Stress Testing for Project Viability

Stress testing isn’t just for banks. Smart startups do it too. Here is HOW. In my 12+ years as a CEO and sitting in investor rooms, one thing is clear: Resilience beats optimism every time. Founders love to talk about upside. But investors want to know how you’ll survive the downside. ➟ What happens if your biggest customer churns tomorrow? ➟ Can your team handle a 3-month cash crunch? ➟ What’s your move if your supplier vanishes overnight? The best founders walk in with answers. They’ve already run the stress test. ➟ Financial runway under pressure ➟ Burn rate in a no-revenue month ➟ Key-person risk and team redundancy ➟ Backup suppliers and fulfillment plans It’s all about preparation. Here’s what real startup resilience looks like: • Real-world scenarios, not just theoretical slides • Emotional readiness at the leadership level • Systems that flex and adapt under pressure • Thought processes that anticipate investor concerns • Lean operations with liquidity buffers • Clear team alignment in a crisis • Defined emergency roles and decisions • No single points of failure • Plans built around contingencies • Confidence rooted in rehearsed execution 10 lessons I’ve learned from founders who plan for the worst (including me): 1. Plan a scenario before fundraising ↳ When the questions come, they already have answers 2. Know your downside, like your ARR ↳ Growth is sexy, but survival is strategic 3. Test team capacity under duress ↳ Crisis reveals real leadership structure 4. Build break-glass plans ↳ Not if, but when things go sideways 5. Stress-test supply chains ↳ Multiple vendors, local options, fast pivots 6. Normalize hard conversations early ↳ So when it’s tough, it’s not new 7. Train emotional endurance ↳ Calm heads beat spreadsheets every time 8. Keep cash sacred ↳ It’s not the runway. It’s resilience fuel 9. Rehearse investor crisis Q&A ↳ Confidence comes from preparation, not polish 10. Turn fear into foresight ↳ Uncertainty becomes a competitive edge The best decks prove durability. Don't have a Plan B? Comment or DM me. We'll figure it out together. ----------------------------------------- 💯 Want to qualify for VC funding? Take your free Fundraising Gap Analysis Scorecard. The link is on my profile page - Leon Eisen, PhD

"You’re the first developer to ever show me this." Here's why investors wire $100K+ checks: A few weeks ago, I was on a call with an investor walking him through one of our JV deals. When he said that...I was honestly shocked. I didn't share anything groundbreaking about the deal. It was just real due diligence. But he was used to the pitch that 99% of GPs make. They show up with: • An excel pro forma • A list of Zillow comps • A contractor estimate (maybe) • A pretty pitch deck full of renderings That might impress retail investors. But institutional capital is underwriting your risk, not your pitch deck. Here’s what we include before we ever ask someone to write a check: 1. Verified Demand • Third-party market studies (not your broker’s gut feeling) • Local appraisal comps, absorption rates, vacancy trends • Cost: $2K–5K • Outcome: "Here’s proof this thing will lease or sell." 2. Construction Cost Validation • At least two contractor bids • Plus a 3rd-party estimator using RS Means and local data • Outcome: "We’re not guessing at $312/sq ft — we’ve confirmed it." 3. Environmental Phase I • Wetlands, soil, stormwater — all flagged early • Cost: $3K–8K • Saved us $500K+ on one site that would’ve been a disaster 4. Utility & Infrastructure Assessment • Where’s power coming from? • Can the site support septic or sewer? • How much is it to extend water lines? • These “hidden” costs add $50K–$200K fast 5. Regulatory Risk Map • What’s the timeline for entitlements? • Any NIMBY patterns in council meetings? • Are similar projects getting approved or denied? 6. Stress-Tested Financials We model every deal three ways: → Base case (what we expect) → Conservative case (costs up, delays hit) → Disaster case (soft demand + rate spikes) Why spend time and money on the extra due diligence? Because investors don't care about your deck; they care about YOU the operator and how prepared you are. Anyone can show a well-designed deck. But the thing that creates real relationships and repeat investors: do your due diligence, even if it costs you more on the front end. This is the difference between “looks good on paper” and “let’s wire funds.” Is due diligence part of your competitive advantage? -- If you own land and are looking for a partner to help you develop it, reach out to connect. Eugene Gershman

