Optimizing Your PFS Submission To Your Lender

I just finished re-reading Ray Alcorn's "Dealmakers Guide To Commercial Real Estate" chapter on your personal financial statements; or PFS. This is really the only helpful guide I have found in hundreds of books on real estate for this subject. He obviously has a lot of real world experience in dealing with lenders and how to position things with them optimally to maximize the chances they'll lend, lend on the best terms, and extend the maximum possible line.

One of the key takeaways from that chapter that I thought I would share with BP is that he recommends submitting the PFS to your lender(s) annually before they ask so that you can do so when it is best for YOU. Real estate investors frequently have swings or seasonal changes in cash flow and thus submitting it at the right time is likely to mean you're able to put a much better foot forward than you would if you wait until the bank requests one. This obviously won't help for new lending relationships unless they're timed to coincide with the best time of your fiscal year.

People frequently ask about whether or not they should raise money when the deals are available or prior to deals being ready. For equity things really depend on a variety of circumstances, but as a general rule I am an advocate of trying to raise the funding needed prior to the deals being presented. This presents one with the opportunity to negotiate harder for the most favorable price and terms on their contract. For debt I think it is even MORE important to organize your relationship with lenders prior to deals being presented. Doing so will allow you to do things like present your PFS when it is the best time of year to do so instead of whenever that great deal comes along.