What is Commercial Real Estate (CRE) Hangout Risk
For commercial property investors looking for stable income, one of the most popular commercial real estate investment options is a single tenant, triple net leased property. These types of properties are typically located in the best locations within the strongest real estate markets, and have credit tenants who allow the borrower to get a loan […]
Types of Commercial Real Estate Loan Guarantee Structures
One of the major benefits of commercial property investment is that debt funding is widely available with generally favorable borrowing terms. However, “favorable” doesn’t mean easy. The primary concern for every lender, from a government agency to a community bank, is the risk associated with their loan being repaid. One of the steps that lenders […]
Recourse vs Non-Recourse Debt: What is the Difference?
When evaluating a loan request, a lender’s primary concern is evaluating the risk of loss associated with the transaction. Specifically, they want to know how they are going to be repaid and if the source(s) of repayment are reliable. In a commercial real estate context, a lender will typically evaluate up to three sources of […]
Commercial Real Estate Loan Covenants Explained
Nearly all commercial real estate (CRE) transactions are financed with some amount of debt. But, a commercial real estate loan is very different from a residential real estate loan. One of the major ways that they are different is that they typically contain some number of “loan covenants.” What are Loan Covenants? A loan covenant […]
What is Debt Yield in Commercial Real Estate?
Traditionally, commercial real estate lenders evaluate the risk associated with a loan request using metrics like the loan to value ratio (LTV Ratio) and the debt service coverage ratio (DSCR). While these metrics are important, there is another metric called debt yield that is becoming widely adopted as an evaluation tool for lenders. Despite the […]
Understanding the Differences Between Commercial Real Estate Loan Types
Commercial real estate is defined as investment property that is acquired with the intent to earn a return through cash flow, price appreciation, or both. The primary difference between a commercial investment property and a residential investment property is that commercial property tenants are businesses, not individuals (with the exception of multifamily). Because there are […]
Loan Term vs. Loan Amortization: What’s the Difference?
Nearly every commercial real estate transaction involves a loan, and commercial real estate mortgages can be far more complicated than their residential counterparts. In many cases, CRE mortgages offer additional options and nuances that are needed to meet the unique needs of a commercial real estate borrower. Several of these unique options have to do […]
What is the Difference Between a Fixed Rate Loan and a Variable Rate Loan?
When a commercial real estate investor is seeking financing for their project, there are many loan variables to consider. As a borrower, they may have to consider things like: the loan term, origination fees, lender, and amortization. While these variables are important, none are as consequential as the loan’s interest rate, which has a direct […]
Interest Only Commercial Real Estate Loans Explained
Every commercial real estate transaction is slightly different. As a result, lenders have a variety of products that are designed to meet as many of the borrower’s needs as possible. One of these products is an interest only loan. In this article, FNRP explains what interest only loans are, when they are appropriate, and the […]
