August 12, 2020

JF2171: | 3 Steps to Hiring An Underwriting Analysts Syndication School with Theo Hicks

In today’s Syndication School episode, Theo Hicks, will be going over 3 steps to hiring an apartment underwriting analysts.

To listen to other Syndication School series about the “How To’s” of apartment syndications and to download your FREE document, visit Thank you for listening and I will talk to you tomorrow. 

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Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.

Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to, or to learn more about the Apartment Syndication School, go to, so you can listen to all the previous episodes.

Theo Hicks: Hello, Best Ever listeners, and welcome to another episode of The Syndication School series – a free resource focused on the how-to’s of apartment syndication. As always, I’m your host, Theo Hicks. Each week, we air a syndication school episode that focuses on a specific aspect of the apartment syndication investment strategy, and for a lot of these episodes, especially the ones in the past, we’ve released free resources for you to download. All of these free resources as well as past syndication school series episodes can be found at

The subject of today’s class is going to be how to hire an underwriting analyst. So an underwriting analyst is someone on your team whose main responsibility is to evaluate the incoming apartment leads. So that is their main responsibility. Sometimes depending on where you’re at in your business, you might have an underwriting analyst fulfill other secondary roles as well, like helping with due diligence after a deal is put under contract and creating the investment summary to present to investors, performing any market research required during the underwriting and due diligence process, or really any other analytic responsibility like reporting in the asset management phase.

So when you are deciding to hire a underwriting analyst, the first thing you need to do is define the role that is what do you want them to focus on. Do you want them to focus only on underwriting, or do you want them to focus on other aspects of the due diligence or the asset management process as well? Once you’ve defined the role and the responsibilities, you can define the requirements of a prospective candidate. So you need to have a background an individual will need in order to be a successful, effective underwriter. So ideally, they have previous underwriting experience, or at the very least, have experience using financial models in Excel.

Now, a great way to get a free underwriter – because you’re gonna have to pay this person if they’re experienced; so the more experience they have, the more expensive it’s going to be… But a great way to get multiple free underwriters is to find someone who is interested in becoming an apartment investor or an apartment syndicator, but doesn’t have the experience or the capital or the network to do deals themselves, and they’re still in the education phase. Well, you can offer to educate them by giving them a free cash flow calculator, a financial model, how-to guides and videos of how to actually underwrite deals, and then in return, they will underwrite deals for you for free as long as you give them feedback on their underwriting. So the underwriting is obviously not going to be perfect, and you yourself are going to need to have underwriting experience if you’re going to train people, but we’ll get into that a little bit later, of how to do this without having any expertise yourself.

The analyst is also going to need a high level of proficiency in Excel at minimum. So even if they don’t know how to do financial modeling, they don’t know how to do underwriting, they need to know how to use Excel. It’s a lot easier to teach someone how to input data into the cash flow calculator than it is to teach someone literally how to input data, how formulas work in Excel. So they need to have some level of proficiency in Excel, since they’re going to be required to pull data from various reports – T12s, rent rolls, OMs, rent comp analyses, market analyses.

In order to avoid making really simple operator error mistakes, they need to also have a very high level of attention to detail, as well as strong financial, quantitative and analytical skills. Sometimes you’re going to allow them to send you deals within a few days, maybe even a week. Other times, you might need to get a completed underwriting model within the next 12 hours. So ideally, they also have the ability to work under tight timeframes, which means they might have to work on weekends and nights as well… And of course, if they’re going to do something else besides simply underwriting, they’re going to need skills in that area as well. For example, if they’re creating investment summaries, well then, they’re gonna have to know how to use PowerPoint as well. They’re going to need to know how to multitask if they’re going to be bouncing additional roles in addition to the underwriting, and then depending on how your business is set up and the role you want the underwriting analyst to play, they might actually need to live in a specific location. So we’ve got skills and we also have physical locations. So if you have an office, well, they’re gonna need to live in the general vicinity of the office if they’re required to come into the office, which isn’t as important right now, since we’re all stuck at home, but eventually, when people return to offices, if you have an office or you want to have an office in the future, you might want to consider hiring an underwriter who lives in the area. Also, let’s say that you have them involved in the due diligence process, well then they’re gonna need to live near the property, so they can go there and perform that.

