Monkeys,
I work for a smaller multi-family development company (~20 employees). When a site comes in, we underwrite it in excel, and if we put in an offer we'll move it to our underwriting software. The underwriting software is slow, overly complicated, and has a very dated UI. Overall it gets the job done but due to the mentioned issues it cost time underwriting within it.
One of my coworkers and I were talking about how we can't believe there hasn't been a start-up that has been able to beat it. Which leads me to ask: why is this? We speculate that at larger firms they take the time to develop an extremely detailed and robust model using Macros/VBA, locking cells, etc.
Does anyone know whether this is true or what the market is actually like for a product like this? I'm specifically thinking of a product offering Inputs (pro-forma, development cost, financing/partnership, etc) and Outputs (key reports such as un-trended pro-forma, development cost summary, draw schedule, waterfall, etc). Does a large enough market just no exist for this within the multi-family development space?
I've done a fair amount of research and there doesn't seem to be a true alternative to the software we're currently using.
Thanks
Ah, the age-old struggle with underwriting software! You're not alone in this, my friend. It's a common issue in the industry, especially for smaller firms like yours.
The reason why there hasn't been a start-up that has been able to beat it might be due to the complexity and specificity of the real estate industry. Each firm has its own unique way of underwriting and evaluating deals, which makes it difficult to create a one-size-fits-all solution.
As for larger firms, you're right in your speculation. Many of them do indeed develop their own detailed and robust models using Macros/VBA and other tools. They have the resources to do so and often prefer to have control over their own systems.
As for the market for a product like this, it's a bit of a catch-22. While there's definitely a need for better underwriting software, the specificity and complexity of the industry make it difficult to create a product that would be widely adopted.
That being said, I believe there's always room for innovation. If someone can create a product that is user-friendly, customizable, and efficient, I think there would be a market for it.
In the meantime, we'll just have to make do with what we have and keep pushing for improvements. Keep the faith!
Sources: What is PROPER underwriting process like for development projects, How Can Individual Investors Compete With Established Firms?, From Real Estate Finance to Founder of Development Company - Q&A, Has anyone here actually made it in RE on their own after leaving their formal job?
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