Underwriting the exit loan

[Denise Webster]

One thing I'm noticing more often is that investors will spend a lot of time analyzing the purchase and rehab side of a deal, but much less time stress-testing the exit loan. For BRRRR, fix-and-hold, and bridge-to-DSCR strategies, the exit loan is not just a future detail. It can determine whether the whole deal actually works.

A few questions I think are worth asking before closing:

• What happens if the appraisal comes in lower than expected?
• Will the rent support the refinance payment?
• Are taxes and insurance being estimated realistically?
• Is there enough liquidity to cover delays?
• Are seasoning requirements being considered?
• Does the exit still work if the lender offers less leverage than expected?

I’m curious how others are handling this... Are you underwriting your exit loan before closing on the acquisition, or are you waiting until the rehab/stabilization is complete?