𝗟𝗼𝗮𝗻 𝘁𝗼 𝗖𝗼𝘀𝘁 (𝗟𝗧𝗖) 𝘃𝘀 𝗲𝗾𝘂𝗶𝘁𝘆. 𝗣𝘂𝗿𝗰𝗵𝗮𝘀𝗲 𝗽𝗿𝗶𝗰𝗲 𝘃𝘀 𝗮𝗽𝗽𝗿𝗮𝗶𝘀𝗲𝗱 𝘃𝗮𝗹𝘂𝗲. When a bank says they’ll fund up to 65% Loan-to-Value (LTV), the natural next question is: how do they calculate your 35% equity contribution? Here’s the basic breakdown: ✅ 𝗦𝗼𝗳𝘁 𝗖𝗼𝘀𝘁𝘀 𝗖𝗼𝘂𝗻𝘁 All funds you’ve already spent on permits, engineering, architectural, and consultant fees can be credited toward equity. ✅ 𝗟𝗮𝗻𝗱 𝗖𝗼𝘂𝗻𝘁𝘀 𝗧𝗼𝗼… 𝗕𝘂𝘁 𝗧𝗶𝗺𝗶𝗻𝗴 𝗼𝗳 𝗣𝘂𝗿𝗰𝗵𝗮𝘀𝗲 𝗠𝗮𝘁𝘁𝗲𝗿𝘀 This is where it gets a little tricky: ◾ If you bought the land a year ago for $𝟭,𝟬𝟬𝟬,𝟬𝟬𝟬, lenders will usually only credit $1,000,000—even if today’s appraisal says it’s worth $𝟭.𝟱𝗠. ◾ Why? Most banks only “revalue” land if you’ve owned it for 𝟮𝟰+ 𝗺𝗼𝗻𝘁𝗵𝘀, at which point they’ll typically take the current 𝗮𝗽𝗽𝗿𝗮𝗶𝘀𝗮𝗹 𝘃𝗮𝗹𝘂𝗲. ✅ 𝗪𝗵𝗲𝗻 𝗧𝗶𝗺𝗲 𝗪𝗼𝗿𝗸𝘀 𝗶𝗻 𝗬𝗼𝘂𝗿 𝗙𝗮𝘃𝗼𝗿 If you bought a site 20 years ago for $500K, and it’s worth $2M today, that $2M appraised value becomes your 𝗲𝗾𝘂𝗶𝘁𝘆 𝗰𝗼𝗻𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻. 👉 The bottom line: Equity isn’t just about dollars spent—it’s shaped by timing, purchase history, and the bank’s rules. Understanding these nuances is key to validating a borrower’s pro forma and confirming they’ve met the required equity contribution to unlock maximum loan-to-cost (LTC).

Be a broker, not a paper pusher. On a 𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗹𝗼𝗮𝗻, the lender will want a 𝗽𝗿𝗼 𝗳𝗼𝗿𝗺𝗮 — but the one you get from the borrower or developer is often the "investor version". That’s a problem. If you just forward the investor version, you risk killing the deal before it even starts. 𝗗𝗼 𝘁𝗵𝗲 𝘄𝗼𝗿𝗸. Review it through the lender’s lens first. The right numbers keep deals moving. The wrong ones stall or even end them. In my previous post (part 2 of Series: 𝗛𝗼𝘄 𝘁𝗼 𝗔𝗿𝗿𝗮𝗻𝗴𝗲 𝗚𝗿𝗼𝘂𝗻𝗱-𝗨𝗽 𝗖𝗥𝗘 𝗖𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴), I covered key terms and underwriting items you need to understand. The pro forma is a big one — and knowing the difference between an 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝗣𝗿𝗼 𝗙𝗼𝗿𝗺𝗮 and a 𝗟𝗲𝗻𝗱𝗲𝗿 𝗣𝗿𝗼 𝗙𝗼𝗿𝗺𝗮 is critical. 𝗞𝗲𝘆 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 🚫 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝘃𝗲𝗿𝘀𝗶𝗼𝗻 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝘀 (𝗯𝘂𝘁 𝗹𝗲𝗻𝗱𝗲𝗿 𝗱𝗼𝗲𝘀𝗻’𝘁 𝗰𝗮𝗿𝗲 𝗮𝗯𝗼𝘂𝘁): ◾ Promotes / sponsor incentives ◾ Waterfalls ◾ Equity IRR targets & multiples ◾ Aggressive lease-up timelines ◾ Low or no contingencies ◾ Exit cap rate compression ◾ Preferred return accruals ✅ 𝗟𝗲𝗻𝗱𝗲𝗿 𝘃𝗲𝗿𝘀𝗶𝗼𝗻 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝘀 (𝗯𝘂𝘁 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝗼𝗳𝘁𝗲𝗻 𝗹𝗲𝗮𝘃𝗲𝘀 𝗼𝘂𝘁): ◾ Equity contributions and breakdowns ◾ Break down of hard costs and soft costs ◾ Calculated Loan to Cost (LTC) ◾ Projected value upon completion and/or stabilization ◾ Loan to Value upon completion and/or stabilization ◾ Assumed financing terms & rates ◾ Loan fees & closing costs ◾ Realistic operating expenses ◾ Construction contingency ◾ Realistic lease-up modeling ◾ Replacement reserves ◾ Loan draw schedule 𝗕𝗼𝘁𝘁𝗼𝗺 𝗹𝗶𝗻𝗲: Same deal, two pro formas — know which one the lender needs before you hit “send.” Your job is more than forwarding files — help your client tailor the numbers to the lender’s perspective so the deal actually moves forward. I'm sure I missed quite a few terms for either lists. Feel free to comment below to add to the lists!

