Underwriting Guidance in Portfolio 360

The Underwriting Guidance feature in Portfolio 360 is designed to help you set expected cost ranges for different aspects of property underwriting. Whether you’re budgeting for taxes, insurance, or repairs, this tool provides a simple way to define what costs should look like for properties, either as a general standard or tailored to specific markets. It’s all about making your financial planning easier and more accurate as you evaluate properties. This can be found by clicking the Defaults tab in the Underwriting Properties page.

What Are Default and Market-Specific Guidelines?

This feature lets you create two types of guidelines:

Default Guidelines: These are your standard cost ranges that apply to all properties unless you set something different for a specific market. Think of them as your go-to rules when no special conditions apply.
Market-Specific Guidelines: These allow you to customize cost ranges for particular markets where expenses might differ. For instance, if taxes are higher in one city than another, you can set a unique range just for that area.

When you underwrite a property, the system first looks for market-specific guidelines based on the property’s location. If none exist, it uses your default guidelines instead.

Categories of Costs

You can set guidelines for various cost categories that come up when underwriting a property. Here are some examples:

Taxes: Property taxes you expect to pay.
Insurance: Costs to insure the property.
Repairs / Maintenance: Money spent on keeping the property in good shape.
General / Admin: Everyday administrative expenses.
Marketing: Costs for advertising the property.
Contract Services: Payments for outsourced work, like landscaping or cleaning.
Payroll: Salaries for staff managing or maintaining the property.

Each category can be treated as either an expense (money going out) or income (money coming in), depending on your needs. Some categories, like repairs or payroll, might also be “controllable,” meaning you can adjust them more easily than something fixed like taxes.

How Costs Are Calculated

You can choose how to measure each cost, based on what makes sense for your planning:

Per Door: The cost is per unit (or “door”) in the property. For example, you might set insurance at $250 per door.
Total: A single, fixed amount for the whole property, no matter how many units it has.
Percent of Purchase: The cost is a percentage of what you paid for the property, like 1% of the purchase price for taxes.

How to Set Up Your Guidelines

Here’s a step-by-step guide to setting up your guidelines in Portfolio 360:

Go to Guidance Settings: Find the settings area in the portal where you can manage your underwriting guidelines.
Pick the Market: Decide if this is a default guideline (applies everywhere) or for a specific market. If it’s market-specific, type in the market name (like “Chicago” or “Miami”).
Choose a Category: Select the cost category you’re setting a guideline for, such as Taxes or Insurance.
Select the Cost Type: Choose how the cost will be calculated—Per Door, Total, or Percent of Purchase.
Set the Range: Enter the minimum and maximum values you expect for this cost. For example, Repairs might be $300 to $600 per door.
Ignore Out-of-Range Values (Optional): If you don’t want to consider costs that fall outside your range (like an unusually high tax bill), check this option. It keeps your analysis focused on typical values.

How Guidelines Work When Underwriting

When you start underwriting a property in the portal:

The system checks if you’ve set specific guidelines for the property’s market.
If there are market-specific guidelines, it uses those.
If not, it applies your default guidelines.

This automatic process ensures your cost estimates match the property’s location, saving you time and effort.

Example Scenario

Imagine you’re underwriting two properties: one in a high-tax market and one in a low-tax market.

For the high-tax market, you set a guideline for Taxes at 1.5% to 2% of the purchase price.
For the low-tax market, you set it at 0.5% to 1%.
Your default guideline for Taxes might be 0% to 0.01%, but you ignore values outside this range since taxes vary so much.

When you underwrite a property, the system picks the right tax range based on the market, helping you budget accurately for each location.

Why Use Underwriting Guidance?

This feature offers several benefits:

Consistency: Keeps your cost expectations the same across all properties unless you choose otherwise.
Efficiency: Automatically applies the right guidelines, so you don’t have to manually adjust every time.
Accuracy: Uses market-specific ranges to give you more realistic financial projections.

Tips for Getting Started

If you’re not super comfortable with technology, don’t worry—these tips can help:

Begin with Defaults: Set up your default guidelines first. They’ll work for most properties and give you a solid starting point.
Add Market-Specific Rules Over Time: As you work with properties in different areas, create specific guidelines for those markets.
Check and Update: Every so often, review your guidelines to make sure they still fit current market conditions or your goals.
Use the Ignore Option Smartly: For costs that can vary a lot (like taxes), ignoring out-of-range values can keep your estimates from getting thrown off by outliers.

By using the Underwriting Guidance feature, you can take the guesswork out of budgeting and focus on making smart investment decisions. It’s built to simplify your process, even if you’re not a tech expert, so you can underwrite properties with confidence.