Underwriting a real estate acquisition requires a few core financial inputs. Some come from the seller. Others you build yourself. Getting both right is what separates a deal that performs from one that surprises you after closing.

Start with what the seller provides. Ask for at least two to three years of operating statements showing actual income and expenses. These tell you what the property has actually produced, which matters more than what someone hopes it could produce. Look at the line items closely. Maintenance costs that suddenly dropped in the year before sale might mean deferred work you’ll inherit. Utility costs that don’t match similar properties might indicate billing issues or inefficiencies you’ll need to address.

The rent roll shows you who’s paying what, lease terms, deposits held, and any delinquencies. It’s your snapshot of current occupancy and revenue. Verify it ties to the operating statements. If the rent roll shows $50,000 in monthly rent but the T-12 shows $540,000 in collected rent, you’ve got a collections problem to investigate before you sign anything.

Next comes what you build yourself. A pro forma is your projection of how the property will perform under your ownership. Start with the historical numbers but adjust for your business plan. If you’re raising rents, show the pace and the vacancy it might create. If you’re cutting expenses somewhere, show what you’ll actually spend instead. Be conservative on income growth and realistic on expense creep.

Debt assumptions shape your cash flow more than most investors appreciate. Know your expected loan amount, interest rate, amortization period, and any interest-only period. Run the numbers at actual quoted terms from your lender. Interest rates move, and a deal that worked at 5.5% might fall apart at 7%.

Then stress test the deal. Run your model against scenarios that could hurt you. What if vacancy runs 10% higher than you projected? What if rates are 100 basis points higher at refinance? What if your renovation budget runs 20% over? Stress tests don’t predict the future but they tell you where you have margin and where you’re exposed.

Finally, consider the value of an independent review. Having someone outside the deal look at your model before closing catches mistakes and challenges assumptions you’ve gotten comfortable with. When you’ve been working a deal for weeks, it’s easy to fall in love with the numbers. An independent set of eyes can spot the rent growth assumption that’s too aggressive or the expense line that was accidentally left out. This is one reason investors bring virtual CFO support into acquisitions before they close. We stress-test deal models, validate assumptions against historical data, and flag issues while there’s still time to renegotiate or walk away.

Good real estate investor accounting means having accurate numbers when they matter most. For acquisitions, that’s before you wire the deposit.