Underwriting a Deal When the Numbers Are Tight

The most dangerous moment in any deal is the one where you’ve decided you want it. From there, every assumption bends a little in your favor: the rent comps get optimistic, the rehab budget gets lean, the timeline gets short. Tight deals don’t blow up on the spreadsheet — they blow up in the gap between what you assumed and what was true.

So I underwrite the exit before the entry. What does this look like if I have to sell in a soft market, with a tenant who stopped paying and a roof that came in over budget? If the deal still survives that story, the upside takes care of itself. If it only works when everything goes right, it isn’t a deal — it’s a bet.

I also separate the person who finds deals from the person who kills them. When I’m wearing the acquisition hat, I’m supposed to be excited. So I make myself put the deal down, sleep on it, and come back as the skeptic whose only job is to find the reason to walk. The good ones survive both hats.

Affordable housing makes this harder and more important. The margins are thinner and the stakes are human. That’s exactly why the discipline matters: you cannot be generous to a community from a position you underwrote into the ground.