Underwriting is an Art Form, Not a Science
Data tells you what is probable. Experience tells you what is possible.
Investment underwriting is not just a matter of number crunching. While market analysis and investment data can indicate a probable outcome for your asset, it is only on-the-ground experience and gut instinct that can unlock its true potential.
A strong investment strategy requires market knowledge that extends beyond statistics, including local priorities, development opportunities, and the long-term vision of a neighborhood. At Gilberti Group, we combine quantitative market data with our qualitative assessments to underwrite investments in a way that supports capital deployment and creates the investment we want to see.
Data analysis: the quantitative assessment
A comprehensive analysis of an investment opportunity is the fundamental first step in any project. Market analysis lays the groundwork for a deployment strategy through key indicators, such as the Internal Rate of Return (IRR), Net Operating Income (NOI), and Debt Service Coverage Ratio (DSCR), which provide insight into market conditions, property value, and projected cash flow. While crucial, investors can sometimes rely too heavily on numbers.
Take IRR, for example. IRR is used to assess returns across an investment’s lifetime, with a higher IRR indicating faster capital growth and a better time value of money. In real estate, where long-term development projects yield higher wealth appreciation, IRR can be misleading because it doesn’t indicate whether value comes from upfront rent or wealth appreciation.
Additionally, IRR alone overlooks other key metrics such as cash-flow stability, which is a strong positive factor in real estate. Analysis of DSCR and cash-on-cash return can be more accurate in predicting a property’s actual income generation, but these numbers alone still won’t convey the whole picture.
While inflation and tax rates will undoubtedly affect property value and rental income, the impact of more holistic factors, such as tenant satisfaction, building quality, and community engagement, cannot be overlooked. Often, it is these qualitative values that ultimately determine the success of an investment, and they are metrics that market data cannot quantify.
Gut feeling: the qualitative assessment
Real estate assets do not exist solely in a trading market. They are rooted in local communities with unique regulatory requirements, governmental priorities, and neighborhood sentiment.
Market analysis won’t tell you how investing in a community project to support residents will improve tenant satisfaction and drive growth and profitability. Nor can the data predict how a new zoning change or the addition of new services will impact a district.
These are metrics that can only be understood by spending time in the local community and speaking to real people, but they could be the key to unlocking the highest income streams and wealth appreciation.
At Gilberti Group, we target underperforming assets with strong potential for value creation in high-growth markets. These don’t always look good on paper, with high upfront development costs and less confident data predictions.
For example, Gilberti Group is particularly focused on the South Florida market, where a growing tech startup hub has attracted a high-earning workforce seeking boutique rentals. This is a high-potential market with a tourism spillover and a rising remote work population. An investment strategy built to optimize on this will serve demand and generate strong future returns.
Know the data, build the vision
At Gilberti Group, when we underwrite a deal, we don’t just look at today’s market. We know that the data speaks for the now, and that future predictions are just that — a prediction. While market analysis and quantitative data can help formulate initial investment decisions, it is the qualitative assessment of a community, the potential value-add opportunities, and the ability to realize a vision that will ultimately determine whether we believe in an investment.
Our underwriting process blends the complex data with our entrepreneurial mindset and forward-thinking approach. We look to the future and plan ahead with a strong strategy for refinancing through development and growth opportunities. These are values that can’t be measured in numbers; it takes lived experience to recognize when an opportunity exists.
Data tells us what is probably, experience tells us what is possible, and a strategy built with vision and nuance is what will make a project succeed. If you want to find out more about how Gilberti Group underwrites real estate investments for greater success, we invite you to connect with our team.
