Commercial Loans and Fun Blog

Operating Expense Ratio II - What Ratio's Will Commercial Lenders Believe?

Posted by George Blackburne on Wed, Apr 4, 2012

In our first lesson on the Operating Expense Ratio, we said that borrowers and brokers had an incentive to understate their commercial property's operating expenses.  The lower the operating expenses, the larger the commercial loan for which the borrower can qualify.


Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

Commercial lenders therefore use the Operating Expense Ratio to see how much the borrower or broker is fudging his operating expenses.  Below are some reasonable operating expense ratios that commercial real estate lenders will believe:

  1. Multifamily:  35% to 45%
  2. Triple-Net Leased Buildings:  7% (Management and Replacement Reserves)
  3. Self Storage:  25%
  4. Mobile Home Parks:  25% to 40%  (Pool?  Clubhouse?  Closer to 40%)
  5. Hospitality (Hotels/Motels):  50% to 65%
  6. Assisted Living:  85% (That's NOT a typo.)


Free Commercial Loan Placement Kit


Free $199 Commercial  Underwriting Manual


The owner or broker would be foolish to try to get away with operating expenses that are too much lower than those shown above; otherwise, your commercial lender may apply some punitive assumption (say, a 45% operating expense ratio on a multifamily deal) that will just kill your deal.

Remember, pigs get pleasantly plump.  Hogs get slaughtered.


Free List of 200   Commercial Lenders


If you found this article to be instructive, I strongly encourage you to subscribe to our blog.


Subscribe To Blog


Imagine having a list of 2,000 commercial lenders organized by state.  I will trade you a free copy of The Blackburne List for the contact information of just one banker who makes commercial real estate loans.  We solicit these bankers to refer their turndowns to C-Loans.


Free Directory of 750+  Commercial Real Estate Lenders


Got a commercial loan that will qualify at some bank, but you just haven't found the right bank?  Remember, is free!


Submit Your Loan to 750 Commercial   Lenders Using  It's Free!


Do you need commercial leads?  We sell our commercial leads for just a token fee upfront (1 to $9 each), plus 37.5 bps. when the deal closes.


Commercial Mortgage Brokers:  Buy Cheap Commercial Leads


Topics: Operating Expense Ratio II