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Real Estate Finance

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

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Real Estate Finance

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

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

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

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

  5. 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.

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

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

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

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

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

  11. Cash Flow

  12. 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.

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

  14. Bringing it altogether. • Go to 21 Jones Drive Model

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

  16. Loan Documents

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