Questions In A Commercial Loan Application

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Questions In A Commercial Loan Application

Property& Valuation Section:

Building Name

Borrower’s Name

Building Type

Number of Units

Age of Building(s)

Property Address

City, State Zip

Building Website

Building Phone Number

Building Email Address

Is the Building Listed for Sale

Link for the Listing

Cash Down Payment

Total Financing (Loan) Amount Required

Cash Out Amount

Detailed use of proceeds required

Present Value of the Building

Date of Last Appraisal

Date of Last Sale

Transaction Type Section:

REO / Foreclosure

Short Sale

Land Contract

Chapter 11 Bankruptcy

Family Transfer

Rate & Term

Cash Out Refinance

Tax Sale

Property Income & Expense Section:

Total Number of Rental Units

Current Occupancy Rate

Current Vacancy Rate

Loan to Value (LTV)

Gross Building Area (GBA)

Total building floor area square feet

Usable Square Footage (USF)

Rentable Square Footage (RSF)

Annual Gross Scheduled Income (GSI)

Money generated by the occupied units

Potential income lost due to vacancy

Annual Gross Operating Income (GOI)

Total Annual Operating Expenses (OE)

Net Operating Income (NOI)

Annual Debt Service (ADS)

Monthly mortgage payments

Debt Coverage Ratio (DCR)

Capitalization Rate (Capx)

Current Mortgage Holder Section:

Current Mortgage Holder (Bank / Capital source)

Contact Person

Street Address

City, State, Zip Code


Email Address

Telephone Number

1st Current Mortgage Balance

1st Original Mortgage Balanc

Date of Original Mortgage

Current Rate & Term

Any Late Mortgage Payment

Mortgage in Default / Forbearance

Is the Property in Bankruptcy

Applicant Information Section:


Company Name

Company Street Address

City, State, Zip

Phone Number

Email Address

Company Web Site

State of Incorporation

Date of Incorporation



Borrower Name

Professional Resume

Personal Financial Statement

Source[s] of income (employer)

Net Worth

Annual Gross Pay

Liquid Assets (Cash)


Years of Business Experience

Credit Score (FICO)

Bankruptcy in Last 10 Years

Judgments in the Last 10 Years

Any Litigation or In Last 10 Years

Income Tax Returns Current & Available

Commercial Loan Supporting Document List

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Commercial Loan Supporting Document List

Financial Supporting Documents:

The last three (3) years corporate tax returns

The last three (3) years personal tax returns

Name and address of corporate bank

Business profit & loss statement

Most recent copy of business bank statement

Personal financial statement for all guarantors

Detailed use of proceeds

Property Supporting Documents:

Schedule of tenants leases

Copies of tenant leases

Schedule of units with square foot per unit

Schedule of improvements to be made with cost breakdown to subject property

Exterior photos of subject property photos of parking lot, street view

Interior photos of subject property


List of all litigation past and present

Guarantor Supporting Documents:

4506 (t) IRS form

Tri merge credit report

Government issued photo ID front and back copy

Articles of Incorporation

Professional resume

Personal financial statement

Personal bank account information

Example Commercial Property Purchase Agreement Checklist

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Example Purchase Agreement Checklist:


Property inspection list

Amount of deposit

Offer withdrawn if not accepted by (date)

Inclusions (i.e., personal property)

Closing date

Possession date

Seller’s disclosure of known defects

Seller’s certification of accuracy of attached lease terms and operating expense data

Schedule of security deposits

Structural inspection contingency

Environmental survey contingency

Buyer’s access to property, documents, tenant records; amount of time for buyer’s due diligence

Penalty for a default by buyer

Penalty for a default by seller

Financing contingency—third-party capital source; amount and terms

Financing from seller; amount and terms

Seller’s and Buyer’s obligations in case of damage, destruction, or condemnation prior to closing

Guaranty by seller not to amend or enter into new lease agreements

Guaranty by seller not to amend or enter into new service contracts

Survival of warranties and representations

Seller’s rent guaranty in the event of vacancy before closing

Example Of A Commercial Property Inspection List

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Example Commercial Property Inspection List:

Construction type (frame, masonry)

Exterior walls (type & condition)

Roof (type & condition)

Foundation (type & condition)

Floors and flooring

Interior walls (type & condition)



Plumbing & fixtures

Electrical & fixtures

Water & sewer

HVAC, oil tanks

Doors & hardware




Fire protection

Sewer & Water


Lobbies, public restrooms

Pest infestations


Environmental assessment




Sidewalks & curbs

Outside lighting

Trash receptacles



Example List Of Commercial Loan Demographic Detail Items

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The following is an example list demographic detail items.


