Table of Contents

• INTRODUCTION – Commercial real estate finance is not an endless subject.  You can master it.
• THREE RATIOS – Most of commercial underwriting can be reduced to just three ratios.
• THE LOAN-TO-VALUE RATIO – Obviously the collateral needs to be worth more than loan amount.  
• DEBT RATIOS – Don’t you have to carefully compute the borrower’s personal budget?  Maybe not.
• DEBT SERVICE COVERAGE RATIO – This ratio is the Big Kahuna.  You need to master it.
• LOAN CONSTANTS – It matters greatly what interest rate and amortization you use.
• HOW MANY DOLLARS CAN I GET? – This is the single most important lesson in this whole manual.
• OPERATING EXPENSE RATIO – Lenders are not going to let you fudge on the expenses.
• NET LEASE VERSUS FULL SERVICE LEASE – Not all commercial leases are the same.
• HOW TO PREPARE AN APARTMENT PRO FORMA – A Pro Forma Operating Statement is like a budget.
• SAMPLE APARTMENT PRO FORMA OPERATING STATEMENT – Here is what a real Pro Forma looks like.
• HOW TO PREPARE A COMMERCIAL OR INDUSTRIAL PRO FORMA – If the property is an office building or industrtial building, here’s what to do.
• SAMPLE TRIPLE NET PRO FORMA OPERATING STATEMENT – Lots of buildings are leased where the tenant pays all of the expenses.
• SAMPLE PARTIAL NET PRO FORMA OPERATING STATEMENT – What do you do when some of the units are triple net and others are not?
• RESERVES FOR REPLACEMENT – You must set aside some money to replace things like the roof and the HVAC system.
• CAP RATES – What kind of return is the owner earning?
• NET-WORTH-TO-LOAN-SIZE RATIO – You can’t borrow $100 million if you are only worth $10.
• TOXIC LIABILITY – Better not buy a property that is polluted.
• THE CONSTRUCTION LOAN PROCESS – How do you convince a bank to make a commercial construction loan?
• CONSTRUCTION COST BREAKDOWN – How does a bank figure out the total cost of a construction project?
• LOAN-TO-COST RATIO – The bank is not going to take ALL of the risk on constructing a project.
• SITE INSPECTIONS – Banks do a quick drive-by first.
• APPRAISERS – Who do banks use to appraise commercial properties.
• LOAN PROPOSALS – What is a Term Sheet?
• FHA 223(f) APARTMENT PROGRAM – The Federal government encourages the renovatnion of older apartment buildings.
• LOAN PLACEMENT MATRIX – Which kind of commercial lender makes which kinds of deals.
• DOCUMENTS TO GATHER ~ APARTMENTS – Here’s what you need to round up for an apartment deal.
• DOCUMENTS TO GATHER ~COMMERCIAL/INDUSTRIAL – Here’s what you need to round up for a commercial-industrial deal.
• HOW TO PREPARE A PROPOASAL SUBMISSION PACKAGE – Here is what a commercial lender needs to see initially.
• GLOSSARY – There are lots of fancy terms in commercial real estate finance.

Updates to Underwriting Manual

• INTRODUCTION TO CUMULATIVE UPDATE OF UNDERWRITING MANUAL – Things change slightly ove the years.
• COMMERCIAL CONSTRUCTION LOANS – Here are more training articles on the construction loan process.
• THE PROFIT TEST – This test makes sure that the developer will actually make money constructing the project.
• LOAN-TO-VALUE RATIO – Commercial lenders reduce their loan-to-value ratios when they have soured on a property type.
• MEZZANINE LOANS – After the Great Recession, life companies, conduits, and banks let debt funds take the riskiest piece.
• THE LOAN-TO-COST RATIO – Banks require average developers to contribute lost of equity these days.