Balancing Risk During Underwriting: How Tamarack Approaches Risk and Return

We live in a world that often celebrates speed, flash, and outsized ambition. In investing, that translates into IRRs that climb into the 20s, leverage ratios that feel risky even on paper, and deals built more on hype than fundamentals.

At Tamarack, we take a different approach. One that might sound conservative—but is anything but complacent.

We believe smart investing is about knowing the difference between bold and reckless. It’s about pursuing strong returns without losing sleep. It’s about managing downside first, so upside becomes a bonus—not a requirement.

And that’s why our model isn’t about swinging for the fences. It’s about hitting consistent doubles.

Our Philosophy: Protect First, Then Grow

Every investment carries risk. The question isn’t whether risk exists—it’s how well you’ve prepared for it.

That’s why our underwriting philosophy starts with downside scenarios. What happens if:

Rent growth slows?
Cap rates expand?
Renovations take longer or cost more than expected?
Interest rates don’t fall—or even rise?

We model for those outcomes. We build in buffers. We plan for stress.

Because if we can weather the downside, we’re free to benefit from the upside.

The Stress Test Matrix

Here’s how that philosophy translates in real time. For every acquisition, we run a sensitivity matrix—a tool that helps us visualize how changes in variables like cap rates and rent growth impact returns.

It’s not about best-case scenarios. It’s about preparing for the full spectrum:

What’s our IRR if rent only grows at 1% annually?
What if cap rates expand by 100 basis points at sale?
How resilient is the deal in a no-growth environment?

We do this not just for ourselves, but for our investors. Because transparency builds trust. And confidence comes from clarity.

Fixed-Rate Debt as a Non-Negotiable

The last few years have been a crash course in interest rate risk. Many operators who were thriving in 2021 found themselves struggling in 2023 as floating-rate debt reset and balloon payments loomed.

Tamarack took a different path. We’ve always preferred long-term, fixed-rate debt—even when it meant we couldn’t compete on purchase price. We believe debt is a tool, not a gamble.

Our typical financing structure looks like:

Fixed-rate terms with 10-15 year amortization
No balloon payments for at least a decade
Favorable prepayment terms (often declining over time)

That means we’re not forced to sell. We’re not hoping rates go down. We can operate from a position of strength, even when the market shifts.

Conservative Doesn’t Mean Small

There’s a misconception that conservative investing means small returns. But in our experience, that’s only true if you limit your vision.

We’ve seen investors achieve:

Mid-teen IRRs with reduced volatility
Consistent distributions year after year
Equity multiples of 2-3x on 7-10 year holds

How? By being disciplined upfront. By avoiding costly mistakes. By choosing the right markets, the right partners, and the right timing.

In other words: by being strategic.

The Power of Long-Term Holds

Many real estate deals are structured for short-term exits—3 to 5 years. The idea is to boost value quickly and flip for a profit.

But at Tamarack, we often prefer a longer horizon. Why?

It allows us to ride out market cycles.
It maximizes tax benefits through depreciation.
It gives our investors consistent income.
It lets us benefit from organic appreciation and rent growth.

One of our recent deals—a 1990s vintage multifamily asset—was structured with a 12-year hold in mind. We built in early cash flow, planned for refinancing after stabilization, and identified a strategic path to reposition units post-regulatory constraints.

The result? A deal with downside protection in year one—and a massive equity upside over time.