Loss to lease is a commonly used calculation in a commercial real estate analysis. However, loss to lease can also be one of the most confusing calculations to understand, especially when you see it for the first time. In this article, we’ll take a closer look at the loss to lease calculation and walk through …
Depending on the complexity of a real estate project, financing can come from many sources. Collectively, the sources are often referred to as the “capital stack” where “stack” is an appropriate metaphor because each source comes with its own collateral, return expectations, and repayment priority. In this article, we’ll define the capital stack and discuss …
Unless you run a large company with an established track record of repaying loans, a bank will likely ask for a personal guarantee before approving a commercial real estate loan. What is a personal guarantee? In this article we’ll thoroughly explain personal guarantees by covering the following: Definition of a personal guarantee When personal guarantees …
In a former life, I helped banks install loan servicing software. In every installation, there came a point where the bank would have to decide which accrual method to use for its loan portfolio. When we got to this point, the Loan Operations manager would always turn to me and say, “what’s the difference between …
The term sheet is an important document in commercial real estate lending. It is used to outline the terms of a potential loan prior to fully underwriting the deal and issuing a commitment letter. In this article, we will take a closer look at how terms sheets work for commercial real estate loans. To provide …
As sure as the sun rises, interest rates are going to go up and down over time. As they change, they have a profound effect on global financial markets, investors, banks, and corporate borrowers. In the world of lending, both borrowers and debt issuers (lenders) have the ability to capitalize on interest rate movements by …
Business owners have many options to consider when searching for the funds needed to finance a capital investment. From traditional bank lenders to fintech startups, the options are plentiful and the purpose of this article is to highlight a lesser known, but widely used source of financing, the SBA504 loan. To get you up to …
As a participant in the real estate market, have you ever come across an attractive deal, but you didn’t have the liquidity needed to secure it? Perhaps you were waiting on another sale to close in order to fund the needed equity for the new deal? The above scenario happens so often that there’s a …
Residual techniques in commercial real estate valuation are sometimes used to value a property, but these residual techniques are also often misunderstood. The income capitalization approach to valuation utilizes a cap rate that represents the value created by all of the real property. It incorporates the capitalization of income from both the underlying land and …
The sales comparison approach is a popular and common valuation methodology for real estate. Yet, there are many nuances to the sales comparison approach for commercial real estate that are misunderstood. The sales comparison approach can be particularly helpful when a property does not generate lease income, or that information is not available. In this …