So once you actually know the requirements you need for your underwriter, which I just laid out –  it might be a little bit different for you, but essentially, this is what you want in the underwriter – then when you screen applicants; you ask them questions to determine whether or not they meet these requirements. But before we get to that, you need to find applicants. So after you define these responsibilities, after you’ve defined these requirements and you’re ready to generate prospects, you need to create a professional job listing. You should include biographical information about you and your company, as well as the responsibilities and requirements that we just discussed. And then once you have the job posting created, then you go ahead and post it to various job listing websites. You can post it to LinkedIn, you can post it to BiggerPockets, you can talk about the analyst role on your podcast or other thought leadership platforms to promote the job listing. You can share on social media, you can promote the job at local meetup groups once we get back to local meetup groups, you can create a landing page on your website for the job [unintelligible [00:09:52].22], you can hire a recruiter, you can put it on one of those recruiting websites… There’s countless ways to generate leads. It depends on where you’re at in your career. If you don’t know anyone at all, well you’re probably not at the point where you’re ready to hire an underwriting analyst anyway, so the other option would be essentially, anywhere in your network; wherever you’re currently at, is where you can generate interest in your position.

Once you generate interest, you want to go ahead and screen the applicant. So the best screening processes are done in two phases. The first will be an initial interview probably over the phone or in a Zoom meeting, and that’s just to determine if they actually meet the requirements that you have listed in the job posting. So here are some questions that you’re going to want to ask. So general questions – ask them what their current day to day tasks are, ask them how much time in their day is spent underwriting deals, ask them who they currently report to, how big is the current analyst team, and what do they like about multifamily investment. Just general background, what they’re doing now, what they have done regarding underwriting.

Obviously, if they haven’t done underwriting in the past, they’re not going to have answers to these questions, and one of the important requirements is previous underwriting experience.

Next is going to be questions related to market knowledge. So ask them what markets have they worked in, what markets are they experts in. Next, you can ask them what markets do they think would be good multifamily markets to invest in, to gauge their expertise. And then the last question you can ask about markets is what are your thoughts on the state of multifamily sales prices at the moment, and where do you see them headed? So again, just gauge their knowledge on the market, as in the market that you’re gonna invest in, but also the real estate market as a whole.

Next are gonna be questions about underwriting. So ask them on a scale of 1 to 10, 1 being a complete noob and 10 being an expert underwriter, what is your level of financial modeling? So how good are they at modeling deals from their own perspective? Can you create your own model from scratch? Please give a few examples of advanced formulas you would use in a model. We’ll get into how to gauge their answers in a second. Let’s just get through the questions. Can you please explain your underwriting process of a recent deal you underwrote? What was the business plan? …to kind of gauge, “Hey, do you have experienced underwriting value add deals like what you’re doing or turnkey deals or distressed deals, condo conversion?”, whatever types of deals you’re doing, they need to have experience underwriting those types of deals. So you want to ask them, “Please explain your underwriting process on a recent deal,” but also ask them, “Hey, what’s your experience on our business plan, the value add business plan, the turnkey business plan?”

Last underwriting process-related question would be, “Are you involved at all with presenting the deal to senior members of the company or investors?” Next, you can ask them about their understanding of debt. So have they ever worked on obtaining new debt, refinance, supplemental? If I referenced the term ‘agency lender’ or ‘bridge lender’, do you know what that means? A due Diligence question – describe what type of due diligence you have performed and what typically goes on. Do they know what typically goes on during the due diligence process? And then your general employment information, employment in the future outlook, where do you see yourself in five years, ten years? Why are you looking for a new job? Describe a challenge you faced at your current or past position and how you overcame it. How do you think you can create value with this company? What is your salary expectation for this position? What do you like to do outside of work?

Now some of these are, as I mentioned, general questions you’d ask about any role, but the answers that are most important are going to be the ones relating to the market knowledge and relating to the underwriting process. And then if you want them to do due diligence or help with that, then obviously the debt due diligence questions are important as well, but let’s focus on the market knowledge and the underwriting process.

