3 Real Estate Underwriting Mistakes Investors Are Making in 2026

A deal can look solid on paper and still fall short on cash flow. In 2026, that gap usually comes down to a few real estate underwriting mistakes that worked fine a few years ago and don’t hold up anymore.

During a recent episode of Your CPA’s Take on Real Estate, Kyle Paxton shared valuable insights on why deals aren’t performing like they used to. The discussion highlighted the importance of building assumptions for the market investors are in today, not the one they bought into.

Why Underwriting Matters More Right Now

From 2020 through 2022, many deals could carry themselves even with loose assumptions. That’s no longer the case. Income isn’t growing as fast as expenses and debt service, and in Sun Belt markets heavy supply has held back rent growth. The low rates, strong rent growth, easy refinancing and manageable expenses many deals were built on have all tightened.

“Real estate’s a little slower, market’s not bad, it’s just less forgiving,” Kyle said. In that kind of market, underwriting has to be tighter, because there’s less room to recover from a bad assumption.

Mistake 1: Using Stale Expense Assumptions

This is the most common mistake, and the easiest to miss. Expenses have kept climbing while rents have not. Florida properties are a clear example, where high insurance and property taxes are often attached to the deal.

An expense line carried over from an old pro forma can make a deal look healthy when it isn’t. The fix is to build from current numbers and make sure every input reflects today’s market, not the market from a few years ago.

Mistake 2: Falling Into the Rent Growth Trap

A couple of years ago, fast rent growth could cover for a high purchase price. “You would still potentially be able to overpay and win because you have the quick rent growth and cap rates were compressed,” Kyle explained.

That cushion is gone in many asset classes. High-supply multifamily in the Sun Belt, college towns, older office space and value-add deals are all areas where investors tend to overestimate returns. Recovery from overpaying is harder now, which means underwriting that counts on rent growth to rescue the deal is a bet, not a plan.

Mistake 3: Counting on an Optimistic Refinance or Sale

This is the biggest one. Many investors enter a deal with a refinance or exit plan that only works if the market cooperates.

Why It Worked Before

When values kept moving upward, aggressive exit assumptions were often rewarded. Investors could reasonably expect to make the jump to a profitable refinance or sale.

Why It’s Risky Now

Lending has become far less forgiving. “You have to understand that the process takes longer. You’re going to get scrutinized more and squeezed a little bit as you go through these processes,” Kyle said.

Higher rates make it harder still. More of a property’s income goes to the lender and loan proceeds can shrink, so buyers have to bring more equity or pay a lower price to hit the same returns. Before entering a deal, the question to ask is whether the refinance or exit plan is realistic for a tighter environment.

Small Misses Add Up Fast

None of these mistakes has to be dramatic to cause damage. “Even small misses in those kind of inputs I talked about around the insurance, taxes, vacancy, cap rates can have a significant impact on your cash on cash return,” Kyle said.

A slightly low insurance estimate plus a slightly high rent projection plus a refinance that takes longer than planned can turn a solid deal into a cash drain.

Underwrite for the Market You’re Actually In

Good deals still exist. They’re grounded in basis discipline, strong current cash flow, more conservative debt and realistic exit assumptions. The investors finding them are the ones who stopped analyzing deals like it’s 2021.

Watch the full episode of Your CPA’s Take on Real Estate to hear what’s changed in deal math and what separates investors who are surviving from those who are scaling. For more conversations like this, subscribe to the Your CPA’s Take on Real Estate YouTube channel.

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