Bob represents owners in both transactional and operational issues.
You call up your friendly neighborhood commercial lender, submit your well thought out loan package, receive an encouraging Letter Of Intent and assume you are ready to roll. Oh, dear reader, if life were only that simple.
Remember that dazzling pro forma you included in that well thought out loan package? Because your lender is most likely not going to agree with you on your income and expenses. And in turn, lower them. This is about the time when they march out the big dogs: In most cases, if your numbers really do accurately reflect your income and expenses, than you should be able to win out during your lender negotiations.
Which means you really just use the cap rate to take a quick snapshot of the property value in order to compare it to similar property types and overall price trends. So, how do they come up with the cap rate?
Simple, just divide the Net Operating Income by the estimated property value: Your cap rate would be 6. Another fairly simple formula, divide your annual cash flow before taxes by your total cash invested.
But always remember, as with all the various valuation formulas, cash on cash return can be deceptive at times so never use it at your sole valuation metric.
Create an air-tight commercial loan package Are your financial records disorganized, incomplete or basically just a total mess? Commercial lenders are no different.
The following is a list of some of the most important items you should have ready before your lender requests them: Pay attention to the details The commercial loan approval process is tenuous at best.
At any point along the way your lender can pull the plug and you will have to start the entire process over again. You want to try and do everything in your power to avoid that outcome.
Successful borrowers have learned the importance of avoiding needless and preventable delays. Aside from delivering all the required documentation accurately and on time, you also want to have a solid understanding of the often neglected details. Details that can pop up out of no where and cost you a loan: They can often take much longer than a client anticipates.
Some of the key takeaways include: Be prepared to wait.Buying Process. In most cases, you need to follow these steps to get a VA home loan.
Eligibility Requirements for VA Home Loans. Find a real estate professional to work with. Property Information - a.
Hotel summary (Brand, Brand History, # of Rooms, Year Built, Construction, etc.) a. Site plans or survey b. Franchise Agreement (include latest punchlist or inspection report) c.
Floor plans. By understanding the commercial loan underwriting process coupled with awe-inspiring financial records, you can get the commercial financing you need in a decent amount of time.
Post navigation 44 Commercial Real Estate Experts You Need In Your Life →. We review the primary credit concerns that lenders face in underwriting commercial real estate loans.
Sector Operating Characteristics Attendees profile the general background of the commercial office, retail, multifamily, hotel and industrial sectors. ROCKPORT UNDERWRITING - HELPFUL HINTS. INTRODUCTION: Implementation on Trepp: Rockport provides a Microsoft Excel based underwriting model to allow for the re-underwriting of loans in Trepp’s database.
Links to the Rockport Underwriting Model can be found. This part provides the requirements for originating conventional and government loans for sale to Fannie Mae. It includes the following subparts: Loan Application Package, Eligibility, Underwriting Borrowers, Underwriting Property, Unique Eligibility and Underwriting Considerations, Government Programs Eligibility and Underwriting Requirements, Insurance, Closing: Legal Documents.