Population Growth

Age Distribution

Income Range

Occupational Profile

Major Employers

Median Home Price

Age of Housing Stock

Housing Mix

Apartment Vacancy

Apartment Rent (range)

Office Vacancy

Office Rent/sf (range)

Retail Vacancy

Retail Rent/sf (range)

Retail Area Traffic Count


Local Government Issues

General Neighborhood Appearance

Commercial Loan Example Of An Income & Expense List

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Example Income & Expense List

Gross Scheduled Rent Income

Other Income



Insurance (fire and liability)

Janitorial Service





Property Management

Repairs and Maintenance

Resident Superintendent



Real Estate

Personal Property



Trash Removal



Fuel Oil


Sewer and Water


HUD’s FHA 223(f) Multifamily Loan Insurance Program

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HUD’s FHA 223(f) multifamily loan insurance program has gained popularity over recent years, most recently spurred by the 2008 Credit Crunch. Even with all the popularity it gained it still remains grossly misunderstood and even unknown, yet it provides for financing that is always a longer term, longer amortization and at a lower interest rate than Fannie Mae, Freddie Mac and CMBS loans… even life company multifamily loans.

In the past FHA 223(f) loans garnished a reputation as being solely for non profits, low income housing and affordable housing projects; as such many market rate multifamily owners/operators have, and continue to, miss out on the industry’s most affordable (and highest leverage) financing mechanism. HUD 223(f) insured loans carry the stigma, and rightfully so, of taking longer to originate. That is true as average origination times remain around 4 months from application to closing; but if you’re not in a great hurry that is only 60 days longer than the average amount of time it takes to close a Freddie Mac multifamily loan or even a Fannie Mae D.U.S. multifamily mortgage.


HUD provides a full checklist of requirements, however much of the checklist and process is managed in-house. Here you can see the full HUD 223(f) checklist. Below, however is a fairly complete synopsis of the outline of the 223(f) FHA insured loan program.

35 Years fixed and fully amortizing interest rates of of January, 2016 are ranging between 4.10% and 4.75% which account MIP in the rate.

To be eligible the property must be at least three years old or, if it was substantially rehabilitated, it must also be at least three years ago. Standard repairs are allowed.

Monthly funding of replacement reserves is required with initial funding of replacement reserves sometimes as much as $1,000 per unit for older properties.

An annual audit of operations is required.

Minimum loan amount is $2,000,000 with exceptions made on a case-by-case basis.


The purchase or refinance of detached, semidetached, row, walkup, and elevator-type multifamily properties including market rate, low-to-moderate income and subsidized multifamily, cooperative housing and affordable housing properties with at least 5 units.


Commercial and retail space is limited to the lesser of 20% of the net rentable area or 20% of the effective gross income.


Single asset, bankruptcy remote, for profit or non-profit entities.


The loan amount will be maximum proceeds subject to the lesser of:

83.3% LTV or the amount of debt that can be serviced by 83.3% of net operating income for Market Rate Properties.

85% LTV or the amount of debt that can be serviced by 87% of net operating income for Affordable Housing Properties.

87% LTV or the amount of debt that can be serviced by 90% of net operating income or more for Rental Assistance Properties.

For Refinances: The greater of 80% LTV or 100% of the total cost of refinancing the existing indebtedness and other mortgageable transaction costs.

For Purchases: 100% of mortgageable transaction costs less the portion of grants, public loans and tax credits applied.

Statutory per unit limits applied.


Properties must have an average actual occupancy of at least 85% for the 6 months prior to application and maintained throughout the process until funding. Maximum underwritten occupancy for market rate properties is 93% and for affordable properties and rental assistance properties it is 95%.


Replacement reserves required in accordance with HUD guidelines (minimum of $250 per unit per year) will be established by a PCNA report. An initial deposit will be required at closing which can be funded by the mortgage proceeds.

Taxes and insurance escrowed monthly.


Repairs, deferred maintenance and capital improvements for up to the greater of 15% of the property value, $6,500 per unit (adjusted for high cost areas), or 20% of the mortgage proceeds can be included in the loan amount subject to leverage and DSCR limitations.


Mortgage insurance premium is paid annually. In the above example of a rate between 4.10% and 4.75%, those interest rates already include the estimated HUD required MIP. At origination, 1% of the loan amount is due to HUD at closing from loan proceeds as the first year MIP. It is 0.60% annually thereafter with an adjustment to 0.45% for affordable properties.


Fixed and fully amortizing for up to 35 years, not to exceed 75% of remaining economic life of the property.


