Friday, June 14, 2013

How to Ask For a Commercial Real Estate Loan

Most investors don't use all of their own resources to do their deals, and in many instances, borrowing money from lenders is not only necessary but makes the most sense financially.  However, it is important to note that the Underwriters of any lender will want to have a clear and complete picture of the property you want a loan for and it is entirely up to you as the proposed Borrower to paint that picture in the most complete and honest terms and nothing less is professionally acceptable.  

The correct way to put this package together is to attempt to sit in the Underwriter's shoes and think about what they will want to know to review your loan application properly.

The package needed is as follows:

  • A detailed description of the deal and the property
  • Include as many color pictures of the property as possible to show as much of the property as you can
  • Aerial map of the property
  • A copy of the Letter of Intent (LOI) or Purchase and Sale Agreement (PSA) (if available)
  • Important dates should be highlighted, such as when the due diligence period ends, the closing date and what day the financing contingency expires
  • 2-3 years of financial statements for the property
  • Current rent roll
  • Current profit and loss statement (year to date)
  • A detailed Operating Plan, explaining how you will operate the property.  Include such things as explaining how you intend to keep the tenants that are there, and/or how you intend to fill vacancies, repairs etc.  Include further explanations such as break-even analysis, and how the lender will be paid back.  
  • Include your exit strategy to exit the deal after your planned holding period.
  • Your proposed property management company resume showing their level of experience and past and current work.  Ensure that your property management company's marketing plan is included
  • 5 year Pro Forma projections to be included 
  • Your resume
The interesting thing about the above is if you put this package together, you will answer just about any question that the Loan Underwriter will have  The Underwriter will want to know these details, so wouldn't it be great if we provided all that information in the package so that they don't waste their time having to ask us for it later???

You can get excellent aerial maps by going to

Ensure in your description of the deal to highlight all of the strengths of the property, such as high occupancy, being close to an expressway / main road, high traffic, good neighborhood.  Include as many positive features of the property as  you can determine.  Remember, the Underwriter is human and may not be familiar with the area and even some very obvious things to you may not appear obvious to them, so ensure these pluses are noted.  Also recall that they are weighing the risk of lending to you so provide as much information as possible to help them do their risk analysis.

By following through in a professional manner as has been described, your loan will stand above others and will have a better chance for approval as a result of being thorough up front.

Until next time, make it a great day!