Real Estate Finance ROI DSC LTV NOI EBITDA

Real Estate Finance ROI!, DSC!, LTV! NOI! EBITDA! EMPIRICA! What Really Matters?

How do I finance real estate? • Good credit • Cash Flow • Collateral

Good Credit • You are already determining this! Credit Cards, Cell Phones, Utilities, Car Loans, Insurance • All this leads to your EMPIRICA score.

EMPIRICA • 720 and up is golden • 680 to 720 is acceptable for secured transaction • Below 680 is doubtful • Automation is coming.

The banks outlook on credit score • The bank lives for a 3% return over what we pay on average for deposits. • How much risk would you take for a 3% return? • Thus 680 and higher are what we want.

Collateral • Cost versus Appraised? LTC versus LTV! • Typically the lesser of the two after the proper discount has been applied.

Collateral • 80% Loan to Value (LTV) – This means that the bank will loan 80% of the appraised value of a property.

Collateral (Continued) • 90% Loan to Cost (LTC) – This means the bank will loan 90% of the cost of a property.

Variations in Discounting • Farmland • Hotels • Special Use Properties – Labs – Hospitals – Malls

Relationships Matter • After all this there is a but. But relationships matter. Occasionally you will be able to get around this rule.

Cash Flow

Residential is so simple. • Rule of thumb for expenses is 35% of gross rents. • Coverage of 1. 2 can vary if it is a higher risk more coverage may be needed. • Go to BSI 300 model.

Commercial Cash Flows • This area has much more variation! • There are no rules! • There are no set rates! • Go to STI Springfield Model.

Bringing it altogether. • Go to 21 Jones Drive Model

Loan Types • • Secondary Market Commercial Loans 504 Loans Seller Financing

Loan Documents