How did you learn underwriting?

Question

Hello, I am new to this world and I am curious about how you learned to underwrite correctly? And how did you Learn to calculate a offer? I trying to learn underwriting now but I do not believe I am doing this correctly and I hear on the podcast that many people put in offers below asking and I do not understand how they calculate their offers.

Bryce Jamison · Answer

Great question!

High level, it's simple. You take your presumed rental income and subtract ALL of your expenses. Where people (me, I'm people) mess up is they over estimate rent, underestimate expenses, and don't include expenses outside of PITI. Not only do you have to account for the mortgage payment, but you need to factory in routine maintenance (OPEX), long term expenses (CAPEX), vacancy, & property management fees.

I use the BP calculator to do all of my underwriting. It's very user friendly and easily allows you to manipulate the numbers to see what it would take to make a deal work. I use standard percentages for the variable expenses and Zillow, plus first hand experience, to estimate rents (for LTRs). The homes on Zillow getting a lot of contacts and applications may be priced on the lower end, while the ones with no contacts are on the higher end.

I also stay in close contact with my lender to ensure I'm using accurate interest rate info. The rate can change +/- 0.1-0.2% everyday, so you have to account for that when running your numbers.

Ryan Flanagan · Answer

I got good at rental underwriting by playing with real estate calculators until I got blue in the face. Every halfway decent looking deal in my area went through the calculator.

Learning how to underwrite flips happened by buying my first flip from a flipper who was in over his head. I bought it on the condition that he would help me get it across the finish line and we would split the profits. He became a mentor on that deal and a few others. I was able to learn how to put together a scope of work from him, which was super valuable.

Learning how to underwrite flips and rental deals enabled me to underwrite BRRRR deals.

That's my progression.

Drew Sygit · Answer

Practice!

Find a thorough spreadsheet and start running numbers.

Then share here and ask what you missed.

Hasan Gabareen · Answer

In general, retail advice tells you to underwrite forward (Price --> Cash Flow), while professionals underwrite backward (Target Return --> Maximum Offer). When you hear about investors offering well below asking, they aren't guessing; they are using strict, rule-based logic to calculate a hard "Strike Price." They anchor on hyper-local rental data, scale variable expenses like CapEx based on the actual age and condition of the property (rather than using lazy, flat percentages), and subtract those costs from the revenue to see exactly what price the math allows. If a seller wants $300k but the target return metrics say the math only works at $220k, then $220k is the offer.

The real trap for beginners is trying to manage this logic inside messy, static spreadsheets that break, use outdated macro assumptions, or force you to guess at variable margins. Underwriting isn't about being a math genius or a spreadsheet wizard; it’s just a logic puzzle. Instead of hunting for the "perfect" spreadsheet template, focus on automating your data guardrails, separating your macro metro trends from your micro property expenses—so the data objectively tells you exactly what to bid, removing the emotion and the guesswork entirely.

Stuart Udis · Answer

Owning and operating real estate, or aligning through employment or another avenue with someone who does, is ultimately where you sharpen your underwriting skills. You can have the most comprehensive and detail-oriented spreadsheets, but if the inputs are inaccurate, the underwriting is flawed.

Vessi Kapoulian · Answer

It also depends on what asset class you are underwriting, as commercial is different from residential (1-4 units). But it ultimately starts with education and practice, practice, practice. Thankfully today there are many online resources and groups for education as well as online access to deals to pull and underwrite and build that muscle.

Christian Grosskopf · Answer

There are many helpful calculators on the internet that I like to use just as a macro look at deals. If the numbers look good from this macro snapshot, then I will dive deeper into the numbers to determine the legitimacy of the investment. But it just comes down to finding a system and tools that work best for you, then plugging listings into the system over and over again until you can identify listings that are worth looking into just by scrolling through them.

James Driscoll · Answer

Great question — underwriting is honestly one of the most underrated skills a real estate investor can develop.

Here's how I've seen people build that knowledge effectively:

- **Work backwards from deals.** Take real properties and run the numbers — NOI, DSCR, cap rate, cash-on-cash. The math only clicks once you've done it on actual addresses with actual rents and expenses.

- **Read lender guidelines directly.** Fannie/Freddie seller guides are publicly available and surprisingly readable. FHA handbooks, too. This is what lenders actually use to approve or decline a loan.

- **Talk to underwriters and loan officers.** After 31 years in the mortgage business, I can tell you that most of what I know came from working through real files — seeing why a deal works, and more importantly, why it doesn't.

- **Stress-test your assumptions.** Good underwriting isn't just modeling the best case; it's modeling vacancy, capex, and rate changes and asking whether the deal still pencils.

The investors I've worked with who truly understand underwriting get better deals, move faster, and almost never get surprised at closing.

Hope this helps — feel free to DM me if you want to dig into any specific aspect of the underwriting process.

Jim Driscoll

Adam Bartomeo · Answer

I read lots of books and practiced, practiced, practiced. This is a learned skill and one that must be continually used otherwise the market movement will make those skills obsolete

Doug Smith · Answer

That's a really good question that will help others. For me? I was a banker/lender for at least 15 years before I purchased my first investment...a flip that had about $35K of rehab work. It was a basic flip in a working class neighborhood. With that flip, I had a partner that had done it before. I knew the financial and financing side inside and out, but I didn't know the contruction side. My wife has design degree, so she knew the process. The parter knew things that I didn't. We hired a general contractor with a good track record. I did some painting and did all the landscaping myself. Having that financial background and in conjunction with that partner and the GC, I was able to put together a multi-page/sheet Excel spreadsheet to help. Through the next few flips, I/we learned how to "back into a strike price.". Basically, we start with having the realtor do a CMA to come up with a conservative ARV. We then back out our desired profit, the rehab budget, the time-value-of money for the desired return, interest and carrying costs, permitting, architectural, etc...and also make sure to add a "contingency reserve of 5%-10% for unexpected expenses, that gave us the hard "strike price", which is the maximum price the math will allow us to pay for the property. You also have to consider other factors like local permitting rules and timelines, the FEMA 50% rule, and other considerations. You learn mainly by doing, but most importantly make sure you have a partner or support to fill in those knowledge gaps that you might have. There is a difference between being stupid and being ignorant. Being ignorant means you don't know what you don't know. Being stupid means you recognize that you don't know something, but you try to do it anyway. Find a good partner with knowledge before you try to go it alone. That is my humble advice. I wish you well.

How did you learn underwriting?

How did you learn underwriting?

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