When you get a client’s 𝗣𝗲𝗿𝘀𝗼𝗻𝗮𝗹 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗦𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁 (𝗣𝗙𝗦), don’t just skim the numbers—go straight to the 𝗦𝗰𝗵𝗲𝗱𝘂𝗹𝗲 𝗼𝗳 𝗥𝗲𝗮𝗹 𝗘𝘀𝘁𝗮𝘁𝗲. One of the first things to check? 𝗪𝗵𝗼 𝘁𝗵𝗲𝘆’𝘃𝗲 𝗯𝗲𝗲𝗻 𝗯𝗮𝗻𝗸𝗶𝗻𝗴 𝘄𝗶𝘁𝗵. If they have no meaningful banking relationships, that’s a red flag—they may not have the experience for this project. If they do have banking relationships, ask: “𝗛𝗮𝘃𝗲 𝘆𝗼𝘂 𝗮𝗹𝗿𝗲𝗮𝗱𝘆 𝗮𝗽𝗽𝗿𝗼𝗮𝗰𝗵𝗲𝗱 𝘆𝗼𝘂𝗿 𝗲𝘅𝗶𝘀𝘁𝗶𝗻𝗴 𝗯𝗮𝗻𝗸𝘀 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗶𝘀 𝗱𝗲𝗮𝗹?” 𝗧𝗵𝗲𝗶𝗿 𝗮𝗻𝘀𝘄𝗲𝗿 𝘄𝗶𝗹𝗹 𝘁𝗲𝗹𝗹 𝘆𝗼𝘂 𝗮 𝗹𝗼𝘁: ✅ 𝗔𝗰𝗰𝗲𝗽𝘁𝗮𝗯𝗹𝗲 𝗿𝗲𝘀𝗽𝗼𝗻𝘀𝗲𝘀 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲𝗶𝗿 𝗯𝗮𝗻𝗸: “We’ve reached our lending limit with you.” “We don’t have a program that fits this project.” “We can’t take on more exposure in that property type right now.” 🚫 𝗥𝗲𝗱 𝗳𝗹𝗮𝗴 𝗿𝗲𝘀𝗽𝗼𝗻𝘀𝗲𝘀: “They just said no” (with no explanation) Anything vague or evasive Reasons tied to serious credit issues, defaults, or foreclosures I recently walked a new broker through this. They wanted to show me a deal, so I first ask for the PFS. I noticed three active banking relationships. I told them: “Ask if their current banks will do the deal. If yes—you’ve saved time and shown you’re looking out for their best interest. For a new client, that helps builds trust—you’re helping them take the path of least resistance, save money, and possibly avoid paying a commission.” 𝗕𝘂𝘁 𝗵𝗲𝗿𝗲’𝘀 𝘁𝗵𝗲 𝗿𝗲𝗮𝗹 𝗿𝗲𝗮𝘀𝗼𝗻: The best kind of client is one who’s already knocked on several doors and can clearly explain why their own network can’t get it done—whether they’ve maxed their limit, the bank doesn’t have the right program, or exposure limits are tapped. That’s when you know they’re truly 𝗹𝗼𝗼𝗸𝗶𝗻𝗴 𝗳𝗼𝗿 𝘆𝗼𝘂𝗿 𝘃𝗮𝗹𝘂𝗲 as a broker, not just using you as another 𝗰𝗼𝗺𝗺𝗼𝗱𝗶𝘁𝘆 to shop rates while you do the legwork. And just as important—if their bank’s answer itself is a red flag, you can make an early call to drop the deal before investing more time and energy. Success isn’t about working every inquiry—it’s about deciding when to act, when to pause, and when to move on.

