Inside Rise48's Three-Level Underwriting Process
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Episode Description
In this episode of the On The Rise Podcast, Rise48 Equity VP of Capital Formation Jeremy Dyer is joined by a member of the Rise48 acquisitions and asset management team for a deep dive into the company's disciplined, three-level underwriting methodology. Taken from the Fundamental Forum December 2025 Session. From initial market screening and qualitative filters to financial modeling, stress testing, and field-level validation, this episode pulls back the curtain on how Rise48 evaluates hundreds of deals to find the two to three percent that actually meet their standards. They also cover lessons learned from the 2021-2022 rate environment, how AI is being integrated into the underwriting process, and what the disposition outlook looks like heading into 2026 and 2027. An essential listen for any passive investor evaluating multifamily operators.
Summary
1. Only Two to Three Percent of Deals Make It Through Rise48 has underwritten approximately 2,000 deals since tracking began, and only two to three percent have passed all three levels of their underwriting process to the point of making an offer. This strike rate is a deliberate feature — not a limitation — reflecting a commitment to protecting investor capital above all else.
"Only deals that perform defensively under multiple stress tests get to acquisition and investor offerings. Otherwise we'll kill the deal at the beginning."
2. Level One Is All About Defensible Fundamentals The first level of underwriting is a qualitative filter designed to eliminate deals before any financial modeling begins. Rise48 screens for vintage, unit count, location quality, household median income, crime levels, school proximity, environmental risks, and Google reviews — beginning with a defensible opportunity rather than trying to underwrite around location risks.
"We intentionally begin with a defensible opportunity supporting strong fundamentals rather than attempting to underwrite around the location risks."
3. Level Two Tests the Maximum — Then Dials Back to Reality At the financial underwriting stage, Rise48 intentionally models the deal at the highest end of market assumptions to test whether it has the capacity to perform at its theoretical maximum. From there, assumptions are tightened back to conservative, reality-based numbers supported by CoStar, RealPage, and the company's own historical portfolio data.
"We intentionally push our underwriting to the highest end of the market but not beyond it — just to understand whether the deal has the capacity to realize that maximum investment threshold."
4. Level Three Is Where the Rubber Meets the Road Field-level validation is where Rise48 engages insurance brokers, tax consultants, third-party inspectors, and their own on-site team to verify every assumption made on a spreadsheet. Properties are physically walked, competitive assets are secretly shopped, and capital expenditure bids are confirmed with vendors — including deals that have already penciled well at levels one and two.
"Even after level three, we've walked away from deals that on paper really penciled and looked good."
5. The T3 Income and T12 Expense Approach Prevents Seller Manipulation Rise48 underwrites income based on the trailing three months — which reflects the most recent performance — while using the trailing twelve months for operating expenses to prevent sellers from manipulating short-term numbers to inflate NOI. Full accounts receivable reports, balance sheets, and cash reviews are required to validate what sellers report.
"If we think that sellers are overstating it or there's something going on, we'll just discount it. We're not going to take it for face value."
6. Operational Distress Is a Deal Killer Rise48 deliberately avoids properties with severely depressed occupancy that require a full operational turnaround. The capital intensity and timeline required to bring a 60 percent occupied property back to stabilized performance is considered too high a risk relative to the potential return — a philosophy that separates them from operators who chase heavy discount deals.
"The amount of capital and time that it would take to release a property from being operationally distressed into that 85, 90, 95 percent occupancy is way more capital intensive and timeline intense than we would like."
7. Lessons From 2021-2022 Shaped a Smarter Capital Structure The rapid interest rate increases of 2022 exposed operators who had entered bridge loans without adequate reserves or hedging strategies. Rise48 responded by building in interest rate caps on all bridge products, adding floor hedges to benefit from rate decreases, and stress testing deals at 60 percent occupancy to ensure distributions can be maintained even in a worst-case scenario.
"We evaluate first-case scenarios like zero percent rent growth, rates that stay elevated, expansion beyond expectations, and elevated concessions — and stress tests are presented to investors to show not only the base case but the downside scenarios as well."
8. The Next 12 to 18 Months May Be the Best Buying Window in Years With a wave of bridge loans from 2021-2022 reaching maturity, lender relationships are surfacing off-market opportunities at significant discounts. Combined with new supply getting absorbed and a construction pipeline that has been largely dormant since mid-2022, the team anticipates strong tailwinds for deals acquired in the current window — with initial dispositions being evaluated for the back half of 2026 into 2027.
"We think we probably have a 12-month window here before that changes — and we anticipate looking at dispositions in the back half of 2026 and 2027."
Resources
Website: https://rise48equity.com/
Jeremy’s LinkedIn: https://www.linkedin.com/in/jeremydyer/
Nick’s LinkedIn: https://www.linkedin.com/in/nickstromwall/