So they need to have market knowledge in order to perform the rent comp analysis and sales comp analysis during the underwriting process. So if they don’t work in your market or they don’t have a good answer to what markets they think are good to invest in and why, or they don’t have an answer as to their thoughts of the sales prices, they’re not going to be able to perform rental comp analysis effectively. They’re also gonna need a high level of financial modeling. So ideally, an 8, 9 or 10. They’re going to need to be able to create their own model and understand the complex Excel functions such as the ‘lookup’ and ‘if’ formulas, and you’re gonna want them to understand the various terminology like renovating units, rent premiums, agency debt, as well as experience with the business plan.

Now, here’s what’s important – what if you are not good at underwriting? What if you don’t like underwriting, but if you’re not good at underwriting, and that’s why you’re hiring underwriting analysts? Well, if you just listen to their answers in the interview and you hire based off of that, how do you know that they’re telling the truth? So you hire them and they start underwriting deals and you don’t really know if they’re underwriting the deals properly or not. That’s why the second step of the interview process is for them to actually underwrite a sample deal, so you can confirm that they actually know what they’re doing. So you want to send them a sample deal, including a rent roll, a T12 and the offer memorandum, as well as a financial calculator, and so this has to be something that you have filled out already… And you send them a blank cash flow calculator, you send them the how-to guide, you send them how to fill the calculator out, you send them the sample deal, and you ask them to send it back within a certain timeframe, and then once they send you back the model, you compare the inputs to the accurate, filled out model, to determine if they told you the truth or if they don’t know what they’re actually doing. Now they don’t have to perfectly underwrite the deal, but the results need to be close. So if a few inputs are off, if their term projections are close, but a little bit off by less than a few percentage points, then it’s fine, they made a simple mistake. But if it’s way off, we’re talking 6%, 7% return difference, a bunch of inputs are wrong or they didn’t input everything properly, then they probably aren’t gonna be a good fit for the role.

One sneaky thing you can do to test their attention to detail skills would be to make one change on the rent roll, the T12. So maybe make a bunch of units vacant on the rent roll or make one maintenance expense very, very large, and then see–  when they come back, you can say, “Hey, this deal looks really good, except there’s this really weird thing, that all these units are vacant or in the revenue on the rent roll, the master revenue and the T12,” or, “Hey, I saw that there’s a one time maintenance expense of $100,000; that’s weird,” just to see if they catch that, or if they just mindlessly input data. So that’s a great way to catch the attention to detail.

Then at that point, depending on how they do with the interview and the financial modeling practice, you can go ahead and decide whether or not you want to hire that person. If you’re still unsure, you can do a test period where you say, “Hey, I’m gonna send you deals for the next month, and then we’ll further evaluate your skills to see if it’s worth hiring you full-time.” So that could technically be a third step in the process, which is, first step is to interview you, second step is to do one sample deal, and the third step is to do a month worth of deals to see if you’re able to stick to the time frame, if you’re able to multitask, if you’re able to have good, solid attention to detail and underwrite these deals properly. So ideally, you know what you’re doing, you know how to underwrite deals, but if you don’t, the way to overcome that is to have a sample deal filled out already, and then test to see how close their underwriting is to that sample deal.

So that concludes this episode on how to hire an underwriting analyst. I guess the last thing we didn’t really talk about is when do you decide to hire an underwriting analyst… And like all things, it depends. You can start right away, or you can wait until you’re further along in your business and you don’t have time to do it anymore… Because really, they’re a time thing or a expertise/don’t like thing. So it’s either where you don’t have time to underwrite anymore, it’s a job that you can outsource for $10, $20 an hour and your time is worth $100 an hour at this point, and you’d rather talk to investors, do other things than spend time underwriting all day. Or if you just don’t like it and you’re really bad at it; then if you’re really bad at it and don’t like it, then you should probably hire someone, especially if you’re really bad at it and you don’t know what you’re doing, you need to hire someone. If you don’t like it, it’s up to you. But again, it’s either your timing, you don’t like it or you lack the expertise or the skill.

So that concludes the episode. Thanks for tuning in. Make sure you check out some of the other syndication school episodes, as well as our free resources at Thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

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