Your Worst-Case Scenario Was the Average Year of 2024

TL;DR

✦ The 2021 "worst-case" model assumed 6% rates, 10% vacancy, flat rents. ✦ The actual 2024 average: 7.1% rates, 11% vacancy in Class C, -3% rent growth in some markets. ✦ Your 2021 worst-case became your 2024 base case. ✦ The fix: re-define "worst-case" using actual 2024 worst-case numbers, not vibes.

The 2021 underwriting fantasy

Pull up an investor underwriting model from 2021. The "worst-case" tab usually assumed:

• Rates +100bps (so ~4.5%)
• Vacancy 8% (vs. base 5%)
• Rent flat year over year
• Insurance flat
• Property taxes flat

Investors who modeled at those assumptions felt rigorous. They were modeling against the 2010-2020 reality — a period of historically benign conditions.

Then 2022-2024 happened.

What the actual 2024 numbers were

Here's what an "average year" looked like across the variables most investors ignored:

Rates

• Avg 30-yr investment property rate, 2024: 7.1%
• Avg DSCR product rate: 7.6-8.4%
• Cash-out refi rate: 7.4-8.2%

The "+100 bps stress" from 2021 (so 4.5%) was 260 bps low.

Vacancy

• National Class B SFR: 7.4%
• Class C SFR (most cashflow markets): 11.2%
• Class A urban: 8-9% (especially after rent control / 30-day STR bans)

The 2021 "worst-case" 8% was the actual base case in many markets.

Rent growth

• National median rent growth 2024: −1.1%
• Austin: −7.2%
• Phoenix: −4.4%
• Portland: −5.8%
• Memphis: +0.4%

The 2021 model that assumed "flat rent" actually overshot reality in major sunbelt metros.

Insurance

• FL average increase: +38% YoY
• CA average increase: +24% YoY
• TX coastal: +42%

The "flat insurance" assumption wildly under-modeled actual cost.

Property taxes

• FL post-reset bills: average +47% over seller's basis at sale
• TX SB2 effective increases: +9-10% YoY

The 2021 model that held taxes flat under-modeled the actual tax line by 8-12% per year.

The compounded effect

Pull a 2021 underwriting model into 2024 actuals:

• Rate +260bps over assumption: cuts cashflow 25-40%
• Vacancy +3-6 points over assumption: cuts cashflow 8-15%
• Rent -2 to -7% under assumption: cuts cashflow 5-15%
• Insurance +20-40% over assumption: cuts cashflow 10-20%
• Tax +30-50% over assumption (post-sale): cuts cashflow 10-25%

Combined, the 2021 base case became a 30-60% cashflow miss in 2024 reality. A property that modeled at $480/mo positive came in at $190/mo positive — at best. Many landed negative.

The new stress-test framework

Stop modeling against your 2021 imagination. Model against 2024 actuals.

Define "stress" with real numbers

For 2026 underwriting, here's a defensible stress test:

• Rate: base + 200 bps. (At 7.1% base, stress at 9.1%. Yes, 9%. It happened recently.)
• Vacancy: local market 90th-percentile, not average. Class C Memphis = 14% stress. Class B Boise = 9% stress.
• Rent growth: -5% over 24 months. Not flat. Down.
• Insurance: +30% over today's binding quote. Not flat.
• Property taxes: post-reset bill (already in your base case if you did it right).

The pass criterion

The deal passes stress if:

• DSCR ≥ 1.0 stressed
• CoC ≥ 0% stressed (you're not bleeding cash)
• Cumulative reserve drawdown over 24 months ≤ 60% of total reserves

If the deal fails any of these stressed, it's a fair-weather deal. Buy it knowing weather changes.

Worked example: 2021 vs 2024 stress test

Same deal: $300K SFR, 25% down, $2,200/mo rent.

2021 underwriting + 2021 "worst-case":

• Base: 4% rate. Cashflow $580/mo. CoC 8.4%.
• Worst-case: 5% rate, 8% vacancy. Cashflow $310/mo. CoC 4.5%.
• "Survives stress." Approved.

Same deal in 2024 reality:

• Actual rate: 7.1%. Cashflow $185/mo. CoC 2.7%.
• Insurance reset: -$80/mo. New cashflow $105/mo.
• Vacancy actual: 9% vs modeled 5%. -$110/mo. Cashflow -$5/mo.

The 2021 "worst case" was the 2024 best case. Investors who didn't re-stress against actual conditions found out at year-3 when their refinance came.

How to update your stress test

1. Pull your 2024 stress test. Did it match actual conditions? If not, your stress is too soft.
2. Use 90th-percentile data, not averages. Average vacancy is a fiction; the 90th percentile is your downside.
3. Model rent declines, not just flat. 2024 proved rents can go negative.
4. Re-stress every renewal year. Insurance, taxes, rate cycle move. Your model should move with them.

Run this in Vricko

Vricko's stress test pulls actual 2024-2025 worst-case data by submarket — vacancy, rent change, insurance, rate cycle — and runs the model against the bottom of those distributions, not their averages.

Try Vricko →

What rigor actually means now

Pre-2022, underwriting felt rigorous if you ran a base case and a "stress" with mild adjustments. That bar is gone.

Now, rigor means: assume your worst case is the actual 2024 outcome, and design the deal to survive that. If it doesn't, walk.

Keep reading

• The 8 Numbers Every Deal Must Pass
• Insurance Doubled in FL/CA: What Your Pro Forma Must Show Now
• Tax Reset at Sale: The Line Item That Breaks 30% of Pro Formas

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