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What You Really Need To Know About Commercial Real Estate Underwriting: Back to Basics

March 20, 2016

Developing the net operating income (NOI) or cash flow is an important first step in the prudent underwriting of a commercial real estate (CRE) property. Quantitative analysis is one facet of prudent real estate underwriting, but the real estate math isn't a black‐and‐white exercise, nor is it simple formula lending. Many qualitative judgments feed into your estimates of property cash flow, coverage, and value that come from quantitative analysis. Your analysis should be completed in the context of the qualitative credit risk assessment. Doing so will avoid over‐advancing on potentially weak property cash flow streams that will in turn jeopardize repayment prospects and bank portfolio quality.

Spotlight

Fusion Homes

Fusion Homes was established when, at the age of 25, Lee Piccoli founded the business with the sole purpose of creating a home building company that would offer the highest level of service, reliability and integrity. Piccoli’s vision to provide superior homes without sacrificing quality or service was a fresh perspective in a booming industry of cost competitors. Since then, our company has evolved into the leader it is today with over 1,000 homes built in five cities throughout Ontario. “I get a tremendous feeling of satisfaction seeing an empty piece of land evolve into a community; a place where strangers become neighbours,” says Piccoli.

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What You Really Need To Know About Commercial Real Estate Underwriting: Back to Basics