Why More Investors Are Losing Deals During Underwriting

Question

I’m seeing more deals die during underwriting than during negotiation lately.

Usually because: rents were overestimated, rehab budgets weren’t realistic, reserve requirements got ignored, the exit strategy wasn’t strong enough, The investors getting deals closed consistently are preparing for underwriting before they even submit offers.

Has underwriting become tougher for you this year?

Will Rockwell · Answer

Hey, Frankie-I'm just getting started myself (haven't bought my first property yet), but that's actually made me hyper-focused on underwriting + assumptions. I'm pretty analytically inclined, and I'd be curious whether there are 1-2 specific areas you think newer investors are consistently underestimating right now. Do you think it could also simply be that either- A) people outsourcing too much thinking to tools like ChatGPT, calculators, etc. and/or B) slower appreciation/rent growth exposing overly optimistic assumptionsOr something else entirely?

Jaycee Greene · Answer

@Frankie Vozzi Sounds like those deals were dead BEFORE they arrived at underwriting but nobody bothered to check for a pulse ;-)