Interest rates are fixed throughout the life of the loan and determined by prevailing market conditions. As of January 2016, interest rates on HUD 223(f) insured loans are generally ranging from 3.10% to 4.10% before accounting for the required MIP adjustment.


All loans are non-recourse to key principals subject to standard carve-outs.


All loans are fully assumable subject to FHA approval and a fee of 0.05% of original FHA loan amount.


Generally, for best pricing, 10 years of call protection structured as a 2 year lockout followed by a step down from 8%. There is no prepayment penalty if loan is assumed.


Application Fee: Generally $25,000 to cover 3rd party reports and due diligence including:


Phase 1 environmental


Market study

FHA application fee: 0.30% of the loan amount.

FHA inspection fee:

$30 per unit where the repairs are more than $100,000 in total but $3,000 or less per unit.

The greater of $30 per unit or 1% of cost of repairs if the repairs required are greater than $3,000 per unit.

Finance and Permanent Placement Fees: Typically capped at 3.50% of the loan amount paid from mortgage proceeds.

Good faith deposit (rate lock and commitment): 1% of loan amount paid at time of commitment and refunded at closing.

Lender’s legal, title, and other standard borrower closing costs.


FHA 223(f) insured loans generally take 100 – 150 days to close subject to deal specifics.


Loans over $50,000,000 may be subject to more conservative leverage and DSRC constraints.

FHA 223(f) can be used in conjunction with LIHTC.

FHA 223(f) can be used to refinance or acquire properties that involve Section 202, Section 236 and Section 8 funding.

A PCNA (Project Capital Needs Assessment) will be required every ten years.

If a HUD 221(d)(4) loan isn’t right for your multifamily development or substantial rehabilitation project, please visit for more options that include bank financing, life company financing, Fannie Mae, Freddie Mac and more.

Commercial Loan Due Diligence & Underwriting

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Winston Rowe & Associates is a no upfront fee commercial real estate advisory and due diligence firm specializes in the financing of commercial real estate transactions.

They have prepared this article to provide a general overview of the due diligence and requirements for commercial real estate.

Commercial loan financing is underwritten on a case by case basis, with every loan application as unique and evaluated on its own merits with an approach and methodology considering worst case scenarios.

The Application:

All commercial loans begin with some sort of an application that the prospective borrower must complete. It’s critical that borrowers do not misrepresent any material facts pursuant to the proposed transaction. This will only result in your loan request being declined down the road when the loan file enters the due diligence phase.

Common misrepresentations made by applicants are; questionable appraisals, source of down payments, personal credit scores, environmental issues, prior offers or letters of interest, use of proceeds, monies invested to date and bankruptcies.

If your honest and upfront about the negative issues concerning your proposed transaction. Most professionals in the commercial lending business will work with you in providing the best options available.

Debt Service Coverage Ratio (DSCR):

A key component in making an underwriting evaluation is the debt coverage ratio (DCR). The DCR is defined as the monthly debt compared to the net monthly income of the investment property in question. Using a DCR of 1:1.10 a lender is saying that they are looking for a $1.10 in net income for each $1.00 mortgage payment.

Typically they will determine the DCR ratio based on monthly figures, the monthly mortgage payment compared to the monthly net income.

The higher the DCR ratio is the more conservative the lender. Most lenders will never go below a 1:1 ratio (a dollar of debt payment per dollar of income generated). Anything less then a 1:1 ratio will result in a negative cash flow situation raising the risk of the loan for the lender. DCR’s are set by property type and what a lender perceives the risk to be.

Today, apartment properties are considered to be the least risky category of investment lending. As such, lenders are more inclined to use smaller DCR’s when evaluating a loan request. Make sure that you are familiar with a lender’s DCR policy prior to spending money on an application.

Ask them to give you a preliminary review of the investment property that you want to purchase. Information is free, mistakes are not.

Loan to Value:

Unlike residential lending, commercial investment properties are viewed more conservatively.

Most lenders will require a minimum of 20% of the purchase price to be paid by the buyer. The remaining 80% can be in the form of a mortgage provided by either a bank or mortgage company.

Some commercial mortgage lenders will require more than 20% contribution towards the purchase from the buyer. What a bank/lender will do is subject to their appetite and the quality of the buyer and the property. Loan to value is the percentage calculation of the loan amount divided by purchase price.

If you know what a lender’s LTV requirements are, you can also calculate the loan amount by multiplying the purchase price by the LTV percentage.

Keep in mind that the purchase price must also be supported by an appraisal. In the event that the appraisal shows a value less then the purchase price, the lender will use the lower of the two numbers to determine the loan that will be made.

Credit Worthiness

For businesses less than three years old, personal credit of principals will be evaluated. This may hold true for longer periods of time for tightly held companies.