Be the investor who's ready for anything. In the fast-paced world of real estate, there’s one thing that separates the successful investors from the ones who struggle when the market shifts: 𝗽𝗿𝗲𝗽𝗮𝗿𝗮𝘁𝗶𝗼𝗻. The market fluctuates, interest rates change, and unexpected challenges can arise at any time. And one of the most powerful tools to ensure you’re prepared for anything is stress testing your investments. Stress testing isn’t flashy. It won’t show up in your Instagram highlight reel. But it will keep you in the game when others are forced to sell, panic, or take losses. Here’s a simple breakdown of the key areas you should stress test before closing a real estate deal: 1. Rent growth slows or stops Why it matters: Rent increases may not happen as planned due to market shifts. Test it: Set rent growth to 0% or -1%. Can the deal still cash flow? 2. Cap rate expansion (lower sale price) Why it matters: Higher cap rates mean lower property values. Test it: Raise the exit cap rate by 1–1.5%. How does that affect sale price and returns? 3. Vacancy increases Why it matters: More vacancies mean less rent income. Test it: Model a 10% vacancy instead of 5%. Can you still cover expenses and debt? 4. Interest rates go up Why it matters: Higher interest rates increase loan costs and affect cash flow. Test it: Increase your interest rate by 1–2%. Does the deal still work? 5. Operating costs go up Why it matters: Rising costs (insurance, taxes, etc.) can eat into profits. Test it: Add 10–15% to operating expenses. How does that impact cash flow? Stress testing these factors gives you a clearer picture of how resilient your deal really is. To learn more about stress test and sensitivity analysis in real estate, click the link in the comments for free access to our underwriting model. #multifamilyrealestate #realestateinvestor #fundmanager #lonestarcapital

🚀 Unveiling Our Rigorous Due Diligence Process for Class A Industrial Developments As new investors diving into the world of Class A industrial real estate, we've learned that success isn't just about spotting opportunities—it's about meticulously vetting them to ensure long-term value for our partners and LPs. Today, I'm pulling back the curtain on our “6-Step Fortress Checklist" we use before committing to any Class A industrial development deal. This process has helped us kill bad ideas early, saving time and capital while building a portfolio of resilient assets. Here's how it works: 1. Market Demand Scan: We start with macro trends—e-commerce growth, supply chain shifts, and regional logistics hubs. Is there sustained demand for Class A spaces (think 32'+ clear heights, ESFR sprinklers, and ample docking)? If vacancy rates are climbing or competition is oversaturated, we walk away. 2. Location Lockdown: Prime access to highways, ports, or airports is non-negotiable. We analyze proximity to labor pools and end-users (e.g., Amazon, FedEx). Tools like GIS mapping help us flag risks like flood zones or zoning changes. 3. Site Feasibility Drill: Soil tests, environmental assessments, and utility audits come next. For Class A builds, we ensure the site supports heavy loads and future expansions without hidden costs. 4. Financial Stress Test: Pro formas get scrutinized—cap rates, NOI projections, and exit strategies. We model worst-case scenarios: What if interest rates spike or tenant turnover hits 20%? 5. Team & Partner Vetting: Developers, contractors, and co-investors must align with our standards. Track records, references, and alignment of interests are key—no shortcuts here. 6. Risk Mitigation Mapping: Finally, we outline insurance, legal contingencies, and energy-efficient designs can boost returns by 10-15%. This checklist isn't just a box-ticking exercise; it's our commitment to being the 'safe pair of hands' you can trust. We've passed on 90% of deals this year alone because they didn't clear all steps—proof that discipline pays off. Fellow investors and LPs: What's one non-negotiable in your due diligence? Share below—I'd love to learn from your experiences! 👇