Frequently Asked Questions

Why should we use your Services?
You are welcome to use others to accomplish the same thing. But, consider this for a moment before doing so. We do not charge you a large fee for what we do and others may charge a application fee and require a large deposit, and that is even before there is a commitment from and Lender/Investor. 
We, on the other hand do not charge you an application fee along with other ridiculous fees involved with loan submission and funding. We only work with Lenders/Investors that do not charge upfront fees and look at the investment as a whole and not just a means of collecting undue fees and causing more undue stress and hardship for the borrower.
We do, however get a referral fee from the Lender/Investor for providing a submission to them and introducing them to the borrower as well as a small success fee from the borrower. This works well for the Lender/Investor, as they do not have to pay a loan officer, along with the benefits that an employee expects from an employer, thus reducing their cost-of-doing-business considerably. As a result of this, they are able to pay us a referral fee for the introduction, which is much less than they would pay a loan officer and advertising to get business in the door. This works well for you in that you will be working directly with the Lender/Investor, along with our assistance to get the loan funded, thus reducing your cost as well.

Please  Note:
The Lender/Investor will have due diligence fees that will pay the costs of an appraisal, property inspections, etc, which will all be explained in their letter of interest (LOI).
The same results, with less expense to you.
What is the Catch?
There is no catch.
We are, in most cases, paid on a referral basis from the investor or lender, or private lender funding the loan. We refer the loan submission request and introduce you to the investor or lender, you then, will be dealing directly with the investor or lender and their staff during the whole process and we will be there for updates for you as well as assisting you and the investor or lender funding the loan as needed.
It’s that simple.
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What is Debt Service Coverage Ratio (DSCR)?
The Debt Service Coverage Ratio (DSCR) helps to determine if an investment property (or a portfolio of investment properties) are generating enough income to make its loan payment obligations.
DSCR is calculated as property rent less property expenses and capital expenditures, divided by scheduled principal and interest payments on the loan.  
        DSCR Example:
What is a “Cap Rate”?
The Capitalization Rate or Cap Rate is a ratio used to estimate the value of income producing properties. Put simply, the cap rate is the net operating income divided by the sales price or value of a property expressed as a percentage. Investors, lenders and appraisers use the cap rate to estimate the purchase price for different types of  income producing properties. A market cap rate is determined by evaluating the financial data of similar properties which have recently sold in a specific market. 

     Cap Rate Example:  
What does “Stress Test” mean?
If a loan starts at a low adjustable rate, the borrower may need to qualify at a worst-case-scenario rate. For example, if the rate were to start at a Prime + 2%, the borrower would probably have no problem qualifying for the loan if Prime is at 5.25% since the rate would then be 7.25%. However, since the loan may adjust over time, the borrower may need to demonstrate an ability to pay should the prime rate increase because obviously the rate will also increase at that time. So, the program may require that the borrower qualifying with a “stress test” or “qualifying rate” of 10.25% in order to ensure that even if Prime were to increase dramatically, the borrower would still be able to make the mortgage payments.
What other factors, other than credit scores, will you be considering when approving a commercial loan?
Liquidity – The dollar amount of the borrowers assets that are easily convertible to cash.
Credit Profile – The timely payment of mortgages, installment loans, and revolving accounts may offset a negative credit score. 

Business Experience – The length of time the borrower has been in business and a real estate investor.
Property Condition and Type – Certain property types have inherently lower risk levels and properties that have no deferred maintenance may help compensate for other negative factors.  
Property Location – Properties in more populous areas typically have higher resale values. 
Verifiable Personal Income – The amount of annual income the borrower can verify.
Property Cash Flow – The amount of cash flow that a property makes can help offset other weak factors for a borrower.
Loan-to-Value (LTV) – The ratio of the loan amount compared to the sales price can have a large impact. This equates to a larger or smaller down payment and this is weighed heavily by underwriters.
What does “Non-Recourse” mean?
In simple terms, a non-recourse loan is one in which, if the loan is defaulted on, the lender can only go after the property used as collateral, as opposed to a recourse loan in which the lender can go after the company or business entity for repayment of that loan, or a full or personal recourse loan in which the lender can go after the owners of the business entity and guarantors. Loans on properties other than multi-family properties typically require full recourse, meaning the guarantors and owners of the business will have to ensure timely payment of the loan.  Non-recourse loans typically have greater down payment requirements. 
How long will it take to close my loan?
Loans usually close within 28 - 45 days; however, we will do everything possible to ensure your loan closes within your time frame.
Why is it valuable to apply for a higher loan-to-value (LTV) amount?
Applying for a loan with a higher LTV amount allows the borrower to better leverage their money. The return on equity they receive from their investment will be higher when they put less money down. Less money out-of-pocket means more cash on hand to invest in the actual business.
What is a Cash-out Refinance and why should I request this?
A loan that allows you to refinance for a higher dollar amount than your current loan balance, and take the difference in cash.
Why? To turn your equity in a property into cash so that you can put it to work making you more money.  Equity in your property is considered “dead equity” because you are not making a return on it unless you pull it out and put it to work somewhere else.
Not all lenders offer cash-out refinance loans, and those that do often have restrictions as to the amount of cash-out and the use of the funds.
Are the appraisal costs the same for commercial and residential properties?
Determining valuation for commercial properties is more intricate, and therefore more costly than for residential properties. A lot more research is involved to find similar commercial properties in a given market. Recent sales are compared, as well as the rental income potential. Proper valuation is critical as property income and appreciation potential are the biggest determinants of value for any real estate investor.
Will an existing appraisal be accepted?
Possibly, If the appraisal was completed within the last six months, we encourage you to send it in for review. We try to keep borrower costs to a minimum and will typically accept a current appraisal of good quality.
  For more Commercial Real Estate FAQs, visit The American Bar Association by using the link below.
The American Bar Association    -    Commercial Real Estate FAQs 
Common Issues With Commercial Real Estate