For corporations, business performance and credit ratings will be evaluated with a proven track record.

As with all lending, business and personal credit plays an important role. As business professionals we are all taught to shop for the best deal in the marketplace,

This is not true when applying for business credit. If you submit your loan request to too many potential lenders in a short period of time (less than a year), you will be deemed a high risk and most likely have your loan request declined or be forced to pay very high interest rates. This creates a high risk profile because most bank fraud is done through the shot gun approach.

If this may be an issue for you, let your prospective lender know upfront and provide them with all past offers for financing that you received with a letter of explanation. Lenders are business people like you and will review the reasons for rejecting valid and invalid offers for financing.

Property Analysis:

Fair Market Value and Fair Market Rent will be analyzed. Special use property may require additional underwriting. Age, appearance, local market, location, and accessibility are some other factors considered.

Report Costs:

Every commercial real estate transaction requires reports which include; appraisals, environmental, certified financials, property inspection and engineering just to name a few.

Reporting costs are not generally part of the loan amount, so expect to pay for these in advance to the funding of your commercial loan.

At Winston Rowe & Associates, their primary objective is to provide the most reliable and efficient means of sourcing both debt and equity for your commercial real estate loans.

Guide To Financing & Buying A Business

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Winston Rowe & Associates, a no advance fee commercial real estate due diligence, advisory and financing firm has prepared this article to address the five most common mistakes that first time commercial real estate owners make when purchasing a business with commercial real estate.

According to Winston Rowe & Associates, the one common denominator that most millionaires have is, that they own their own business.

Owning your own business can be a very financially rewarding experience. The thrill of being the boss and having complete control over your own destiny are the primary reasons people leave the work force to operate their own company.

Owning your own business can easily turn in to a nightmare if you make mistakes. These mistakes are avoidable if you know what to look for in the business.

You have a better chance of becoming a millionaire if you avoid these 5 major mistakes when buying a business.

1) Due Diligence Investigation:

Winston Rowe & Associates has found that through their years of experience when performing due diligence for clients commercial real estate business financing. One thing they caution clients on is that not everything is as it seems and that is especially true when buying a business.

The owner can produce financial statements that show a business is thriving. You need to do due diligence to make sure the information presented to you is valid and shows an accurate picture of the condition of the business. For example, will they produce Business Tax Returns to verify the profit and loss statement they gave you?

Beware of sellers that are reluctant to demonstrate through documentation the financial health of their business. That great deal you found may just be smoke and mirrors. Always keep in mind that business people almost never walk away from a successful business, because they are tired of making money.

You also want to make sure you know what items the business actually owns, what is leased, what is owed to the business and what the business owes to others. You do not want to buy a business only to find out there is a huge pile of bills that are due and the income you were expecting does not materialize.

Doing a solid job of due diligence is what a firm like Winston Rowe & Associates does for clients that will helps clients avoid buying the wrong business or paying too much for the business.

2) Not Having Enough Cash Reserves:

Running a business requires capital. Successful businesses are able to generate enough revenue to cover the cost of their expenses. In times when the revenue is less than the expenses then you need cash reserves to cover the shortfall. If you spend all your money in the acquisition of the company then you will not be able to cover shortages when they occur.

This can be the quickest way to bankrupt your new business.

Winston Rowe & Associates always recommends to clients not buy a business until you have the necessary funds to both buy the business and the necessary funds to keep it open after the purchase.

3) Cash Flow & Debt Service Coverage:

There will always be a transition period when buying a new business. Some vendors will have a loyalty to the seller and will pull their business when management changes. Likewise you might lose some of your buyers after the transition. These changes are unavoidable.

They can have a tremendous impact on the cash flow of your business.

If you purchase a business assuming the current cash flow will cover the payment on your debt, then you might be in for a rude awakening. Working with Winston Rowe & Associates will ensure that the business you are financing will support the monthly mortgage payments and show a profit.

4) Don’t Pay For Future Potential:

Sellers will try to set a price on a business based on the projected value of the business. For example a self-storage business that is 40% occupied at the time of purchase may be worth $1 million dollars. If the occupancy rate was 80% then the value of the business might increase to $2 million dollars. You should not pay $2 million for the business because the seller entices you on the future potential of the business.

It will be your time, effort and energy that create the future potential in the business. You should be awarded for your efforts. Do not make the mistake of over paying for a business and rewarding the seller for your hard work.

The value of the business should be based on the condition at the time that you purchase it.

5) Wrong Finance & Entity Structure:

The worst mistake that you can make is to buy a business using the wrong entity structure.

First time business owners will buy a business and sign every contract in their name. This is a major mistake because it makes you personally liable for any loss that the business incurs.

