How to Analyze Affordable Housing Apartment Buildings Without Losing Money

Why This Episode Matters

If you’re looking to invest in multifamily affordable housing, underwriting is the most important skill you can master. A bad analysis can sink your deal before it starts, but a disciplined approach can create long-term stability, impact, and wealth.

On this episode of the Affordable Housing & Real Estate Investing Podcast, Kent Fai He is joined by Andrea Garcia, a multifamily investor who grew up in Section 8 housing and now dedicates her career to creating safe, high-quality affordable apartments. Andrea walks through her full underwriting process, from choosing markets to analyzing rent rolls, so investors can avoid costly mistakes and position themselves for success.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments.

How Do You Pick the Right Market for Affordable Housing Investments?

Andrea emphasizes that choosing the right market is more than sticking to the city you know. Investors should examine:

• Population growth: Are people moving in or moving out?
  
  

• Rent growth trends: HUD’s Fair Market Rent (FMR) data is a key resource.
  
  

• Employment base: Are major employers expanding or leaving?
  
  

• Demographics: Student housing, military housing, or family-oriented units each require different strategies.
  
  

Her advice: “Call brokers, meet property managers, and attend local meetups. It’s like swimming in a new pool—you have to feel the water before diving in.”

What Is a Target Market Analysis in Multifamily Real Estate?

A target market analysis helps you determine whether a deal aligns with local economics. Andrea looks at:

• Median rent versus median income
  
  

• Vacancy rates and property manager feedback
  
  

• Neighborhood-level data (not just the city as a whole)
  
  

• Employer stability and upcoming job growth
  
  

She recommends resources like the U.S. Department of Labor, U.S. Census Bureau, Fannie Mae, Freddie Mac, and Novogradac’s rent income calculator for affordable housing investors

What Are the Steps to Underwriting Affordable Housing Apartments?

Andrea lays out a clear step-by-step framework:

1. Napkin Underwrite: Quick math on gross potential income, vacancy, and expenses to estimate value.
   
   

2. Market Analysis: Check comps, demographics, and local demand.
   
   

3. In-Place Financials: Review trailing 12 months (T-12), rent rolls, and expense ratios.
   
   

4. Trends Analysis: Identify income or expense anomalies, tax reassessments, or hidden risks.
   
   

5. Renovation & CapEx Costs: Estimate improvements needed to raise rents or stabilize.
   
   

6. Financing Terms: Explore debt options (Fannie, Freddie, FHA, bridge loans) and equity partners.
   
   

7. Return Metrics: Confirm IRR, cash-on-cash, and equity multiples meet investor expectations
   

Key Insights From Andrea Garcia

• Don’t chase comfort zones: The best markets may be outside your hometown.
  
  

• Talk to people: Property managers, brokers, and comps reveal more than spreadsheets.
  
  

• Conservative underwriting wins: Always question inflated rents, low expenses, or unrealistic projections.
  
  

• Understand Section 8 nuances: Fair Market Rents, median income limits, and tax credit maximums all shape what rents you can actually collect.
  
  

• Your team matters as much as your numbers: Property managers and financing partners can make or break the deal.
  
  

Memorable Quotes

“I grew up in Section 8 housing. Now I get to create safe, beautiful apartments for families like mine. That’s my why.” – Andrea Garcia

“Sometimes brokers overprice by millions. If your napkin underwriting says $900K and they’re asking $3M, show your math. Numbers speak louder than emotion.” – Andrea Garcia

“Pick up the phone. Calling 12 comps will teach you more than any offering memorandum.” – Andrea Garcia

“The most critical success factor is your team. Property managers can save or sink your investment.” – Kent Fai He

Common Questions This Episode Answers

How do I start analyzing an affordable housing deal?
Begin with a quick “napkin underwrite” of gross potential income, vacancy, and expenses to see if it’s even worth pursuing.

What’s different about underwriting Section 8 vs. market-rate deals?
The structure is similar, but Section 8 requires factoring in Fair Market Rents, tax credit rent limits, and median income rules.

How can I avoid overpaying?
Always compare NOI against realistic cap rates and demand updated T-12s. Six-month-old financials are useless in today’s market.

What if the neighborhood has high crime?
Investigate further. Sometimes crime stems from poor property management. Visit in person, use Google Earth, and talk to locals before dismissing a deal.

What’s the best way to find property managers?
Look for those with consistently low vacancies and realistic expense ratios. Ask for sample financials and verify with offering memorandums.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments. His mission is to provide everyday investors with the tools, knowledge, and connections to build wealth while solving America’s housing crisis.

DM me @kentfaihe on IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.