ll blow your mind. Anyhow, she took the office upstairs, which left me with the dining room table as the place where all of the underwriting happens. My friends and partners laugh at me. I’m making $10 MM offers from my dining room table…before the kid’s breakfast is cleared…lol

Be that as it may, as I sat there working on yet another offer an email came in from a CFFU student. Here’s an excerpt:

Hi Ben,

We’re in need of some guidance so your help would be greatly appreciated. We just received a contract for our first big deal, 40 units, and our lenders stated that the debt service coverage is too low given the seller’s reported expenses and our purchase price. Do you put a property under contract before investigating the real numbers behind the property?…

Below was my exact response to this email:

I am going through this process right now. It’s a 150+ unit. What this process looks like roughly is this:

  • I receive and study the offering memorandum
  • I prepare a Pro Forma Income & Loss for how I think the property will perform under my management. For this, I use the average per door numbers (both income and expense) that I know to be true.
  • I adjust those in specific ways according to the OM representations to reflect the specifics of the property.
  • If my underwriting is close, meaning I am getting the CCR, IRR, and DSCR at first pass, then I contact the broker/seller for more info and start dialing things in.
  • If things are still looking good, I contact a PM I trust to validate my assumptions. If the PM comes back with a number substantively different from mine, I need to get to the bottom of why.
  • Next is the LOI.
  • If my LOI is accepted we go under contract.
  • DD is next. This is when we go through every lease and every unit, etc.

So, you see, there is investigation happening the entire time. But, you are not going to see the “real” DD items until after you’re under contract and in the DD phase. But, this doesn’t mean that you shouldn’t be educated enough about all elements enough to make a realistic first pass. How else can you even know what to offer?
When you offered on this property, did you know what the Debt Service Coverage Ratio (DSCR) would be based on you debt package? You should always know this and many other things before you make an offer. Once you get under contract is not the time to come up with real expectations – it’s time to validate them.

Cutting to the Chase

There were a number of follow up emails, but in the end my student took me up on my offer to engage in 4 sessions of consulting. The level he was trying to play at was beyond CFFU. Frankly, few people ever try to wrap their head around this level of understanding, but he was there, and a few scattered back-and-forth emails weren’t going to help him gain the sort of in-depth understanding he was looking for. The way to get him up to speed quickly and efficiently, without missing anything important in the process was to do several “deep-dive” one on one sessions.
We did it. I gave him 4, 90-minute sessions. This turned out so much better than anything I thought possible!

Here’s what he had to say after:

“WOW! That is all I have to1 say about Ben’s consulting. My partner and I studied Ben’s CFFU, but we reached out to him because we were in the middle of making an offer on 40 units, and we wanted to make sure we weren’t missing things. And we are glad we did! If you compare my initial underwriting model to the one I created as a result of consulting with Ben, it is worlds apart. Not even close. And the kind of things I was missing weren’t small details – they were highly important things. Ben insisted on 4, 90-minute sessions. I tried to argue (can’t blame me for trying). But, Ben said the model covers distinct areas and would require 4 sessions.

Guys, I can recommend Ben’s consulting with no reservations. My knowledge of underwriting deals has grown so much and I am so much more confident in my abilities. Ben understands real estate and he is able to explain it in a way that not too many people can. I am in the process of putting together this 40-unit deal right now. Wish me luck, and thanks Ben!”

This Was the Most Enjoyable Teaching Experience!

It truly was. While I have been growing frustrated not knowing how to breathe life into JustAskBenWhy, this was such a spark. The sessions were high level, intellectual, and to the point. I loved working with a smart and capable individual who was eager to learn and to grow. I loved working with a doer!

And for me, the very wonderful thing about this was this – finally, after a long while, I felt truly useful, helpful, and appreciated! I was able to deliver very substantial value to a client, and it felt awesome!

Finally, after not knowing how to move JustAskBenWhy forward, it became clear!

JustAskBenWhy Consulting

Below is a fragment from one of our 90-minute sessions. This is the format you can expect should you engage.

Four 90-minute sessions

My underwriting model is comprised of several spreadsheet pages, some of which you can see in the video. All of the pages are linked, and each serves the purpose of answering a set of questions. So many people seem to think that real estate investing is about numbers. I, on the other hand, have been telling you for years that real estate investing is about the story, and the numbers are only there as a means of telling this story.

So – the reason I need 4 sessions with you is because this is how long it takes to break-down the story into component parts, and to translate those into numbers and spreadsheets. Sessions 1,2, and 3 are focused on teaching you to build a model. And in session 4 we apply the model to your deals.

This is how I did it for Jeff, and it worked out extremely well. In the end, his spreadsheet ended up looking very different from mine in some ways, but all of the logic was preserved, and all of the details of the “story” were captured.

We did sessions 1, 2, and 3 in quick succession in the first week, which helped to preserve the continuity. And then we took one week off to allow him to build out his model, at which point we had our last session in which we applied his model to the deal he was working on, and had the opportunity to look for inconsistencies.

What’s Covered?

Everything. Here you are, looking at a building, trying to figure out whether you should be interested. You are trying to understand the current financial condition of the asset, and how it’s likely to behave in the future.

Below are some of the triggers covered in the underwriting model:

  • Underwriting Broker Pro Forma
  • Underwriting T12
  • Underwriting GSR
  • Underwriting Stabilized P&L
  • Underwriting CapEx Credit
  • Underwriting OpEx
  • Underwriting Stabilized NOI
  • Underwriting Stabilized Cap Rate
  • Underwriting ARV
  • Underwriting CapEx Reserve
  • Underwriting Strike Price
  • Underwriting Financing Options
  • Underwriting Equity Needed
  • Underwriting Exit
  • Underwriting Reno LTL and Vacancy
  • Underwriting Property Taxes
  • Underwriting to the IRR

There are many other points that we cover (click here to see all of the details), but the important thing is to remember that the reason we go over all of this is because we are painting a picture. In fact, you can think of all of the bullet-points as colors on a painter’s politra, and by mixing the right colors in the right amounts we can get whatever picture we want.

The broker’s/seller’s job is to paint the picture he wants you to see. Your job is to paint the picture which most resembles the truth!

I have to brag a little. It was SO COOL seeing Jeff grow as much as he did in such a short time. His perspective evolved from that of a 2nd grader to that of a university master degree student. The transformation was truly amazing!

Are you ready for the next level?



  • Jeff Almonte Reply

    Thanks for the consulting Ben! I truly did not expect to gain that much knowledge in a short amount of time. I’m officially under contract on the 40-unit, and I am confident going into the deal. I can quantify the returns much more accurate than my previous 30 line excel sheet. The loan is going smoothly and my lender was impressed with my underwriting.

    • Ben Reply

      Hahah People – I promise I did not solicit this comment! This is cool hahaha

      Jeff, I am so happy to hear! Our consulting was really a lot of fun for me, and challenged me as a teacher in ways I haven’t been in a while. You’ve shown me the way I can be most helpful to talented folks like yourself, and you’ve illuminated the way forward for JustAskBenWhy. Thank you for that! And something tells me we’ll be doing deals together at some point 🙂

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