If there is loss your creditors will go after your home, your car, and your savings. Buying a business using an entity structure such as a corporation or a LLC can minimize your personal risk.

Use an advisory and finance firm like Winston Rowe & Associates to ensure that you have the correct financing structure and a business attorney and an accountant to help determine what the best entity structure for you to use is.

Do not make the mistake of putting everything you own at risk when you buy a business.

Owning your own business can be the quickest path to becoming a millionaire but you may never reach that goal if you don’t avoid these 5 major mistakes when buying a business.

At Winston Rowe & Associates, their primary objective is to provide the most reliable and efficient means of sourcing both debt and equity for your commercial real estate loans.

Winston Rowe & Associates has an excellent knowledge based investor resource for commercial real estate.


How To Analyze A Real Estate Deal

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When you’re considering the purchase of commercial income property you need to know as much as you can about the income and expenses before you even consider making an offer.

There are Four calculations that every real estate investor should utilize to determine a potential income property’s investment quality.

They are the ensuing:

1) Gross Rent Multiplier

2) Net Operating Income

3) Capitalization Rate

4) Debt Service Ratio

Gross Rent Multiplier (GRM):

The gross rent multiplier is a simple method by which you can estimate the market value of a commercial income property. The advantage is, this is very easy to calculate and the GRM can serve as an extremely useful precursor to a serious property analysis, before you decide to spend money on an appraisal.

To Calculate the GRM:

Gross Rent Multiplier  =  Market Value  /  Annual Gross Scheduled Income

Transposing this equation:

Market Value  =  Gross Rent Multiplier  X  Annual Gross Scheduled Income

Net Operating Income (NOI):

Net Operating Income is a property’s income after being reduced by vacancy and credit loss and all operating expenses. The NOI represents a property’s profitability before consideration of taxes, financing, or recovery of capital.

To Calculate the NOI:

Net Operating Income  =  Gross Operating Income less Operating Expenses

Capitalization Rate (Cap Rate):

The capitalization rate is the rate at which you discount future income to determine its present value. The cap rate is used to express the relationship between a property’s value and its net operating income (NOI) for the coming year.

To Calculate the Capitalization Rate (Cap Rate):

Capitalization Rate  =  Net Operating Income  /  Value

Transpose this formula to solve for the ensuing variables.

Value  =  Net Operating Income  /  Capitalization Rate

Net Operating Income  =  Value  X  Capitalization Rate

Debt Service Ratio (DCR):

Debt service ratio is the ratio between the property’s net operating income (NOI) for the year and the annual debt service (ADS).  Potential mortgage lenders look carefully at the DCR and its future projections, basically they want to know if the property can generate enough income to pay the mortgage in addition to cash reserves and a profit.

To calculate the Debt Service Ratio (DCR):

Debt Service  =  Annual Net Operating Income (NOI)  /  Annual Debt Service

Winston Rowe & Associates really wants to be able to find a way to help everyone who comes to them find a funding solution that meets their needs.

That’s why Winston Rowe & Associates actually wants to speak with clients, so they can truly understand your business and its distinct needs.

The best funding solutions occur when they combine data with consultation and common sense.

CMBS Definition

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CMBS stands for commercial mortgage-backed securities. A CMBS loan is a commercial real estate loan that is backed by a first-position commercial mortgage.

CMBS loans are for properties such as apartments, hotels, warehouses, offices, retail, or any other type of real estate that is used in connection with a company or business in need of such a space.

There are two types of CMBS loans — the traditional version or the delegated program.

The traditional version works much like a conventional loan.

Terms are agreed upon by both the investor and the lender, and then the lender appoints a trust vehicle for the loan. The loan is then separated into bonds — also known as tranches — that are created based on a risk assessment of the value of the loan.

The delegated program is a CMBS loan where there is one buyer for the CMBS loan and terms are agreed upon before the actual loan application is filled out.

The terms generally come from the financial institution where the CMBS loan originated from.

Underwriting Parameters:

For CMBS Loans, Conduit Lenders have reverted back to more prudent real estate credit decisions, with a much more conservative attitude towards risk.

In addition to more traditional loan to value (LTV) maximums of 75%, and debt service coverage ratios (DSCRs) of at least 1.25x, Lenders are also calculating the anticipated debt yield (net operating income/loan amount) of at least 7-8%.  Borrowers should expect to have “hard cash” equity invested in their projects, while being able to maintain a post-closing liquidity of at least 5% of the loan amount and an overall net worth of at least 25% of the loan amount.

Hard Money Asset Based Lending Definition

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Asset-based, hard money loans are made by private money lenders which are non-institutional (non-bank) capital sources, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction.

