CRE Financing

/CRE Financing

Have you fallen in love with your property? Take the 4 question test.

August 31st, 2016|

Over the many years I’ve been in the commercial real estate business I’ve come across all sorts of investors.  Occasionally, I encounter someone who has fallen in love with their commercial property.  You know the type.  Their approach to their property is based more on feelings than sound investment decisions.

Want to find out if you’ve fallen in love with your property?  Answer these four questions.  Do I do these things?  (more…)

Think Like a Lender: 7 Rules of Thumb Lenders Use to Size a Loan

August 20th, 2016|

Why Lender Rules of Thumb are Important

One of the more common mistakes of investing in commercial real estate is not fully understanding the importance the lender has on a property’s return on investment.  Now I know what you’re thinking.  “Doug, of course the lender is important to a property’s ROI.  The lower the interest rate the higher the ROI.  Duh.”  Yes, that’s true but that’s not what I’m referring to.

Maybe even more critical to a property’s return on investment is the size of the loan.  It’s the lender that ultimately determines the loan size.  Not the pro forma found in the marketing flyer, nor the buyer’s proposed budget.  It’s the lender.  And without having an accurate estimate of the loan amount, the buyer doesn’t know how much cash is required at closing.  And how much equity that’s required to purchase the property is a key factor in determining the property’s cash-on-cash return.

This is not an academic exercise.  As an investor the sizing of the loan is a critical component for calculating the property’s return on investment.  That’s why it’s important to understand that lenders have rules of thumb that they use in their underwriting guidelines.  It has the potential of significantly affecting the property’s cash-on-cash return.  Not all lenders have the same rules of thumb.  That would be too easy.  No, each lender sizes the loan differently but generally there are seven rules of thumb that most lenders will use to determine the loan amount.

As capitalization rates continue to decline, loan sizes are more and more being constrained by the lender’s debt coverage ratio instead of their loan to value ratio.  This puts additional importance on understanding these rules of thumb. (more…)

Know the Six Key Borrower Underwriting Guidelines that Lenders Use to Qualify You

February 22nd, 2016|

 

A Short History of Underwriting Guidelines

Borrower underwriting guidelines have changed dramatically in recent years. Back in the good old days, prior to the Great Recession, lenders did a very cursory job of underwriting the borrower. They typically asked the  borrower to provide a simple financial statement with a credit check, and that was the extent of the credit items required. (more…)

Negative Interest Rates – Coming to a Bank Near You

February 5th, 2016|

 

In my January 9th blog post, “My Crystal Ball Forecast for Commercial Real Estate in 2016” I stated that even the most seasoned prognosticators will fail to predict major events occurring in 2016. And these unexpected events will have enormous influence on the economy and specifically on commercial real estate. (more…)

  • Tipping Point Marshall Commercial Funding

Apartment Rental Rates – Are We at a Tipping Point?

January 23rd, 2016|

In my last blog post, My Crystal Ball Forecast for Commercial Real Estate in 2016, I made five predictions about the coming year. One of my predictions was that 2016 will be the last year for modest growth for the US economy. Unfortunately it appears the world is heading towards a recession this year and the US will likely follow sometime early next year. (more…)

  • Salesmen sign contract here

Four Types of Sleazy Mortgage Brokers to Avoid Like the Plague

October 17th, 2015|

In a recent blog post I skewered residential mortgage brokers who attempt to broker a commercial mortgage loan. They are the first of four types of mortgage broker to avoid like the plague. (more…)

Tough Love Advice To Residential Mortgage Brokers

September 18th, 2015|

From time to time I get a phone call from a residential mortgage broker trying to place a commercial real estate loan through me.

I try my best to be cordial over the phone but deep down I know 30 seconds into the conversation this isn’t going to end well. (more…)

Crowdfunding – The Basic Facts & The Potential Opportunity

June 28th, 2015|

A primer (rhymes with swimmer) is a position paper that covers the elementary principles of a subject. That is exactly what I’m attempting to do in this article because I’m only a few steps ahead of you on understanding the impact of crowdfunding on commercial real estate. (more…)

The Five Key Factors For Choosing An Apartment Lender

June 1st, 2015|

From time to time, I work on a loan that I believe my readers would like to know the details of the transaction. Such is the case today. In the past year there has been a monumental sea change in who the 800 pound gorilla is for financing small apartment loans in the $1 to $3 million range. (more…)

Thoughts from a Commercial Mortgage Broker: Eight Ways to Help Close Your Transaction

January 20th, 2014|

In today’s commercial real estate environment it is imperative that we do everything we can to get our transactions closed.  We certainly don’t want to be the cause for a sales transaction going sideways and yet many times we can inadvertently put a deal at risk.  Shown below are eight ways a real estate broker can help his chances of his deal closing. (more…)