Preparing for A Commercial Real Estate Loan

There are many steps involved in the process of investing in commercial real estate. Once you have identified your property and plan of action, the first step is to obtain financing. The type of lender you choose will determine the timeframe and documentation needed for approval. Most private money lenders will require less income documentation than banks or institutional lenders, but it is still highly beneficial to prepare for your loan and have your strategy clearly defined.

Here is everything you can expect to provide when applying for a loan, however, depending on the lender, this list may vary.

• Schedule of real estate owned, including positive or negative net operating income (NOI) and any existing debt coverage

• Resume/bio along with your track record calling out the assets you've owned, retained, and flipped helping to paint a picture of your experience in the asset class in which you're pursuing a loan

• Historical and/or anticipated sources and uses of money spent, as well as future funds to be invested

• Personal financial statement (PFS)

• Bank statements evidencing cash needed, as well as additional liquidity to support funds for the specific transaction

• Explanation of any derogatory credit history to be addressed up front

• If it is a purchase transaction, a copy of a purchase agreement or copy of anticipated terms

• Insurance policy

• Entity documents if holding title in an entity name

• Articles of organization/incorporation

• Operating agreement/bylaws

• Certificate of Good Standing dated within the last 90 days

• IRS EIN letter

• Exit strategy defining your plans (short term or long term) to pay off the subject mortgage

• 12 month payment history if this is a refinance

Other general items lenders may require:

• A valid photo ID

• Credit authorization form

• Signed letter of intent (LOI)

Specific programs may also require additional documentation depending on your property and strategy. See examples below:

Ground Up/New Construction

• Plans/specs

• GC information (resume, experience, GL insurance, workers comp insurance or exemption letter of explanation (LOE))

• Survey/plat map

• Construction budget

• Permits/entitlements

• Builders risk insurance

Multifamily

• T12 and T3 previous 12 months and most recent 3 months P&Ls

• Broker OM if available

• Rent roll for 12 months

• Rehab budget if value-add

• Property proforma

Fix and Flip

• Plans/specs and GC information is required for heavy rehab only

• A rehab budget for the scope of work to be completed

• Permits if required for the specific project

  The experts at CALCAP Lending can guide you through any of the above loan programs, preparing you for a hassle-free process.