They use a very strict set of rules regarding the collateral status of the physical assets being used to obtain a loan.

What is Hard Money Used For:

This type of financing is used for high risk business transactions that traditional banks or institutions will not lend on.

For example; Chapter 11 Bankruptcy, commercial property that is vacant or needs rehabilitation and other types of high risk business ventures, turnaround situations, short-term bridge financing and for investors who want to purchase properties to fix and flip.

Types of Collateral Used:

Asset based lending comprises business or a real estate loan secured by the liquidation value of their assets, generally at quick fire sale values.

A recipient receives this form of financing by offering real estate, inventory, accounts receivable and/or other balance-sheet assets as collateral.

Common assets that are provided as collateral for a hard money loan include physical assets like real estate, such as land and physical properties, company inventory and manufacturing equipment, or physical commodities.

If the borrower fails to repay the loan or defaults, the hard money lender can seize the collateral and sell the assets in order to recoup its loan amount.

In many cases the collateral to secure the loan is two times the value of the loan; hence the hard money lender will make a substantial profit even if the loan defaults.

Due Diligence and Underwriting:

Prior to authorizing a loan, lenders require a relatively lengthy due diligence process, which includes the inspection of the real estate, balance sheet, ledgers and assets to calculate the value of a company’s allowable borrowing capacity.

Costs associated with this analysis vary, but common charges include site visits, collateral evaluations and interest costs.

Hard Money Lending Source:

The objective at Winston Rowe & Associates is to add value to a client’s commercial real estate acquisition or refinance by offering a wide range of hard money, asset based financing solutions for; apartment buildings, hotels, shopping centers, office buildings, industrial property, raw land, medical offices, manufactured home developments and construction projects.

The Basics of Commercial Loan Due Diligence

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Winston Rowe & Associates a no upfront fee national commercial real estate finance specialist has developed this article to assist prospective client in understanding the basics of commercial loan review and due diligence.


The owner of a commercial property, such as a shopping center, strip mall, apartment complex, office building and multi-tenant building, can collaborate with the bank or lender for a possible commercial loan modification.  This adjustment to the commercial loan may result into the reduction of the amount that is due, the temporary payment of interests only, the extension of the duration of the loan, or a decrease in the interest rates.

However, before the talks on possible modifications to the terms of the loan agreement can be held, the lender has to conduct a commercial loan review.  This review will include the analysis of the information regarding the borrower and the different documents.

Borrower & Lender Relationship:

The commercial loan review will involve both the borrower and the lender and is necessary before a commercial loan modification could be agreed upon by both parties.  It should be noted that the financial regulators are recommending loan workouts because they realize that most of the borrowers do not necessarily want to default on their loans but have only temporarily lost their abilities to come up with the originally agreed upon payments as a result of the economic situation.  A number of the commercial property owners only need a breather to recover from their present financial conditions while others may need a permanent change to the terms of the loan.

The loan workout will be advantageous to the borrower because it will forestall the repossession or foreclosure of the property.  It will benefit the lender because the expenses required a foreclosure are avoided and the payments will still be made by the borrower albeit at lesser amounts.  During the crisis in the commercial real estate market, the lender also avoids being stuck with assets that are very difficult to sell if a commercial loan modification is allowed.

Lender Review & Due Diligence:

The lender utilizes the commercial loan review to ensure that the business has the capacity to provide for the mortgage payments in case the adjustments are allowed.  Some of the factors that the bank or lender will look into during the procedure to determine the creditworthiness of the commercial property owner include the trend in the cash flow of the business, the payment history, market conditions, and the presence of guarantors.

From the point of view of the borrower, the commercial loan review process is quite different.  Loss mitigation attorneys and experts usually help the property owner in this procedure by carefully scrutinizing the various details of the original loan agreement.  The reason for this is that many agreements that were made during the times when commercial real estate was booming contained flaws or violations of laws and regulations that were created to protect the rights of the borrowers.  If such violations are discovered in the loan contracts, the lender would not be able to enforce all of the provisions found in the agreement, and this includes foreclosure.

The lender may even be required to return to the borrower the interests that have been paid from the beginning of the loan.  Therefore, the commercial loan review can provide the borrower with powerful negotiation tools that can hasten the lender’s approval of the commercial loan modification application.

Winston Rowe & Associates understands that in this business very few funding requests will fit neatly in a box and therefore we look forward to working with you to identify a unique deal structure that can benefit from their commercial loan programs.

