Real Estate Finance ROI!, DSC!, LTC!, 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