Robert SchmidtThe loan to value ratio (LTV) is widely used in commercial real estate. It’s simple to calculate, and it has many applications in commercial real estate analysis. It’s a key metric used by lenders to determine the size of a loan. Not only that, but it is also used by appraisers to determine the overall …
Interpreting interest rates is not always as straightforward as it seems and getting it right can have important implications for all parties involved in a commercial real estate transaction. Interest rates can take two forms: nominal interest rates and effective interest rates. As a result, there can be some confusion about what a quoted interest …
The sources and uses statement is important to understand in commercial real estate transactions. Yet, there is often a lot of confusion around what a sources and uses statement is and why it is needed. In this short article, we’ll take a look at the sources and uses statement, discuss how it is used in …
Equity waterfall models in commercial real estate projects are one of the most difficult concepts to understand in all of real estate finance. Cash flow from a development or investment project can be split in a countless number of ways, which is part of the reason why real estate waterfall models can be so confusing. …
The debt yield is becoming an increasingly important ratio in commercial real estate lending. Traditionally, lenders have used the loan to value ratio and the debt service coverage ratio to underwrite a commercial real estate loan. Now, the debt yield is used by some lenders as an additional underwriting ratio. However, since it’s not widely used …
The Debt Service Coverage Ratio, often abbreviated as “DSCR”, is an important concept in real estate finance and commercial lending. It’s critical when underwriting commercial real estate and business loans as well as tenant financials, and it is a key part in determining the maximum loan amount. In this article, we’ll take a deep dive …
The Modified Internal Rate of Return, often just called the MIRR, is a powerful and frequently used investment performance indicator. Yet, it’s commonly misunderstood by many finance and commercial real estate professionals. In this post, we’ll take a deep dive into the concept of the MIRR. We’ll define the MIRR, look at the logic and intuition …
The Net Present Value (NPV) is one of the most important and widely used concepts in finance and commercial real estate. In this article, you’ll learn: What Is Net Present Value (NPV)? Net Present Value (NPV) is an investment performance measure widely used in finance and commercial real estate. NPV is the difference between the present …
In finance and commercial real estate it’s simply expected that you know how to use a financial calculator. Yet, it’s surprising how many commercial real estate and finance professionals still don’t know how to properly use a financial calculator. Sometimes it’s because they didn’t learn it correctly the first time, and other times it’s because they …
What’s the difference between a recourse vs. non-recourse loan? In commercial real estate both types of loans are common depending on the stage and type of financing. In this article, we’ll take a closer look at recourse and non-recourse commercial real estate loans, as well as the “bad boy guaranty.” What is a Recourse Loan? …