Brandon Gilkey Shares His Essential Guide to Underwriting a Residential Home Portfolio

July 11, 2023

If you want to create a portfolio of residential real estate assets, the process can seem overwhelming. However, underwriting is essential to assessing and understanding potential investments before committing capital. This guide will outline the basics you need to know when evaluating a residential property investment portfolio. From what goes into the analysis process through risk management strategies that ensure your portfolio performs consistently over time, this post covers everything you need to tackle any investment opportunities that come your way confidently.

What is Underwriting, and Why is it Important for Residential Home Portfolios

Expert Brandon Gilkey says underwriting evaluates all the perceivable risks of purchasing or investing in a particular asset. When it comes to residential home portfolios, underwriting is especially crucial to ensure that all risks have a mitigation strategy which helps protect assets and the money invested into these portfolios. Underwriters assess various factors, such as current value (of market and portfolio); market trends; demographics of the area; profit and loss statements (sometimes called T-12); creating proforma’s, the property’s 1 year and beyond potential value, and the various exit strategies to be employed and when. This information helps investors decide which properties to add to their portfolio. By conducting rigorous underwriting, investors can avoid risky investments and minimize potential losses. In this way, underwriting plays a critical role in protecting an investor’s bottom line and ensuring long-term success in the residential real estate market.

Key Steps to Consider When Underwriting a Residential Home Portfolio

Underwriting a residential home portfolio can be complex, but considering key steps can make the process smoother. Here’s some key steps:

  1. Evaluate each property in the portfolio by determining its current value and “after repair value” or ARV. This also includes analyzing the income and expenses related to the property.
  2. Assess the portfolio's overall risk profile and determining an appropriate level of risk tolerance/mitigation is essential. Risks to consider include: improvement costs; insurance costs; increased real estate taxes; property management costs; acquisition costs; lending expenses; title/closing costs, loss rents and any commissions or fees due to agents. All these costs create your entry and that entry really needs to be about 75% - 85% of the ARV of the home or portfolio.
  3. Evaluating market trends and economic conditions is crucial. You do not need to predict the future but understanding the overall direction of the real estate market is essential. You can not be buying at the top and selling at the bottom.
  4. Lastly, it is vital to regularly review and adjust the portfolio as needed to ensure it remains profitable and meets company goals. Do you need to raise rents? Refinance a property? Sell a property? Do some improvements? Get a new property manager?

Underwriters can make informed decisions and create a thriving residential home portfolio by following these steps.

Identifying Risk and Mitigating Factors

Identifying any situation's risks and mitigating factors is crucial to ensuring success. Whether in business, finance, or our personal lives, identifying potential risks and planning to reduce those risks can be the difference between success and failure. By thoroughly analyzing the risks involved in any decision or action, we can identify potential roadblocks and take steps to avoid or minimize them. At the same time, it is essential to identify potential mitigating factors that can help us overcome any obstacles that may arise. By being proactive in our risk management, we can increase our chances of success and achieve our goals more quickly.

Understanding the Impact of Credit Policies on Loan Approvals

Credit policies play a significant role in determining whether or not loan applications are approved. Every lender is tied to the interest rate the the “Federal Reserve Bank” sets. What this means is that if the Fed’s interest rate is around 1.5% lenders will be in the 5% range. You as a borrower will never get the rate that the Fed publicizes. That rate is the number at which THEY lend to institutions, who then lend to buyer. Lenders use these rates and policies to assess the risk of lending money to individuals or businesses. It is essential to understand the impact of credit policies because they can affect your ability to secure a loan in the future and the costs to do a loan. Your credit score is a factor some of the time but not always. Hard-money lenders are asset based. Meaning they lend based on what you are buying as opposed to looking at your credit. These are great lenders, and although they have higher interest rates, its an excellent idea to have 4-5 of these relationships in your back pocket. .

Utilizing Automation to Streamline the Underwriting Process

As the world continues to innovate and shift towards technological advancements, it's no surprise that companies are finding ways to utilize automation to streamline their processes. One area that has seen significant improvements through automation is the underwriting process. By implementing automation tools, companies can gather information, analyze data, and make informed decisions at lightning-fast speeds. This results in more accurate risk assessments, faster turnaround times, and a more efficient overall process. Utilizing automation in underwriting can not only improve a company's bottom line and lead to happier customers with a faster and more seamless experience. The primary tools I use when underwriting include: zillow; redfin; propertyIQ, and house canary. These tools give incredible amounts of data. These are the only tools I would suggest but these are free and easy to use!


In conclusion, underwriting is essential to managing a residential home loan portfolio that requires intricate and meticulous steps. By carefully assessing risk factors, implementing credit policies, providing regulatory compliance, and utilizing automation processes to streamline the process, you can ensure your financial institution is set up to minimize losses while capitalizing on returns. With effective underwriting practices at the heart of any successful residential home loan portfolio, businesses within this sector must deeply understand underwriting best practices and standards. Doing so can help them protect their investments, grow their business, and achieve tremendous success in the long term.



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