Walk Me Through Your Underwriting
This question tests structure, judgment, and priorities. Use this script to walk through a deal like a lender.
The answer structure (memorize this)
If you follow this order, you’ll sound senior
- Deal story + business plan (what’s changing, timeline)
- NOI build (assumptions you actually believe)
- Size the loan (downside first)
- Exit underwriting (cap + takeout rate)
- Risks + protections (structure mapped to failure modes)
1) Deal story (10 seconds)
What they’re testing
That you can summarize the deal in plain English and identify the business plan, timeline, and the one thing that must go right.
Say it like this
“It’s a transitional [asset] in [market]. The plan is [lease-up/renovation/re-tenanting] over ~[X] months, targeting NOI from ~$[A] to ~$[B]. I focus on downside stability, timing risk, and refinance viability.”
2) NOI build (what you mention and why)
What they’re testing
That you know the real drivers: occupancy, rent, concessions, expenses, and timing—and you haircut assumptions instead of parroting the pro forma.
Revenue assumptions
- In-place rent roll and occupancy
- Market rent comps (with a haircut)
- Lease-up velocity / downtime assumptions
- Other income (conservative)
Expense assumptions
- Taxes (reassessment risk)
- Insurance trend
- Payroll/repairs/utilities sensitivity
- Mgmt fee + replacement reserves
The line that separates pros from amateurs
“I underwrite a conservative stabilized NOI, then I run a downside case where lease-up is delayed and rents are lower — because timing risk is what kills bridge deals.”
3) Size the loan (downside first)
What they’re testing
That you size to a binding constraint and can explain tradeoffs. Strong candidates size to downside debt yield, then cross-check DSCR and LTV.
Sizing sequence
- Size to downside debt yield on conservative NOI
- Cross-check DSCR at stressed rates / cap cost
- Confirm LTV using the lesser of as-is, haircut-stabilized value, or cost
Mini example
Downside NOI$2.0mm
Target DY8.5%
Max loan~$23.5mm
Then say: ‘I’ll confirm DSCR at stressed SOFR and verify the exit clears.’
4) Exit underwriting (where deals break)
What they’re testing
That you underwrite takeout realistically: takeout rate, stressed cap, lender appetite, and what happens if stabilization slips.
Say this out loud
“I underwrite the refi at a realistic takeout rate and a stressed exit cap. If takeout doesn’t clear with reasonable assumptions, I reduce proceeds, add structure, or pass.”
Quick checklist
- Exit cap: stressed vs comps
- Takeout DSCR: what perm lenders require
- Timing: does stabilization happen before maturity?
- Margin: is there cushion if NOI misses?
5) Risks + protections (match structure to failure modes)
What they’re testing
That you can identify the real loss drivers and map protections to them—reserves and controls for timing risk, triggers for cash flow risk.
Key risks
- Lease-up delay / tenant credit
- Capex overruns / construction timing
- Expense growth (taxes/insurance)
- Market move (cap rates / liquidity)
Protections
- Interest + capex reserves
- Springing cash management
- Milestones / covenants
- Guarantees where warranted
How to finish your answer
“I’m comfortable if downside debt yield holds, the exit clears at realistic assumptions, and structure covers timing risk. If any of those fail, I adjust proceeds or pass.”