Thu, 18 February 2016
I heard of two deals recently that ended up going south after the lender apparently did not come through with the loan. Upon closer inspection, though, it was ignorance by the sponsor about how the lender would underwrite the deal, i.e. how they would value the asset and determine the LTV, for example. Or what they require of the sponsor. Or that they require (gasp!) a capital reserve at closing.
All of these materially alter the deal and need to be understood upfront.
To avoid these mistakes, it's imperative that you "interview" your commercial mortgage brokers so that you understand how they underwrite deals and they will require of you. Then you can incorporate those assumptions into your financial model (i.e. the SDA) and you won't be taken by surprise a few weeks before closing.
In my course "The Ultimate Guide to Buying Apartment Buildings with Private" I have a list of 10 questions to ask your commercial mortgage brokers. What I wanted to do in this episode is actually interview a broker and ask them the 10 questions.
That way, you know the questions to ask and you'll also get an idea of what answers you can expect.
To help us with this exercise, I have on the call Ira Zlotowitz, founder and president of Eastern Union Funding and Shai Romirowsky, VP at Eastern Union Funding.
Here are the complete show notes and transcript: