Most development deals don’t fail because of bad underwriting.
They fail because the deal never made sense to begin with.
Before you start modeling returns or stress testing assumptions, you need to understand how the entire deal actually comes together.
That’s the step most people skip.
The Mistake Most Investors Make
A lot of people jump straight into spreadsheets and try to make a deal work.
They adjust rent.
They tweak exit assumptions.
They play with the numbers until it looks good.
But if the structure is off, none of that matters.
You’re just building a better version of a deal that shouldn’t exist in the first place.
What “Structuring the Deal” Actually Means
Before you go deep, you need to lay out the core pieces:
- What does the project actually cost?
- What can be financed vs what needs to be raised?
- How long will it take?
- What does the exit realistically look like?
- What do both the investor and sponsor actually make?
This isn’t full underwriting.
It’s getting clarity on what you’re actually dealing with.
Why This Step Matters
When you structure a deal properly, problems show up early.
You’ll quickly see things like:
- Capital requirements that don’t match your resources
- Rent assumptions that feel stretched
- Exit pricing that depends on everything going perfectly
- Investor splits that don’t justify the work
This is where you either gain confidence — or save yourself from a bad deal.
A Real Example
We recently looked at a deal where multiple offers came in within 24 hours.
The price kept getting pushed higher, and we had the ability to stay in the deal.
On paper, we could make it work.
But only if we:
- Pushed rent higher than we were comfortable with
- Tightened exit assumptions
- Accepted lower returns for the risk
At a certain point, the structure stopped making sense.
So we walked away.
Where Deals Typically Break
1. Capital Stack
Total project cost is one thing.
What you actually have to raise is another.
A deal can look fine until you realize how much equity is required to close it.
2. Rent Assumptions
It’s easy to justify higher rent when you want the deal to work.
But without real confidence behind it, you’re just building a best-case scenario.
3. Exit Pricing
Cap rates drive everything.
Even small changes can dramatically impact your final returns.
4. Investor Structure
The split between LPs and GPs can completely change the outcome.
You need to understand what you’re actually getting paid for the work and risk.
The Balance in Underwriting
You can’t be so conservative that you never do deals.
And you can’t be so aggressive that you’re buying a dream.
The goal is to find the middle:
- Realistic assumptions
- Solid returns
- Enough margin for error
If you have to stretch everything to make it work, that’s your answer.
How We Approach It
Before going into full underwriting, we focus on getting a clean snapshot of the deal:
- Total cost
- Financing structure
- Timeline
- Exit range
- Return profile
From there, it becomes much easier to decide whether it’s worth spending more time on.
This is also where different deal strategies come into play, whether it’s build-to-suit, ground lease, or a pad sale, because each one changes how the deal generates value.
How This Fits Into the Process
We don’t rely on one model to do everything.
Each step has a purpose:
- Back of Napkin → filter deals
- Development Snapshot → structure the deal
- Sensitivity Analysis → stress test assumptions
- Full underwriting
Most people skip step two.
That’s where problems start.
Final Takeaway
If you can’t clearly explain how a deal works, you shouldn’t be in it.
Structuring the deal is what gives you that clarity.
It helps you understand:
- What needs to be true
- Where the risks are
- And whether the opportunity is actually worth pursuing
Sometimes the best decision you can make is to walk away.
📥 Download the Development Snapshot Spreadsheet
If you want a simple way to structure your deals before going deeper:
