💡 𝗧𝗶𝗽 𝗼𝗳 𝘁𝗵𝗲 𝗗𝗮𝘆 𝗳𝗼𝗿 𝗡𝗲𝘄 𝗖𝗥𝗘 𝗟𝗼𝗮𝗻 𝗕𝗿𝗼𝗸𝗲𝗿𝘀: 𝗦𝗮𝗺𝗲 𝗗𝗲𝗮𝗹, 𝗧𝘄𝗼 𝗣𝗿𝗼 𝗙𝗼𝗿𝗺𝗮𝘀 — 𝗞𝗻𝗼𝘄 𝘁𝗵𝗲 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲.

Aug 14 • General

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!

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