[DOWNLOAD] Deal Triage: How to Pre-Qualify Any Commercial Deal in 90 Seconds or Less

Pre-Qualify Commercial Deal
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So… would you like to know how you can evaluate any commercial property on the fly in a flash?

You got it.

Actually… you really don’t have a choice.

As I’ve been saying since 2011, there is a coming tidal wave of maturity defaults starting very soon and your success is directly correlated to how well you can perform deal triage.

(For those of you looking to raise your own funds to purchase assets, if you couple this headline with the growing trend towards negative interest rates, you get the once-in-a-generation Perfect Storm…)

You need to be able to answer this question now:

How will you manage this deal flow?

Before you put up one dime of your or your investor’s money – or even think of placing capital from an institution into the opportunity, you must ask these 5 critical questions, just as a doctor or surgeon in the ER takes the vitals of a patient:

What’s the…

  • Current NOI?
  • Pro Forma NOI?
  • Existing Debt Structure?
  • Sources and Uses?
  • Exit Strategy?

By getting the answers to these questions, you’ll save yourself a tremendous amount of time, preserve your credibility, and show any prospective investor you have discipline.

That you are a true professional who pays attention to their money and respects their time.

And when the numbers pencil out, you’ll make yourself and your investors a pretty penny in the process.

Luckily, that’s the information I’m sharing with you today… along with a free download to print and tack up on your wall (why are you laughing? What’s so funny? I’m not kidding — I’ve had customers do this and tell me it’s saved them from making plenty of deal mistakes).

How to Qualify a Commercial Deal

Let’s get right into it.

1. The Current NOI

Otherwise known as the current Net Operating Income or cash flow being thrown off by the asset.

How to Find It:

Found on the property’s financial statement.

Why It’s Important:

Tells you how the asset is performing today. Not 8 years ago, not the best 6 months over the past 2 years averaged out.

Today.

Expressed As:

Annual $ figure.

2. Proforma NOI

Otherwise known as the “Target NOI” or known as Stabilized Value.

How to Find It:

Found on the property’s financial statement.

Why It’s Important:

Although it is essentially an educated guess, it gives you an indication of what your borrower is trying to get to after repairs and improvements for those value-added deals where the asset needs to be rehabilitated.

Expressed As:

Annual $ figure.

(NOTE: Want access to my business vault? Right now I’m offering access to my systems, strategies, templates, trainings, and recordings. It’s all included in The Investor’s Syndicate, and is available to you here.)

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3. Existing Debt Structure

This tells you how many loans are on the property and their unpaid principal balances.

How to Find It:

Usually found on the property’s financial statement. If not, ask the borrower or current occupancy owner for this information.

Why It’s Important:

This will allow you to understand if the property is over leveraged or not, and allow your Fund Manager to structure financing accordingly.

It’s also important to keep in the back of your head that there is a huge tidal wave of commercial maturity (aka “technical”) defaults looming and some properties are not worth what is owed on them. They are underwater.

Expressed As:

  • Lien Position (1st, 2nd, Mezz…)
  • Loan Amount ($)
  • Interest Rate (%)
  • Term (Years)

4. Sources and Users

Identifies where funds are coming from and how they will be used to improve the property.

How to Find It:

Will tell you if your sponsor knows what they are doing – it must add up!

Why It’s Important:

Needs to be provided on an itemized list format from your borrower.

Microsoft Excel is the preferred medium for this as capital providers and investors will like to play with the numbers a bit. Cause that’s what we do.

Expressed As:

Repair/ Improvement Cost ($)

5. Exit Strategy

Details how your borrower intends to cash you out.

How to Find It:

Needs to be communicated clearly on the Executive Summary. Ask for it.

Why It’s Important:

Will allow you to understand if this deal is a viable opportunity. Can they refinance or sell it later?

Do they have a buyer lined up already and it’s just a matter of finishing the open heart surgery on the property? The more specific they are, the better you are.

Expressed As:

Narrative.

Like I said… this will save you from entering plenty of doomed deals.

Don’t forget to download the PDF – and feel free to post a picture on The Commercial Investor Facebook page. My team will get a kick out of it.

(NOTE: Want access to my business vault? Right now I’m offering access to my systems, strategies, templates, trainings, and recordings. It’s all included in The Investor’s Syndicate, and is available to you here.)

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Until next time.

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Salvatore M. Buscemi
A former investment banker for Goldman Sachs in NYC, Sal is one of the nation’s leading authorities when it comes to investing in residential and commercial real estate. He’s raised over $50 Million in capital for his real estate hedge funds.

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Salvatore M. Buscemi

About Salvatore M. Buscemi

A former investment banker for Goldman Sachs in NYC, Sal is one of the nation’s leading authorities when it comes to investing in residential and commercial real estate. He’s raised over $50 Million in capital for his real estate hedge funds.
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