Archer has unveiled AIM Automated Underwriting, a data-driven underwriting tool that significantly enhances the multifamily underwriting process and reduces the amount of time required to complete a first underwriting from days to minutes.
Fred Canney, Archer co-founder, COO, and CFO, led the development of AIM Automated Underwriting. In the Q&A below, he walks us through the ins and outs of the tool and explains why it has the power to revolutionize the underwriting process.
Q. What exactly is AIM Automated Underwriting? How did Archer come up with the idea for it?
A: AIM Automated Underwriting is the next logical evolution in our drive to add value to real estate acquisitions teams. In a nutshell, we connected our growing real estate data set with a multifamily underwriting model to create a significantly enhanced underwriting model that can estimate a cash flow on almost any multifamily property in the U.S. with or without a T-12 and Rent Roll. With this tool, we can quickly (<15 minutes) complete a first underwriting of any property identified with our AIM platform as a potentially actionable off-market deal to arm our clients with the information necessary to pursue that off-market target.
Q. What industry challenge does it solve?
A: We are seeing and hearing from our customers that they are stretched – their teams are trying to do more with less and are constantly looking for ways to differentiate their capabilities relative to other GPs/Operators. AIM Automated Underwriting gives our clients back multiple days’ worth of time for each and every deal evaluated. It vastly improves the quality of each underwritten model by bringing transparency and immediacy to comparable analysis and benchmarking. We’re talking about saving three to four days of work per property multiplied by, in some cases, hundreds of properties evaluated each year – it’s significant.
Q. Why is quality underwriting important?
A. As with any investment decision, you’re putting money at risk for a given expected return, subject to a range of possible outcomes. When you have information readily available at the beginning of the process, you can plan for contingencies, execute the investment plan better, and generate better (and more consistent) long-term outcomes for your investors/shareholders. While good underwriting can’t guarantee a better outcome, it can certainly help groups be more prepared going into the investment decision, can help them size the purchase price better and prepare to execute their investment strategy faster/more consistently than before.
Q. What is the foundation for AIM Automated Underwriting? Is it machine learning? Is it an algorithm? What datasets does it rely on?
A. It’s a whole combination of things that make AIM Automated Underwriting possible. It starts with a comprehensive and well-organized dataset complete with typical real estate information as well as comprehensive demographics and trend markers that help with investment decision making. We then augment that base data with algorithms and machine learning that predict operating costs, identify the best comps in the market for revenues or sales, and automatically sort through thousands of comparable properties to select only the best. And finally, we organize the information in a useful and intuitive way through our own UI that helps real estate acquisitions teams – our clients – quickly apply their expertise to adjust the base level assumptions as needed.
Q. How does AIM Underwriting compare to human underwriting?
A. At Archer, we are constantly learning from our clients and looking for ways to augment the human expertise with smarter tools plus data that makes our human expertise more valuable. We view AIM Automated Underwriting as an “augmenting tool” – one that effectively produces a baseline underwriting complete with comparable analysis and all of the information needed to make a good decision as an acquisitions expert.
Q. What is the most unique attribute of AIM Automated Underwriting?
A. The breadth of information and the speed with which it is available to an acquisitions professional – those are two of the most remarkable things we hear from clients when they see the model. We think the analytics and algorithms that lead to the comp recommendations and the estimates of revenues/costs are pretty cool too.
Q. Is AIM Automated Underwriting a unique tool or do other companies have similar tools?
A. We believe this is pretty unique in the industry. While there are other tools out there for parsing rent rolls or quickly evaluating T-12s, and even for internal deal management to keep a team on the same page with documents and version control, we haven’t seen anyone offering a multifamily underwriting tool of this magnitude before. We’re pretty excited for where this will head.
Q. Are there any downsides to using AIM Automated Underwriting?
A. Maybe one downside is that an analyst using AIM Underwriting is likely to see an increase in the number of properties they have to evaluate given we made evaluations so much easier…but is too much of a good thing, a bad thing?
Q. Who can use AIM Automated Underwriting?
A. Right now, we’re using AIM Automated Underwriting with select clients as a way to demonstrate the value of the offering and improve the user experience with our tools.
Interested in learning more about AIM Automated Underwriting? Contact us now!