Two tools in the IntellCRE analysis suite help you pressure test a deal and model more complex capital structures: sensitivity analysis for stress testing your key assumptions, and refinancing for modeling a refi partway through the hold. This article covers both.
Part 1: Sensitivity Analysis
Why It Matters
A handful of assumptions drive almost all of your returns:
Proforma rents and rent growth
Hold term
Purchase price
Exit cap rate, which combined with the NOI in the final year of the hold determines your exit value and therefore most of the profit
Market cycles and shifts in demand move these numbers. A small variation can turn a great deal into an average one, which is why it's worth running sensitivities on every underwriting.
Running a Sensitivity Analysis
Open the property and click Analysis in the left-hand menu, then open your analysis.
Go to the Value & Financing step and click Sensitivity analysis to add the section.
Check the sensitivities you want and set the step for each:
Exit CAP Rate step
Purchase Price step
Proforma rent growth step
Hold Term step
Use the # of Steps slider (3, 5, 7 or 9) to set how many scenarios to show.
Open the Sensitivity Analysis tab in the bottom panel and expand it to view the tables.
Reading the Table
The middle column is your current underwriting assumption.
Columns to the left step down by your chosen increment. Columns to the right step up.
Each column shows the resulting exit value, IRR, and equity multiple.
Examples:
Sensitivity | Example step | What it shows |
Exit cap rate | 0.10% | Lower cap rate produces higher exit value and stronger returns |
Purchase price | $150,000 | Buying cheaper improves every return metric |
Proforma rent growth | 0.5% | Higher growth lifts returns meaningfully |
Hold term | 1 year | How the deal performs at shorter and longer holds |
Important: Hold Term and Loan Term
If you're using financing, never run a hold term sensitivity longer than the loan term set in your acquisition financing. If the hold extends past the loan term, the model has to pay off the loan before the end of the hold, which registers as a very large negative cash flow and skews the results.
Using Sensitivities in Your Marketing
You can include sensitivity analysis in deal reports, websites, and brochures. It's an effective way to justify pricing to clients, partners, sellers, and buyers, whether you're defending a higher price or explaining a lower one.
Part 2: Modeling Refinancing
Start With Property Value
Your property value drives everything downstream. Choose your source:
The comparables estimate (based on average price per unit and per SF from your sale comps), or
Min. Purchase Cap Rate
Acquisition Financing
Click Acquisition financing to add the section. Set up your traditional acquisition loan first.
Enter LTV, loan amount, and down payment, or
Let the system size the loan automatically to hold your DSCR at a target (1.25 by default, or another number you set)
Adjust the loan terms manually at any point
Adding a Refinance
In Value & Financing, click Refinancing to add the refinancing section. You need a hold term set first.
Loan terms
Interest rate
Amortization (years)
Refinance Month: when the refi triggers, for example 60 for a year five refi or 120 for year 10
Loan fee
Interest rate spread
Interest only period
Valuation parameters
Cap Rate used for valuation: applied to the NOI in the refinance year to determine the property's value at that point. For example, a year five NOI of $237,000 at a 4.0% cap rate values the property at roughly $6.2 million.
LTV: controls the size of the new loan, and therefore how much cash you pull out of the deal.
You can also enter the Loan amount directly.
How It Flows Through the Model
At the refinance month, the new loan proceeds are used to pay off the remaining balance on the acquisition loan.
Anything left over is your cash out, available for other projects, property improvements, or distributions to yourself, investors, or partners.
From that point forward, the model applies the refi terms for interest and principal payments.
At the end of the hold period, the sale proceeds cover the payoff of the refinance loan.
You can verify all of this in the Cash Flow tab in the bottom panel. Open the debt financing view to see the acquisition loan balance at the refi date, the new loan amount, and the payoff.
Questions about sensitivity analysis or refinancing? Reach out to [email protected].