Intro
Your Intro to Underwriting
Real estate investing can be lucrative, but to be truly successful, you must master property comping and underwriting.
When you’re out there, trying to figure out what a property’s worth, you can’t just throw out a random number and cross your fingers.
That’s not how seasoned professionals operate. It’s all about blending research, expertise, and a touch of market intuition. This is where the power of comparables, often referred to as “comps,” truly shines. They provide the data-driven foundation to make informed decisions with confidence.
Comps are what you do when you look around your property’s neighborhood and find homes that are like yours in size, age, and features. You should be especially interested in the homes that recently sold. Comping is a technique every successful realtor knows like the back of their hand.
Real Estate Investors jump straight to the realtor’s MLS system, and that can be a decent way to track homes. But, don’t limit yourself.
Get to know your local real estate agents and county assessor’s office. These folks have the intel, the secrets of what’s happening in the neighborhood when you need more information.
If you’re the DIY type, don’t fret. There’s always Zillow, Redfin, and a dozen other online platforms. Filter, search and compare – you’ve got the whole world at your fingertips. But remember, it’s not just about gathering data; it’s about understanding it.
The market shifts and turns so the rule of thumb is to stick to comps within 3 to 6 months.
Now, when you hear underwriting you might think that we’re talking about the kind of underwriting that banks and mortgage lenders do when they gather a million different pieces of documentation to see if you qualify for lending.
When I use the term “underwriting,” I’m basically talking about digging deep into the financial details of a property. It’s like doing a health check to see if this property is going to be a good investment for the long haul. We’re not just looking at its current value, but also how it might perform in the market down the road. And just to be on the safe side, I always map out a solid exit plan. This way, we’re prepared for the long game and can manage our cash flow effectively.
So, let’s walk you through the process of underwriting and comping step-by-step, ensuring you get the most out of your investments.