Deal Underwriting Hub
Investor-focused underwriting and acquisition guidance across Massachusetts
Underwrite Commercial Deals Like an Investor Before You Send the LOI
Become proficient in calculating NOI, cap rate, debt coverage, cash-on-cash return, value-add upside, and offer price across multifamily, industrial, retail, office, NNN, and land
What is underwriting?
Real estate underwriting is the process investors and lenders use to evaluate a property's income, expenses, financing, risk, and long-term investment potential before submitting an offer.
Key Underwriting Metrics
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NOI = Gross income - Operating Expenses
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Cap Rate = NOI / Purchase Price
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Debt Coverage Ratio = NOI / ANNUAL Debt Service
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Cash-on-Cash Return = Pre-Tax Cashflow / Total Cash Invested
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IRR = Measures total annualized return over time, no easy formula. Use a spreadsheet. Usually want to see 12-18%+ depending on strategy.
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Expense Ratio = Operating Expenses / Gross Operating Income
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Vacancy Rate = 5-10% depending on asset and market conditions, don't leave this out
Key Considerations by Asset Class
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Multifamily: units, rents, utilities, laundry, parking, repairs
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Industrial: tenants, ceiling height, docks, electrical service, drive-ins, office/warehouse split SF
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Retail/Office: tenants, vacancy, lease types, expenses
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NNN: lease term, increases, tenant credit, reimbursement structure
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Land: zoning, approvals, wetlands, Phase I, utilities access and development timeline
Start with actual income, not unattainable projected market rates.
Verify expenses before trusting NOI.
Use market cap rates to work back into property value.
Stress test debt assumptions.
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Only send an LOI when the numbers give you a path to profit.