The Commercial Real Estate Investor Podcast 364. Why Underwriting is SO Important | Office Hours
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Mar 12, 2026 A deep dive into why underwriting determines if a deal actually works. Quick walkthrough of tools and a real KFC underwriting to show assumptions, financing, taxes, and exits. Discussion of stress tests, lender constraints, and which levers to pull to flip returns. Practical talk on passive NNN benefits, tax savings, and comparing CRE to other investments.
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Use Cost Segregation To Capture Upfront Tax Benefits
- Run cost segregation and bonus depreciation scenarios to show tax savings and their timing.
- Tyler selects restaurant benchmarks, captures accelerated depreciation, and notes it boosts year-one tax savings substantially.
Tiny Assumption Changes Can Upend Returns
- Small changes to purchase price, cap rate, or exit assumptions drastically change IRR and cash metrics.
- On the KFC, buying at 5.75% cap then selling at 6.25% in 10 years yields low IRR but shows loan paydown and tax benefits.
Stress Test Deals And Identify Which Levers To Pull
- Stress test base, bear, and bull cases and document levers you can pull to make a deal work.
- Tyler demonstrates lowering purchase price, changing LTV, or seeking better debt terms to move IRR from ~6% toward target.