Investor Encyclopedia

Sensitivity Analysis

Sensitivity Analysis: a practical Canadian real estate investor guide to definition, deal math, underwriting use, common traps, and Realist.ca implementation.

Definition

Sensitivity analysis changes key assumptions to see how returns break under stress: rates, vacancy, exit cap, rent growth, taxes, costs, and timing.

Formula

Scenario return = base model recalculated after changing one or more assumptions.

Example

In underwriting, tag sensitivity analysis beside the exact source input and rerun the model when that input changes. The point is not a pretty metric; it is a better buy, hold, refinance, or walk decision.

Why It Matters

sensitivity analysis changes what a disciplined buyer can pay, how much debt the asset can safely carry, and whether the return is coming from operations or fragile assumptions.

Investor Interpretation

Use it to kill bad deals quickly. If the back-of-envelope version does not survive conservative assumptions, do not spend five hours making it look alive.

Realist Tie-In

Realist.ca can make sensitivity analysis searchable as an encyclopedia entry, link it to property underwriting, and show it beside listings, saved analyses, market pages, and investor lead magnets.