All Forum Posts by: Darryl Dahlen

Ah, good point. Still, most people with great credit are very protective of it.

If you use a credit score to help vet a tenant, wouldn't there it stand to reason that the higher the score, the more likely they are to pay and protect their score?

Too bad there wasn't a score for how clean a person is. I remember this guy who had 800 credit but his place looked like downtown Beirut.

This may be an odd thought, but for those who do a credit check as part of your background check, couldn't you use the tactic of reporting rent to the credit bureaus as a way of ensuring you get the last month's payment?

Reporting rent may also provide a means to be more flexible on the deposit since someone with a very good score is less likely to jeopardize their score over a missed payment.

I would think most tenants would welcome the rent reporting to their credit report. Not only will it be an effective tool to substantiate to the next landlord that they pay on time, Not to mention having the rent listed on their credit report may help them qualify for a mortgage when they go to buy a home.

Just a thought.

Good question Bryan.

I didn't mention anything about tax returns or reserves more because those are a given these days. The reserve requirement can vary widely from lender to lender, but as rule, you should plan on having at least 6 months of PITI above and beyond the down payment. That doesn't mean you need cash sitting in a bank. 401k, stocks, mutual funds, or any asset that can be liquidated would generally suffice.

Given most commercial loans are full-recourse these days, it doesn't do the lender much good to have the borrower guarantee a loan if that guarantee is worthless. Having good credit, reserves, and experience, are the foundation a full-recourse loan.

Since these are small balance commercial loans, the borrower's credit score is also a consideration. I can't tell you what score would be a deal killer, but I consider anything below a 680 a possible issue.

NOW, that being said, there are some lenders out there who will underwrite the property more heavily than the borrower or vice verso. I have one lender who doesn't even appraise the property on small balance commercial loans. It sounds odd, because it is, but that's the way the do things.

If you are paying the utilities, then that would factor into your NOI, which would in turn effect the DSCR.

I just noticed a spelling error. Ration should actually be ratio.

DSCR stands for debt service coverage ration. It is a numerical number that is obtained by dividing the NOI by the debt payment(s).

For "most" commercial deals, lenders are looking for a DSCR of 1.2 to 1.25. For properties that have been taking a hit due to the economy, hotels and strip malls come to mind, lenders are looking for a DSCR around 1.4.

I'm a little confused. Your are asking about refinancing a property, but are looking to buy.

Buying a multi-family property requires 20-30% down. They don't care about what the property is worth, they care about the purchase price and that the appraisal supports that value. On multi-family deals, most lenders are looking for a 1.2 to a 1.25 DSCR with the property showing 80-85% occupancy for 3 to 6 months with no incentives used to fill the units.

Some will look of for landlord experience or want a property management company running the show if you are weak. They can also enforce one on larger properties.

If you are looking to refinance down the road you should have no issue providing the occupancy level is strong and the property can debt service. Usualy, lenders will will base the LTV off of the appraised value after 12 months.

Whether you approach a local lender or one that is national really makes no difference providing you know the lender is really lending.

If it were me, I would embrace this opportunity for a couple reasons.

One, you would be working for the actual broker, not some underling. You stated he has been the top commercial broker for the past 4 years in your area. I dare say he can teach you a LOT more real world experience then you would learn in the same time by working for a bank.

Two, more than likely he can open doors for you that will further your own pursuits. Being a top dog in any business means the owner knows the right people and is capable. By you knowing, and working for this person, ought to go a long way to establishing your network.

The fact he'll match your salary, and you can earn commissions, makes this almost a no brainer.

Like Anthony said, if you don't like it, you should be able to go back to banking with a resume that looks even better.

I didn't think of Marcus and Millichap, but that very well be what I am looking for. Thank you!

Retail property is a hard sell right now for most lenders since the economy is weak. With falling values, and a large amount of empty space in most markets, lenders are hesitant to take risks on retail property.

Lenders are already dealing with too much in the way properties that are underwater and/or are under performing.

That is why 80% is going to be a stretch. Not saying it's impossible, but the deal is going to have to fire on all cylinders for it to have a chance at that LTV.

If that is the benchmark you need in order to pursue then your local lenders are your best bet.

Problem is most banks/credit unions often won't tell you if the deal is too rich for their blood. They may very well come back with a lower LTV after you've spend weeks in underwriting and have spent money on a appraisal.