Overview

In this episode of the Ironclad Underwriting Podcast, Jason Williams and Frank Patalano dig deep into the concept of stress testing in commercial real estate underwriting. They explore why sensitivity analyses are critical, how assumptions around interest rates, exit cap rates, hold periods, and expense ratios can make or break a deal, and the importance of preparing investors with realistic projections. Through real-world examples, they highlight lessons learned, common pitfalls, and practical ways to build more resilient underwriting models.

Topics Covered

• Why stress testing and sensitivity analyses are essential for conservative underwriting

• The impact of interest rate volatility and cap rate assumptions on deal performance

• How to stress test hold periods, rent growth, and stabilization timelines

• Using expense ratios to prepare for realistic operating costs

• Communicating scenarios with investors to build trust and confidence

Quotes

• "Who would have thought interest rates would have tripled in nine months? Nobody. That’s why you have to stress test."
• "You don’t want to underwrite cap rate compression—you want to underwrite cap rate expansion. If you end up with compression, that’s just gravy."
• "Improvement, not perfection. Each deal teaches you something new that makes the next one stronger."

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🎧 Connect with Frank:

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