Our underwriting begins with the downside case. We hold rents flat, push expenses and insurance higher than the seller’s numbers, and stress the exit cap rate. If the property cannot cover its debt comfortably in that world, we pass.
Only then do we model the upside: the renovation plan, the operational fixes, the rent growth the market supports. We want the upside to be a reward for good work, not a requirement for survival.
Debt gets the same treatment. Fixed or capped rates, coverage ratios with real cushion, and maturities that do not force a sale in a bad year.