Most small multifamily deals don’t fall apart in negotiations. They fall apart in underwriting.

Here's the pattern I see all the time. An investor puts a property under contract assuming bank-style terms because the deal "looks clean." Strong rents, decent NOI, nothing exotic. The financing conversation gets pushed off until after the LOI is signed.

Then the lender starts asking real questions.

Which rents are in place versus projected? How many units are actually paying market? What does trailing twelve NOI look like after management fees and real expenses, not the seller's spreadsheet?

Suddenly the numbers change. The loan is smaller than expected because DSCR is based on in-place income, not pro forma. Amortization is shorter than modeled. The rate is higher than what was assumed when the offer went in.

At that point the deal only works if the buyer brings in more cash or accepts thinner margins. Sometimes it still closes. A lot of times it doesn’t.

The problem usually isn’t that the lender is being difficult. It’s that the deal was built around financing that was never realistic for the asset.

The investors who avoid this don’t wait for underwriting to surprise them. Before they submit an offer, they already know which income will count, how sensitive proceeds are to trailing rents, and whether the exit still works if the refi looks worse than expected.

If those questions aren’t answered early, they get answered later, when there’s no flexibility left.

Would love to hear how others here stress test financing assumptions before locking up a deal.