What underwriting assumption has cost you the most money?

Question

I've been spending a lot of time analyzing rental properties and noticed that small assumption errors can completely change whether a deal looks good or bad.
Sometimes it's rent estimates.
Sometimes it's maintenance.
Sometimes it's vacancy or property management.
For investors who have bought rentals before:
What underwriting assumption ended up being the most wrong after you purchased?
What do newer investors tend to underestimate the most?
Curious to hear real examples.

Hasan Gabareen · Answer

As Arman and Travis said, the problem isn't accounting for a little change here and there with the vacancy or property management but the heavy costs of the Capex reserves, increases in the interest rates, and an emergency fund for whatever reason is what will drain the cash flow at the end of the day. Casual Real Estate investors struggle with thinking of all things that can go wrong because frankly no one wants to be discouraged but this is the kind of thing that differentiates a good deal from a bad one.

Eduardo Cavasotti · Answer

The miss that hurts BRRRR investors is capital left in the deal after refi.

A deal can look fine at $300 a month cash flow, but if $25,000 stays trapped, it slows the next purchase more than people model.

I underwrite the low rent, low ARV, real rehab number, then ask how much capital comes back and whether the deal still clears a $150 monthly floor.

Garrett Crosby · Answer

Great question and honestly one of the most useful conversations new investors can have before they actually buy something.

For me the single most expensive assumption has been property tax reassessment after purchase. A lot of sellers have owned a property for 10, 15, 20 years and their tax basis is way below current value. You buy the property and the county reassesses — suddenly your tax line is 40-60% higher than what you modeled. That alone can flip a cash-flowing deal into a break-even.

Second would be turn costs. Investors budget vacancy as a percentage but forget about the actual hard costs of a turnover — cleaning, paint, carpet, small repairs, maybe a month without rent. Model those separately, not just as a vacancy rate.

And third — optimistic rent. People pull the highest comp they can find instead of the median. Run your numbers at market rent, not best-case rent. If the deal still works, great. If it only works at the top of the range, that's a problem. Happy to dig into any specific deal numbers if helpful.

Travis Main · Answer

Hey Chukwu,

Newer investors tend to underestimate maintenance and capital expenditures more than anything else. It's easy to budget for a vacancy month here or there, but roofs, HVAC systems, plumbing issues, and turns between tenants have a way of showing up when you least expect them. A property can cash flow great on paper until you get hit with a few larger expenses in the same year.

Another thing I see people get wrong is rent projections. Everyone likes to use the highest comparable rent they can find, but the market doesn't always cooperate. I think it's better to underwrite conservatively and be pleasantly surprised than to buy a property that only works if everything goes perfectly. One of the best habits an investor can develop is stress-testing the deal. If rents come in a little lower, expenses come in a little higher, and you still like the numbers, you're probably looking at a much stronger investment than the spreadsheet alone might suggest.