iv. Underwriting & Credit Analysis

Underwriting and credit analysis assess the risks and assumptions underlying a real estate investment or loan. These processes evaluate income durability, asset quality, borrower strength, and downside scenarios to determine whether capital should be deployed and under what terms.

Borrower Creditworthiness

An assessment of a borrower’s financial strength, track record, and ability to meet debt obligations.

Debt Service Coverage Ratio (DSCR)

A metric comparing net operating income to required debt service, used to evaluate loan repayment capacity.

Downside Scenario

A stress-tested projection reflecting adverse market or operating conditions.

Expense Assumptions

Forecasted operating cost estimates used in underwriting models.

Guarantor

An individual or entity that provides additional credit support by agreeing to repay obligations if the borrower defaults.

Loan Covenant

A contractual requirement or restriction imposed by a lender to manage risk during the loan term.

Sensitivity Analysis

An evaluation of how changes in key assumptions affect projected outcomes.

Stress Testing

The process of modeling extreme but plausible scenarios to evaluate resilience.

Underwritten NOI

Net operating income adjusted for conservative assumptions used in underwriting.

Vacancy Assumption

An estimated level of vacancy applied in underwriting to reflect market and operational risk.