Fundamentals of Underwriting

Hi all, Just starting out and I'm trying to understand underwriting on a deeper level than just punching numbers into a spreadsheet. For starters I would like to know what are good returns for value add multifamily but more importantly what makes those good returns. I would also appreciate any other advice and resources on underwriting. Thanks

2 Comments
 
Most Helpful

There's no right answer tbh. The goal is that you want to be correct in your assumptions as much as possible to get a clear picture of what the investment will end up doing in the next 5-10 years. Once you have the most accurate model you think is humanly possible, you can see the return metrics and if you are ok with the returns based on the risk you're taking on then it's a good deal, otherwise it isn't for you. Some funds are fine with taking on a value-add deal and getting a 10-12% IRR simply because they think it is a low-risk deal or because they are happy to just have positive growth. Then there are some funds that think anything less than 18-20% IRR isn't worth their time or too much risk. 

Besides the internal IRR thresholds, firms also have to think about their equity sources and what are good enough returns for them. If you're syndicating deals with HNW instead of institutional they will have different risk appetites and IRR thresholds that they want to see in a deal. You might internally be happy with 12% IRR but if your LPs are only ok with 15%+ then you'll never get equity for deals (which is why some places do multiple models for internally v. LPs and lenders). 

Finally, general market conditions. Right now most people are seeing double digit losses in the public equity markets so an upper middle class family that is seeing their portfolio drop 20% in stocks would be ecstatic to have a double-digit return and steady cash flows. But during times like the back half of 2020 and early 2021 when stocks were rebounding and soaring, you could take on less risk and get 3x returns on tech stocks with much more liquidity and shorter time horizon. People's expectations on investments fluctuate based on their alternative options and right now there aren't many better options than a cash flowing asset that can hit 12-15% returns. 

 

Et quam natus iste aut quam corrupti. Aut molestiae tenetur et voluptatibus qui nisi soluta commodi. Iure aperiam maxime aut nostrum. Nam ut consequatur doloremque quo quo et.

Amet omnis voluptatem in rerum a saepe excepturi dolorum. Et sint et aut velit sit. Tenetur molestias ut quis.

Autem recusandae culpa omnis cupiditate maxime saepe. Cupiditate molestiae enim possimus tempore. Repellendus accusantium vel id dolores. Id ut ut sed voluptatem. Porro laboriosam vitae expedita quia. Possimus quia id sunt ad sint enim. Officia pariatur pariatur quod.

Velit corrupti blanditiis accusamus ut numquam quam. Ex ducimus sit eius perspiciatis et quod beatae expedita.

Career Advancement Opportunities

November 2026 Investment Banking

  • Evercore 01 99.5%
  • Moelis & Company 01 99.0%
  • JPMorgan 01 98.4%
  • Guggenheim Partners 02 97.9%
  • Morgan Stanley 06 97.4%

Overall Employee Satisfaction

November 2026 Investment Banking

  • Moelis & Company No 99.5%
  • Morgan Stanley 02 99.0%
  • Evercore 01 98.4%
  • Banco Santander 02 97.9%
  • BMO Capital Markets 13 97.4%

Professional Growth Opportunities

November 2026 Investment Banking

  • Evercore 01 99.5%
  • Moelis & Company 01 99.0%
  • Morgan Stanley 05 98.4%
  • Goldman Sachs 01 97.9%
  • JPMorgan No 97.4%

Total Avg Compensation

November 2026 Investment Banking

  • Vice President (16) $429
  • Associates (57) $264
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (28) $184
  • Intern/Summer Associate (16) $161
  • 1st Year Analyst (84) $151
  • Intern/Summer Analyst (76) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”