9 Key Tips For Investing In Apartments and Multifamily Real Estate

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#1: Think Big

If buying a 5-unit apartment requires you to get commercial financing, which is more of a hassle, then why bother? I would recommend buying properties with at least 10 units. Remember that the more units you buy, the cheaper they are per unit. Also, Dave Lindahl has been quoted as saying, “It’s no harder to manage 50 units than it is 10.”

#2: Don’t Choose Apartments by Default

There’s nothing wrong with investing in residential apartments per se. I’m just pointing out that since most investors are already comfortable with residential property, they tend to look for apartments without considering the other types of commercial property, such as office buildings, industrial, mobile home parks, land, etc. Weigh all of these property types and choose your own niche based on whatever will help you reach your unique goals, regardless of your comfort zone.

#3: Learn the New Formulas

If you’re buying houses, you may use certain formulas, like buying at 75% of After-Repaired Value, minus estimated repairs. Commercial property will have new and different formulas to get used to, such as Net Operating Income and Cap Rates. Learn what is considered good in your area and get familiar with them when making offers.

#4: Be Prepared to Spend More Time at First

Fight the temptation to get discouraged if you haven’t done your first deal yet, or if you are spending more time per deal than your previous ones. Houses are so similar that it’s easy to make a cookie-cutter system for buying and selling them. “When I begin looking for commercial properties, I was surprised at how long it took me in the beginning to screen deals and make offers” per Dave Lindahl, a real estate guru.  Just remember that there is a learning curve, like with anything else, and that things will go faster over time.

#5: Be Prepared to Lose Due Diligence Money

After your offer is accepted, you have a period of time (just like with houses) to do your due diligence. You should get an appraisal, property inspection, and other tests and inspections required by law. The only problem is that these cost a lot more than they do for smaller deals. You might spend $5,000-$10,000 on a deal, only to find out you don’t want to buy it after all. While this is always better than buying a bad deal, you should still be prepared for these kinds of expenses.

#6: Relationships Are Even More Important

Relationships with other investors, private lenders and consulting firms like Winston Rowe & Associates are important when investing in real estate, but they are even more so when buying commercial properties. For one, properties costing a million dollars or more are probably not within the financial wherewithal of most of us individually, so you probably have no choice but to get to know and work with partners. Also, many commercial properties are sold without being listing first, so the more people in your network who know what you’re looking for, the more deals you’ll find.

#7: Find A Funding Solution In Advance – Winston Rowe & Associates

Commercial loans are a different animal than residential loans and in some ways better. The down payments needed are usually a higher percentage than loans on single-family houses, which means you’ll have to put more down (or get your partner to put more down). However, there is often no personal liability if the deal goes south, and they are more lenient about letting you borrow the down payment money from someone else. Nevertheless, before making offers, ask around and find out who the best lenders are in your area to use when buying commercial properties, as it may make the difference between qualifying for one or not.

#8: Winston Rowe & Associates Are Partners to Your Bridge to Wealth

Buying million-dollar properties is not something most people can qualify for on their own (in fact, getting a loan to buy a house is hard enough!) So make sure that you spend a lot of time finding private lenders or deal partners to help you out. A partner can provide the cash and/or credit needed to purchase a property, and you can compensate them by paying a fixed interest rate or a percentage of the cash flow or proceeds from the sale.

#9: Know Where to Get Tough Questions Answered

Lastly, it’s imperative that you associate with experienced commercial investors who can answer questions that come up while you are evaluating properties. There’s no sense in losing a deal or buying a bad property because you didn’t understand certain environmental regulations or estimating what trash collection really costs. Know who you can ask to get fast answers when you need them, and make them your new best friends.

Winston Rowe & Associates has an excellent knowledge based investor resource for commercial real estate valuation and market analysis. 

Tip’s For Dealing With Delinquent Tenants

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If it happens to you, time is of the essence, and it’s important to have a well-conceived plan already laid out.


Adopt policies that make it easy to pay rent on time, and difficult to pay late. For example, accepting electronic payments, credit cards, or direct deposit make it easy to pay on time.

Stress the importance of on-time rent payments at leasing.

Send out an invoice with return envelope enclosed.

Make sure the rent due date is realistic (i.e. it coincides with when they receive their paychecks).

Diplomat or Enabler

Evictions are expensive and time-consuming. So is finding a new tenant. From this perspective, it is tempting to try to work something out with your delinquent tenant. Occasionally you’ll have a tenant who has genuinely experienced a temporary financial hardship, one that is resolvable, and it can be in your best interest to help them through their rough patch.

But here’s the hard reality: The majority of late paying tenants will do it again. Not paying rent is a big deal, and it’s in your best interest to make the tenant understand that.

Accepting payments late with no consequences, or accepting partial payments not only encourage late payers, but it can compromise your rights to re-take the property. The longer you allow a late payer to string it out, the more you risk becoming an enabler.

