What’s One Green Flag You Look For Immediately on a Multifamily Deal?

Question

When you first look at a small multifamily deal, what’s one thing that immediately gets your attention in a positive way?

Could be:• below-market rents• location• expense ratios• seller motivation• value-add opportunity• long-term upside• assumable financing• anything else

Interested hearing what experienced investors notice early that newer people might overlook.

G. Brian Davis · Answer

For me, it's usually a clear path to creating value.

Below-market rents can be part of that, but so can operational improvements, better management, reducing expenses, or solving a problem the current owner hasn't addressed. The best deals often aren't the ones with the prettiest numbers today. They're the ones where there's a realistic opportunity to improve the property and increase income over time. Everyone seems to develop their own filters after reviewing enough deals.

Denise Supplee · Answer

One thing that immediately gets my attention is a clear value-add opportunity that doesn't depend on everything going perfectly. Whether that's offering below-market rents, implementing operational improvements, or reducing unnecessary expenses, I appreciate seeing multiple ways to enhance a property's performance.

Through the co-investing club I help run, we've reviewed many opportunities, and one thing I've noticed is that the strongest deals often have upside that's already visible rather than relying heavily on future appreciation.

Ryan Rodriguez · Answer

Deals with greater than 20% loss to lease. If I can underwrite with real expenses and get to a cap rate that is on par with the cost of debt, it then seems like a clear path

Stephen Quesinberry · Answer

When I first started in multifamily, I was very focused on below-market rents and obvious value-add opportunities.

Now, after going through a few full cycles and having more operational experience, I think a lot more about price per unit and overall basis. Your basis impacts so many things on the back end: flexibility during downturns, ability to refinance, exit options, buyer pool, and how competitive the deal will look years later.

I still like upside, but I’m much more focused now on buying at a basis that gives me room to operate and eventually sell well, not just forcing rent growth.

Seth McGathey · Answer

When I first started it was expected cash flow.

Now it is value add potential, because I am mainly focused on value add. If I can get a property and refinance to get all or most of my initial investment back while still breaking even or cash flowing a little, then to me it a a no brainer.

What’s One Green Flag You Look For Immediately on a Multifamily Deal?

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