Key Takeaways:

Transcript

Welcome + Why Underwriting Doesn’t Have to Be Boring

Hey, Tilden Moschetti here, hope you are doing well. Coming to you live from North Carolina. I wanted to welcome you to this webinar today. We’re going to do a lot of very cool things. We’re going to go through underwriting, but we’re going to do it in a manner that you probably haven’t seen before.

Underwriting itself for financial analysis is probably considered one of the most boring things you could do by many syndicators. I actually find it extremely exciting. And you’ll see why once we dive deep into the financial analysis picture. When you look at it from the concept of levers, which is what we’re going to talk about, you’ll see that there are a lot of possibilities in how you can shape deals into ones that not only work really well, but also work very well for your investors.

Start With FIT (Founder Investment Theory) Before the Spreadsheet

At the end of the day, what we’re trying to do is build an investment that investors will invest into, but will still make you the most amount of money. So a lot of times how I approach the financial analysis picture is I start with my FIT, right, the Founder Investment Theory, and I’ve got videos on that. And I’m sure you’ve heard me talk about that before.

When you start with the FIT, and you get an idea about what your investors are looking for, not only from a financial picture, but also from what sort of deal in general they’re looking at it from – what sort of lens? Are they looking at it as a cash flow deal? Are they just needing a long term thing? What’s going to get them excited? Those things. Then you can start to build your investment offering in a way that really dials it in specifically for those investors.

Why “IRR Marketing” Turns Syndicators Into Commodities

Starting in the financial analysis picture, we start with the typical things that you might see in advertising. So what do my investors expect to see in terms of IRR or expect to see in terms of some sort of multiple or something like that? The problem with that is that we see, and you see this on advertisements all the time on Facebook, is that all that syndicators are talking about is those measures. “Hey, we’ve got a great 15% IRR. We’ve got a 15% IRR.”

I mean, if you scroll through my entire feed on Facebook, because I click on every single ad that syndicators put out, it’s just full of these and it’s just IRR after IRR after multiple after multiple after IRR after preferred return preferred return IRR. And there’s nothing at all interesting, which puts syndicators in the role of just a commodity where you’re competing on IRR, multiples, preferred returns, things like that.

And what that does at the end of the day is it puts you in a spot where now you’re competing as a commodity. You’re trying to give investors the highest possible return possible, even at sacrificing yourself. There are a lot of ads right now that are competing, saying, “Well, our splits aren’t 80% like everybody else, our splits are 95% to the investor and only 5% to us.”

But what that ultimately means for the syndicators is, unless they’re really padding their fees, which they are – but unless they’re actually, you know, if they were doing it correctly, and not padding their fees, and just doing those 5% splits to them, they’d be out of business. They would be doing way too much work for not enough reward.

Pro Forma Basics: Facts vs. Assumptions

So when it comes to financial analysis, and when it comes to writing a pro forma, so even your real estate agents when they’re building a pro forma, there’s two sets of things that are going on at any given time, right? They’re looking at facts and they’re looking at assumptions. This is how every analysis starts with those two items.

So what are the facts? We’ve got simple things like size of the property… lot size… FAR… existing tenants… demographics… operating expenses… property taxes… fair market value, which is the price you’re paying for it.

But let’s talk about assumptions: likelihood of renewal, likelihood of default, demographic changes, job base shifts, assessed value and property tax impacts, and future rent behavior.

Why Rent Assumptions and Vacancy Are “Big Levers”

A lot of times we care a lot about rents, right? Rent growth means higher values of the property. Historical terms, vacancies, rents, turnovers, time to lease—those are facts. But future rents are assumptions, and those assumptions can radically shift outcomes.

Case Study Lens: Vacancy and Supply Shifts Can Break a Thesis

So let’s talk about vacancy real quick… Applesway… Houston… they made a set of assumptions… saying, “we’ve got a tremendous, great vacancy rate”… but vacancy was going up due to new supply.

They assumed interior renovations would drive $200–$300 higher monthly rents. But when supply increases, vacancy rises and rents compress—especially when tenants can move across the street into newer product.

Capital Improvements: Cost, Time, and “Value Add” Are Assumptions

Capital improvements might help retention, but cost overruns and schedule slippage are common. And even if improvements are completed, the “intrinsic value” of the work depends on whether tenants actually pay for it through higher rents.

The Four-Step Method of Financial Analysis

So let’s talk about the four-step method of financial analysis:

1) Basic facts and assumptions (inputs, market data, property facts)
2) NOI and potential value (objective NOI today + cap rate / market data)
3) Cash flow (debt, fees, capex, reserves, cash drag)
4) Performance (purchase price, sale price assumptions, prefs, splits)

This isn’t strictly linear; it’s layered—more assumptive as you move upward.

NOI and Value: Where Levers Begin to Move

When we’re coming up with potential value: NOI ÷ cap rate = value.

Levers that move NOI: income, expenses, vacancy, and other income. Levers that affect the credibility of NOI: realistic rent roll assumptions, realistic “other income” (e.g., charging for parking), and realistic expense savings (e.g., water reduction claims).

Cap rate is also a lever, and it requires real comp work—walking comps, building a matrix, comparing conditions—similar to how appraisers support an income approach.

Cash Flow Levers: Debt, Fees, Reserves, Capex

Cash flow becomes more subjective: debt terms (interest-only vs amortizing), fees (asset management, construction fees, developer economics), reserves (cash drag), capex, and distribution design.

Even distribution patterns change investor experience—even when totals may be similar.

Performance Levers: Purchase Price, Exit Assumptions, Prefs, Splits

Performance is what investors see, but it’s built on levers:

Aggressive “double your money in 2–3 years” exit assumptions require extreme NOI and cap rate execution.

The Core Investor Reality: They Invest in You

At the end of the day… the assumption that investors only care about the number is wrong. Investors care about why you—your credibility, reputation, track record, alignment, and story.

Long pitch decks don’t win capital. Trust and clarity do.

Closing: Underwriting as Strategy, Not Marketing

We’re in a different economic phase—higher interest rates, shifting demographics, changing asset-class risk. The opportunity is real, but success is not built by competing on prefs and IRR alone.

When you build your brand and compete on trust and thesis—underwriting becomes a tool for durable success, not just a marketing output.

So thanks again for taking the time and I hope you enjoyed this webinar.