Full Definition
Underwriting is the comprehensive financial and risk analysis of a commercial real estate investment. Buyer underwriting evaluates rent rolls, operating expenses, market comparables, tenant credit, lease terms, and capital needs. Lender underwriting additionally analyzes DSCR, LTV, debt yield, and sponsor financial strength. Every institutional deal involves underwriting before LOI or closing.
Related Terms
Pro Forma
A projected financial statement for a property showing expected income, expenses, and cash flow over time.
DSCR (Debt Service Coverage Ratio)
Ratio of NOI to annual debt service. Lenders require 1.20x-1.30x+ typical for commercial loans.
LTV (Loan-to-Value)
Loan amount as a percentage of property value. Typical commercial LTV ranges 65-80%.