How did this loan get approved?

[Raj Patel]

I know of someone who bought a retail property a few years ago. Retail in the sense that it’s your standard building with parking lot and retail tenants. 

The NOI at purchase was $90k.
The bank gave him a 10 year loan at 4.25%

His P+I was around $88,000 a year. 
DSCR ratio barely above 1.
He put 35% down. 

Yet the loan went through. 

The only reason I ask how is to gauge how much we read on the internet is ********? 

How much is just fear mongering with the hope of influencing people to steer them to your line of product? 

I’m also curious because I’m trying to plan out my purchase later this year, and exploring all options. 

Thanks. 

[Ned Carey]

@Raj Patel too many other factors to know. Was there an opportunity to improve the NOI? Perhaps the lender base d the loan on potential. The lender may have calculated the NOI differently. There may have ben fraud or a mistake involved. Sometimes lenders simpy make bad deals. A 65% loan is fairly low risk for a lender perhpas that was a factor.

Regarding fear mongering. I am not sure exactly what you are referring too. I can tell you I am often cautioning new investors to the incredible risks they are taking and try to help them understand it is not all as rosy as those seling courses or you tube videos claim.

A lot of people have made money in the last several years not because they are smart but because they were the beneficiary of an unprecedented increase in prices and rents.