Be Prepared for Battle

Even though it may be in your best interest to help ethical tenants through a rough patch, experience dictates that if your tenant launches a habit of late pays, it will get worse with time. There is always the chance that your tenant is stringing you along intentionally, trying to live rent-free while they save money or search for another place to live. You need to know what your legal options are and be ready to take action.

Collect Your Due

Once a tenant account goes seriously delinquent, your likelihood of successfully collecting the debt drops precipitously. Therefore, it is crucial to aggressively pursue the debt with all means at your disposal. This includes submitting the debt to a collection agency and employing all legal means of collection.

When speed and experience are important and crucial to your apartment balding investing success, a principal at Winston Rowe & Associates is always available to speak with prospective clients. They can be contacted at 248-246-2243

Easy-to-Avoid Apartment Building Maintenance Mistakes

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If you are not careful, costs and complications of maintenance projects can quickly skyrocket out of control.

Take steps to avoid these common maintenance mistakes so you don’t wind up with more than you bargained for:

Hiring contractors without checking references. You wouldn’t rent to someone without checking them out first, so don’t make the same mistake with contractors. The only way to be certain that the person you have chosen does good work is to talk to previous customers.

Be cautious about who you allow into the rental property. Fixing a botched repair or remodel can cost more than the original work.  And just imagine the liability you’ll face if the contractor has a criminal past.

Choosing cost over skill. Low bids are hard to turn down, but be skeptical — you get what you pay. Chances are the person has a skeleton to hide — like disgruntled clients, no insurance — or worse. Strike a balance, and find someone who has at least the minimum skills needed for the job at the most reasonable price.

Allowing tenants to do repairs. Sure, the tenant may be eager to fix the place up, but rest assured, they’ll want something in return. Chances are they’ll ask for more than you would have paid someone with talent. Asking tenants to supervise contractors is another big mistake because they won’t be as cost-conscious as the landlord.

Unpaid contractors can lien the rental property. Encourage tenants to report repairs, then step in and get the job done.  Don’t give the tenant the opportunity to run up a large bill.

Not fixing the little things. Routine maintenance is a must-do, regardless of how long a tenant is staying in the property. Check in periodically and look for minor things that will gobble profits if left unattended — like pesky water leaks, roof damage, poor drainage, or wobbly railings.

Failing to give tenants notice. While landlords can usually come into a rental for emergency repairs, in just about every other case, the tenant is entitled to notice.

Failure to provide that notice not only stirs up bad feelings, but the tenant may claim everything from theft to breach of the lease.

When speed and experience are important and crucial to your Apartment Building investing success, a principal at Winston Rowe & Associates is always available to speak with prospective clients.

If you would like to learn more about apartment building financing options from Winston Rowe & Associates 

Investing In Apartments Versus Single Family Homes

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Winston Rowe & Associates has prepared this article to detail the benefits of investing in apartment buildings versus single family homes.

Many investors would rather invest in single family homes than apartment buildings. However, the problem is that it is somewhat difficult to get positive cash flow houses. One apartment building may provide as much cash flow as twenty little houses. And once you have management in place it may be a lot less work.

When considering apartment buildings, you must remember to buy properties that will have positive cash flow from the start, based on the current income and all of your projected expenses including management. You are an investor, not a manager, and a good income property should pay for management and still produce positive cash flow. It is a good idea to investigate and verify details before making an offer; this will ensure for a honest investment.

Start by verifying income. There should be rental agreements signed by tenants, and rental histories showing if there are any problem tenants or late payments. Look for rental deposit documents also, to see amounts and where the deposits are kept. Also ask to see service contracts and agreements. Do they transfer, or are you free to seek better deals? These can include property management agreements, landscaping, snow plowing, pool cleaning service, and cooling system maintenance agreements.

Get the last 24 months income and expense statements, and look for anything unusual, like expenses that are too low or income that seems too high. Review the rent roll, and find out if the rents are over or under the market rates for the area. If there are employees, look at the payroll records for any surprises, like accrued vacation time that you’ll have to pay.

For the exterior inspection, you will want to first walk around and take notes. Watch for anything that looks unusual or in need of repair. Then you can get professional inspections, if necessary. You want to verify that the electrical and plumbing systems are up to date and meet current codes. You also want to get an estimate on how many years.

Take notes, and list problems, and estimated costs to correct them. You can use these notes during subsequent negotiations. The problems investors run into when buying income properties are usually not unforeseeable. They can be avoided or resolved if you just do your due diligence. Use a checklist so you won’t forget anything.

You can contact Winston Rowe & Associates at 248-246-2243