Commercial Loans Blog

How To Underwrite Commercial Loans - Part 2

Posted by George Blackburne on Tue, Nov 20, 2018

Screen Shot 2018-10-22 at 8.31.36 PMYou really should pay close attention to what I am teaching you here.  This is the meat-and-potatoes of commercial real estate finance ("CREF").

Let's suppose you're a starving commercial loan broker, and you can't afford my wonderful nine-hour course, How To Broker Commercial Loans.  Maybe you can't even afford to buy the written training manual, Underwriting Commercial Loans.  I have good news.  You can now access much of this wonderful training for free on C-Loans.com.

C-Loans is slowly making this wonderful training manual available for free online.  We covered the first ten chapters in a recent blog article, How To Underwrite Commercial Loans - Part 1.  Today's training article continues with Chapters 11 through 20.

 

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Before we get into today's training, I want you consider the absolute cheapest way to receive commercial leads.  For just $1,000 per year, you'll receive on average one to five commercial leads per day.  Because you pay upfront, all commercial mortgage brokers and lenders qualify to buy leads from CommercialMortgage.com.  (Our other portal, C-Loans.com, uses a different model.  C-Loans only gets paid when deals close, so any lead buyer has to be rich and pristine.)  Do you own a bridge lender?  Leads from CommercialMortgage.com are the Deal of the Century.

 

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Chapter 11:  As you branch out into commercial real estate finance ("CREF") for the first time, your early loans should be apartment loans.  This chapter explains how to prepare a Pro Forma Operating Statement (a budget for the next twelve months, while setting aside reserves for future replacements) on an apartment building.

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/how-to-prepare-an-apartment-pro-forma


Chapter 12:  Here is what an apartment Pro Forma Operating Statement should look like:

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/sample-apartment-pro-forma-operating-statement


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Chapter 13:  When you are ready to expand into commercial loans, you will need to know how to prepare a Pro Forma Operating Statement on a commercial building.  This chapter explains how.

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/how-to-prepare-a-commercial-or-industrial-pro-forma

Chapter 14:  Here is what a sample Triple-Net Pro Forma Operating Statement looks like:

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/sample-triple-net-pro-forma-operating-statement


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Chapter 15:  One of the hardest Pro Forma Operating Statements that you will ever have to prepare is one where some of the tenants are triple-net tenants, and some of the tenants are full service tenants.  This situation occurs when a hot, brand new shopping center opens and leases out on a triple-net basis. Later, as the shopping center ages, new tenants will only sign if the lease is full service.  Here's how to handle it.

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/sample-partial-net-pro-forma-operating-statement


Chapter 16:  What is a Reserve for Replacement?  You're rushing to get a package out, and you know that you must include one; but how on earth do you compute a Reserve for Replacement?

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/reserves-for-replacement

 


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Chapter 17:  What on earth is a cap rate?  What do you do with it?  You've wondered about this for years, haven't you?

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/cap-rates

Chapter 18:  The Net-Worth-to-Loan-Size Ratio is an extremely important ratio in commercial real estate finance.

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/net-worth-to-loan-size-ratio

 

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Chapter 19:  Toxic contamination liability is a HUGE issue in commercial real estate finance.  What is a Level I toxic report?  What is a Level II?

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/toxic-liability

Chapter 20:  This is one of the most important chapters of this Underwriting Manual, and it is a great primer on the subject of commercial construction loans.

https://www.c-loans.com/knowledge-base/how-to-underwrite-commercial-loans/the-construction-loan-process


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Topics: commercial loan underwriting ratios