Why Underwriting Is Crucial for Successful Investments w/Matt Brawner
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Episode Description
Welcome to the Freedom Point Real Estate podcast! Today's guest Matt Brawner joins the show to share his wealth of knowledge on all things underwriting: what it is (especially as it relates to multifamily real estate investing), why it's crucial to a successful deal, and what's all involved.
Matt started in real estate in 2011. Matt has a wide breadth of experience in the business as an investor, broker and a property manager. Matt is a founding partner of Minnesota Capital Management. Matt lives with his wife and three children in Dayton, MN. As a family, the Brawner’s are active in their church and love exploring all that the outdoors has to offer.
CONNECT WITH MATT BRAWNER!
Website: https://www.enduruscapital.com/
LinkedIn: https://www.linkedin.com/in/mattbrawner/
Email: matt@EndurusCapital.com
CONNECT WITH JEREMY DYER!
Website: https://startingpointcapital.com/
Instagram: https://www.instagram.com/startingpointcapital/
LinkedIn: https://www.linkedin.com/in/jeremydyer
Facebook: https://www.facebook.com/startingpointcapital
Book a Call! https://calendly.com/startingpointcapital/discuss-investing-with-jeremy-dyer?month=2023-12
Summary
Tip #1: Understanding Underwriting Essentials
Matt emphasizes the importance of underwriting in multifamily real estate, likening it to creating a business plan for each property. He stresses the need to analyze income, expenses, and value creation strategies comprehensively. As Matt points out, "Underwriting is about identifying opportunities to increase cash flow and understanding the dynamics of multifamily properties as businesses."
Tip #2: Key Metrics in Underwriting
The discussion delves into critical metrics like debt service coverage ratio (DSCR), lost to lease, and deferred maintenance. Matt explains how these metrics offer insights into a property's financial health and potential for value enhancement. He highlights the significance of maintaining healthy margins and proactively addressing maintenance issues to ensure sustainable cash flow.
Tip #3: Overcoming Common Pitfalls
Matt shares insights on navigating challenges in underwriting, emphasizing the importance of execution and experience. He cautions against overly optimistic projections and stresses the need for a proven track record in executing business plans. As he aptly puts it, "Execution is key, and experience with the proposed strategy in the target market is paramount."
Tip #4: Tenant Quality and Occupancy Rates
Tenant quality and occupancy rates play pivotal roles in underwriting decisions. Matt underscores the significance of understanding the resident base and creating comfortable living environments. He highlights the impact of tenant behavior on property maintenance and turnover, emphasizing the importance of proactive management.
Tip #5: Market Dynamics and Investment Timing
In a dynamic market environment, timing and market sentiment are crucial factors. Matt discusses market trends, supply dynamics, and interest rate uncertainty, emphasizing the importance of cautious optimism. He advocates for a focus on cash flow and long-term strategies amid market fluctuations.
Tip #6: Investor Due Diligence
For prospective investors, due diligence on sponsors is essential. Matt advises investors to scrutinize track records, team expertise, and market focus. He emphasizes the value of experienced sponsors with a history of navigating market cycles and delivering results.
Tip #7: Strategic Growth and Focus
Looking ahead, Matt outlines plans for strategic growth and focus for Endurus Capital. He emphasizes the importance of refining investment strategies, market focus, and operational efficiency. Matt underscores the commitment to providing value to investors while prioritizing long-term sustainability.
Tip #8: Personal and Professional Balance
Beyond business objectives, Matt shares personal goals for balancing family and professional pursuits. He highlights the importance of spending quality time with family while driving business growth. Matt's approach reflects a holistic perspective on success, integrating personal fulfillment with professional achievements.
Tip #9: Building Strong Relationships
Matt underscores the significance of fostering relationships within the real estate community, stating, "Networking and building strong relationships with industry peers can provide valuable insights and opportunities for collaboration."
Tip #10: Continuous Learning and Education
Encouraging a commitment to lifelong learning, Matt advises, "Stay informed about market trends, regulatory changes, and industry best practices through ongoing education and professional development initiatives."