Hi Dealmakers, I created a recent post on Linkedin that I wanted to share with you for those that might find this useful 😃 I recently got a call from a “new-ish” CRE mortgage broker who occasionally reaches out for advice. He told me about a client seeking a loan on a deal located in a state and asset class that his go-to lenders couldn't do. Without a budget for CoStar or other data platforms, he wanted to know how to efficiently source new potential lenders without wasting a lot of time. I’ve arranged CRE debt since 2007, and here’s a method I used early on to build a call list of viable lenders: 𝗦𝘁𝗲𝗽 𝟭: 𝗧𝗮𝗽 𝗶𝗻𝘁𝗼 𝘆𝗼𝘂𝗿 𝘁𝗶𝘁𝗹𝗲 𝗿𝗲𝗽. Call your favorite title rep and ask if they can set you up with access to a title profile platform like TitlePro24/7—and if they’re willing to give you a property report allowance. They’re usually happy to do this in hopes of earning your title business down the road. 𝗦𝘁𝗲𝗽 𝟮: 𝗪𝗵𝗲𝗿𝗲 𝘁𝗵𝗲𝗿𝗲’𝘀 𝘀𝗺𝗼𝗸𝗲, 𝘁𝗵𝗲𝗿𝗲’𝘀 𝗳𝗶𝗿𝗲. 🔥 Let’s say you get a loan request for a hotel in a market you don’t usually work in. Open a second browser tab and search for similar properties nearby—same size, same star rating, etc. Hotel booking sites are a great tool to quickly pull up a list of comparable properties with addresses. 𝗦𝘁𝗲𝗽 𝟯: 𝗨𝘀𝗲 𝘁𝗵𝗲 𝘁𝗶𝘁𝗹𝗲 𝗽𝗹𝗮𝘁𝗳𝗼𝗿𝗺 𝘁𝗼 𝘀𝗲𝗮𝗿𝗰𝗵 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗿𝗲𝗰𝗼𝗿𝗱𝘀. Paste the property addresses into TitlePro and pull up the mortgage history. You’ll often find current and past lenders - their funded loan amounts, and recording dates. If a lender has financed that hotel (or similar ones) recently or in the past, they’re more likely to consider your current deal. 𝗙𝗶𝗻𝗮𝗹 𝗦𝘁𝗲𝗽: 𝗕𝘂𝗶𝗹𝗱 𝘆𝗼𝘂𝗿 𝗰𝗮𝗹𝗹 𝗹𝗶𝘀𝘁. Take those lender names and do a quick online search to find the right contact in their CRE lending department. The lender website or LinkedIn is a good place to start. It’s a simple and effective way to open up new lender relationships without expensive tools. I just wanted to share here to help out the community of dealmakers!

💡 𝗧𝗶𝗽 𝗼𝗳 𝘁𝗵𝗲 𝗗𝗮𝘆 𝗳𝗼𝗿 𝗖𝗥𝗘 𝗠𝗼𝗿𝘁𝗴𝗮𝗴𝗲 𝗕𝗿𝗼𝗸𝗲𝗿𝘀: Don’t rule out a banking contact just because your deal may exceed their stated lending limit. They might set up a 𝗰𝗹𝘂𝗯 𝗱𝗲𝗮𝗹 to get it done. Ex: If your commercial bank states their max loan amount is $10M and your deal is $15M—still make the call. If the deal is strong enough, some banks may "team up" with other lenders to fund it as a 𝗰𝗹𝘂𝗯 𝗱𝗲𝗮𝗹. 👉 A club deal is when two or more lenders participate on the same loan, each taking a portion. It spreads the risk/exposure and allows them to collectively fund a larger transaction than they could/want to alone. This is coordinated on the bank side, so no additional requirements or duties for you or the borrowers. So don’t assume the door is always closed—present the deal anyway. You might be surprised how often the right deal can still get done.