Presenting a deal analysis to a Lender

[Noah Garza]

I had a question on presenting a deal I have analyzed, using BP's calculators of course, to a potential lender. Is it a good or a bad idea to present more than one analysis on the same property? I currently save at least two PDF's on each property analysis I've done, one with the best possible out come as far as cash flow goes and one with some changes such as not getting the rent I expected or having more built in expenses. All scenarios I'm still cash flowing positively, any feed back will be helpful, Thanks in advance!!

[Crystal Smith]

Originally posted by @Noah Garza:

I had a question on presenting a deal I have analyzed, using BP's calculators of course, to a potential lender. Is it a good or a bad idea to present more than one analysis on the same property? I currently save at least two PDF's on each property analysis I've done, one with the best possible out come as far as cash flow goes and one with some changes such as not getting the rent I expected or having more built in expenses. All scenarios I'm still cash flowing positively, any feed back will be helpful, Thanks in advance!!

I don't think there's anything wrong with your approach. We usually present one analysis. (Please note:  We do this one analysis for ourselves first before we greenlight a project.) Why only one? Most lenders will do their own analysis anyway. So we present one analysis that takes into account as many realistic risk factors as possible & is back it up with supporting data with references. The risk factors essentially establish an almost worst-case scenario that influences cash flow. 

For example: We were looking at a fully occupied cash flowing property. With 0% vacancy, we met our ROI numbers. Financials from the owner over the past couple of years showed about a 5% vacancy rate, but vacancy rate for the area was 17.5%. We used the 17.5% vacancy rate number in our calculations. That killed the deal. If we could have made our hurdle rate with 17.5% and were going to borrow we would have used the 17.5% in the analysis provided to the lender.

Bottom line:  Nothing wrong with 2 analysis just make sure you provide verifiable references for your numbers.