Underwriting in a Higher-for-Longer World
The assumptions that quietly broke when rates stopped falling.
Most pro formas built between 2015 and 2021 carried one silent assumption: exit cap rates at or below entry. That assumption is gone, and the models that still lean on it are producing fiction.
Three Inputs to Re-Examine
Start with the exit cap — underwrite it flat to entry at best, wider in most cases. Then revisit the refinance: deals penciled on a 2026 refi at 2021 rates are the next wave of distress. Finally, stress your rent growth against real wage growth, not the last cycle's momentum.
None of this is pessimism. It is simply underwriting to the world as it is, which is the only kind that survives a hold period.
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