How to Analyze a Multifamily Deal in 10 Minutes: A Beginner’s Guide
If you are new to real estate, analyzing a multifamily deal can feel overwhelming. You hear terms like underwriting, cap rates, debt coverage ratios, and expense ratios. It sounds like you need a finance degree or a spreadsheet the size of a dining room table.
You do not.
The truth is that seasoned investors rarely start with a full underwriting model. We do a quick pass first, because most deals are not worth chasing. The goal of the first review is to answer one question: Does this deal deserve more of my time?
Here is how to analyze a multifamily deal in 10 minutes so you can eliminate bad opportunities and focus on the ones that matter.
Start by Understanding the Story Behind the Deal
Every deal has a narrative. Why is the owner selling? What problem exists today that you can improve? If there is no visible value add opportunity, you are likely paying retail pricing for an average return. Good deals usually come from inefficiencies you can solve: under market rents, poor management, deferred maintenance, bad collections, or mispriced expenses.
If you cannot identify a story, move on.
Before you continue reading: GET MY MULTIFAMILY DUE DILLIGENCE CHECKLIST HERE
Income and Rent Growth Tell You More Than Anything Else
Multifamily investing is an income business. Your first task is to compare current rents to market rents. If the property is already maxed out, and rents match the market, your upside is limited. But if market rent is significantly higher than current rent, you have room to create value.
A beginner does not need exact numbers here. You just want directional clarity. Is there room for rent improvement, or is the deal already topped out?
Occupancy Means Nothing if Tenants Are Not Paying
A building with 95 percent physical occupancy means nothing if half the tenants are delinquent. Look for occupancy, collections, and whether bad debt is rising or shrinking. A property with weak collections tells you it might require stabilization time, legal costs, eviction strategy, or management replacement.
This is not a deal killer. It simply tells you your timeline and work needed.
Expenses Tell You Whether the Deal Has Good Bones
A healthy multifamily property typically runs around a 40 to 50 percent operating expense ratio. If you see a property with operating expenses above that, it may indicate inefficiency, waste, or deferred maintenance.
As a beginner, do not try to rebuild the budget. Just ask: are expenses relative to income reasonable for this market?
Taxes and Insurance Can Kill Deals Overnight
Taxes can reset after a sale. Insurance premiums have increased drastically nationwide. If you buy a deal assuming last year’s taxes and insurance numbers, you will be shocked later. Ask whether reassessment is likely and whether the property sits in a high risk insurance environment.
A quick phone call to an insurance broker can save you thousands.
Cap Rate and Cash Flow Tell You Whether the Deal Makes Sense
This step does not require fancy math. Divide net operating income by the purchase price and compare it to prevailing cap rates in the market. Then ask: does this property produce real cash flow after debt?
If not, the deal either needs repositioning or a lower price.
Stress Test the Deal
Ask yourself what happens if income drops 5 percent or expenses rise. Good deals have margin. Bad deals fall apart instantly. Even a simple stress test reveals whether you are buying durability or fragility.
A Quick Market Check Protects You From Hidden Risk
The best building in the worst neighborhood will still be a bad investment. Spend two minutes checking population trends, job growth, and supply pipeline. If people or employers are leaving, your rent assumptions may be wrong.
So Does This Deal Deserve Your Time?
After 10 minutes, you should know whether:
- The deal is worth deeper underwriting
- You need more information
- It should be discarded entirely
The more you practice this, the better you get at filtering quickly. Professionals are ruthless with their time. They disqualify fast so they can go deep on only the best opportunities.
The Bottom Line
Learning how to analyze a multifamily deal does not have to be complicated. A fast first pass allows you to screen deals, eliminate weak ones, and pursue only the opportunities with upside. As you improve, you will spot risk and opportunity almost instantly.
When you are ready for full underwriting, metrics like cash on cash returns, debt coverage ratios, loan terms, and pro forma assumptions matter. But the beginner’s 10 minute snapshot gets you moving so you can think and act like an investor instead of guessing.
