“The lender just walked away — and we were days from close.”
If you were working live deals between mid-2022 and early 2023, that sentence probably hits close to home.
The volatility in that window taught a hard lesson: finance/refinance risk is very real — and it is easy to underestimate until it is staring you down at the 11th hour.
The Risk That Does Not Show Up in the Spreadsheet
Finance/refinance risk refers to the possibility that, when it comes time to secure or replace debt, market conditions, credit availability, or rates have shifted … and not in your favor.
You might:
- Face higher interest rates than underwritten
- Struggle to find a lender at all
- Have terms changed at the last minute
- Or worse … have your financing pulled entirely
None of those show up in your IRR — until they blow up your deal.
Why “Certainty of Close” And Relationships Matter More Than Ever
In a market where interest rate curves or markets shift weekly and lender risk tolerance tightens without notice, certainty is a competitive advantage.
I have seen deals fall apart not because the fundamentals were wrong — but because someone assumed the debt would be there when they needed it. In this environment, that is not a safe assumption.
That is why it is important to consider financing and refinance risk:
- When underwriting do not forecast a refinance into the underwriting. Why? Because relying on future favorable rates to hit returns is speculative at best — and reckless at worst.
- Instead of chasing the cheapest debt, prioritize lending partners with a strong track record of closing and willingness to build a relationship. They might not be the lowest-cost option, but they close. And in this market, you get what you pay for.
Managing Finance Risk: What Actually Works
If you want to avoid sleepless nights and surprise emails from lenders, here are a few things that have worked for us:
- Do not model in a refi unless you would still do the deal without it.
- Work with brokers/lenders who have closed in this market.
- Stress-test the financing assumptions with more than just a +/- 50 bps toggle.
- Build flexibility into the capital stack — do not corner yourself into one path out.
- Underwrite conservatively, especially on interest rate and debt availability assumptions.
This Is Not About Being Pessimistic — It Is About Being Prepared
Optimism is necessary in real estate. But optimism should live in your vision — not your underwriting model.
In a market like this, disciplined risk management is what keeps good deals alive.
Certainty is not just a preference — it is a principle.
Vessi Kapoulian
Breaking down multifmaily underwriting one step at a time to create educated and empowered investors
P.S.
If you are evaluating an investment and need a second set of eyes, I am here to help. Send me a message and we’ll schedule a complimentary call.
P.P.S. And if you are ready to do a deeper dive and learn how to analyze deals on your own from beginning to end with confidence and ease, go to masteringmultifamilyunderwriting.com or message me on how to get started today.