How to Get the Finest Commercial Real Estate Loanby Stacey Galvin consultant
Last year, commercial real estate loans worth USD 400 billion were underwritten. Among these loans, multifamily properties were sold the most (nearly USD 150 billion); whereas, retail, office, hotel, and industrial real estate followed. So, now, that means gaining approval for commercial loans is a tad difficult when it is compared with acquiring home loans.
Many who have secured commercial loans without any assistance have said that the process is pretty gut-wrenching experience. You must be thinking as to how commercial loans worth billions got approved in 2015, then? It is simple—borrowers know what a lender wants, and, most importantly, they know how to give it to that person. However, now, it is time to give you the low-down on the process of getting commercial real estate financing.
Step 1—know about a commercial financial loan and its underwriting process
When it comes to getting commercial loans, it is similar to riding a giant roller coaster as you get tossed and turned a lot. And you can even get confused easily by the jargon of commercial real estate loans. So what can be done, now? The deal is simple—you will have to study the basics of the commercial financial loan and know about its underwriting process. By doing so, you will be able to make your loan-acquiring process a breeze.
Step 2—know your loan type
Before applying for a commercial real estate loan, it is better to have basic knowledge about different commercial loan types (such as the recourse and the non-recourse ones). For example, many people have the misconception that if a borrower has a non-recourse loan, then the individual will not be liable to repay when the start-up goes bankrupt. However, that is not the case as there are many provisions by which the bank can make the failed business owner (the borrower, that is) liable. (One of the provisions is referred to as “Bad Boy Guarantees.”)
Step 3—have a realistic view about your LTV
LTV, which is an acronym for Loan-To-Value, is the loan amount that is divided by the property value. However, even if you know about LTV, you may not be aware that this value can be calculated differently by the lending institution that you are approaching. For example, if you wish refinancing a multifamily property that you believe is worth USD 3 million, you presume that your LTV will be anywhere near 75 percent. However, the lender may never agree with your income and your expenses; also, the lender can lower them easily. (They use their specific NOI and DSCR to lower the values of your income and expenses.)
So keep these steps in mind to get a commercial real estate loan that can fit the bill completely well.
Created on Dec 31st 1969 19:00. Viewed 0 times.