Conservative Underwriting - What it means.

We often hear from syndicators, about how conservative their underwriting is. What it means is the income is projected to be lower than what it could be. And the expenses are projected to be more than they could actually be. And finally the interest rate higher than what it might be. This leads to a very conservative net operating income and a conservative net profit.

Which also means, the % returns are lower. Don't expect higher returns keeping everything else conservative. The price of safety is just few percentage points from the cash on cash returns and from the over all IRR. If you are presented with a higher IRR and still claim to have run the numbers conservatively, look at the numbers closely.

To your legacy.