Commercial Loan Underwriting Problem

[Account Closed]

How does commercial underwrites calculate DSCR with no direct way to verify NOI? 

I want to purchase an off-market, single tenant, and vacant bank building but there is no rent roll. It was originally built by the bank that occupied it (no rent paid), then was bought out by the city for street expansion and never leased out. The road upgrade ended up not impacting the building and the city is planning on offloading the property.

How does commercial underwrites calculate DSCR with no direct verifiable NOI? I could follow-up with the lease offers the city has received, which has been numerous, and sign an "intent to lease agreement" or something. Is my only options to pay all cash or owner finance?  Really in a tight spot here... Thank you for your concern.

[Tim Milazzo]

Hi Joe - it sounds like this property may be a candidate for a Bridge Loan if you have a strong business plan and can demonstrate market demand. Bridge loans are typically I/O (interest-only), which means you won't be paying down principal, only interest. They are more expensive than your typical bank loans (usually 8-12%), but give you the flexibility to work a business plan that does not include initial cash flow.

Once you tenant the property and establish cash flow, you'll then be able to refinance into lower cost debt based on the rent roll and NOI.

In the meantime, here's the typical checklist in order to qualify for a bridge loan: https://www.biggerpockets.com/member-blogs/9562/80403-checklist-how-to-land-a-commercial-bridge-loan