1. You have to have a rock solid lender network - you need more than a few names or just a lender list. You need real relationships where the lenders respect you and value your business. Otherwise your loan package will be on the bottom of their pile and your deals will slowly evaporate. Sounds dramatic, but it's true. Everyone in this business is alway thinking about saving time. Also, you have to know their programs inside and out. You have to know them cold.
2. The second main skill set you need is the ability to screen loan applications quickly - i.e knowing how to read tax returns. You need to be an EXPERT at analyze a tax return to figure out what the REAL net income is and if you can close the prospective loan before you put a lot of time into it. You need to be able to decide to work on a deals or walk from it.
Bottom line, if you cannot sit down and in 20 minutes review (i.e. read the borrowers tax returns) and decide to work on a deal or throw it in the "round file", you will have a very difficult time making money in this business. You will be operating at half speed. You will be throwing shit against the wall HOPING some of it will stick. And when it does, you will not know why. You can easily waste hundreds of hours on a single transaction, that could never fund in the first place. The reality is that there are many deals that are just not fund-able. If I were to take a guess at it, probably 50% of the loans we review are not doable.
Analyze Tax Returns
What we have done here is writen a commercial training book/case study, which is based on a deal that we recently closed. The example is a purchase, retail, 6 units with a purchase price of $700,000. The borrower occupies 60% of the building with their own business. So, what makes this a good example is that the borrower has three sources of income 1. the business that will occupy the space 2. the tenants that occupy the other 40% of the building and 3. the borrower has a separate W-2 job, all of this income gets to be included to figure out the Global Income.
So, we go through the borrowers tax return (with their permission and all personal info blotted out), page by page and highlight what we used for income. Because 40% of the property is occupied by tenants, we also put together a Debt Coverage Analysis so you can see how much of the buildings income we were able to use.
After reading this report, you will have an organized method for calculating ALL income on a deal that can be used to service the debt of the proposed loan. And you will know how to read a tax return to better pre screen you deals.
How to Analyze a Tax Return
Again, in this transaction the borrower is trying to purchase a 6 unit retail property. Purchase price is $700,000. She currently leases space in the property and will continue to occupy roughly 60% of the rentable square feet, after the purchase closes. She currently pays $60,200 a year in gross rent, which she will continue to pay herself after the loan closes and she becomes the owner.
Because her business occupies more than 50% of the building she wants to structure the loan as an owner occupied mortgage and thereby reduce the down payment to 10%. So the total loan amount is $630,000.
She owns her business through a sole proprietorship and reports her business income on the Schedule C of her 1040. Again, what complicates this deal is that the borrower has three sources of income.
In the book, we:
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Go through the borrowers 2007 tax return, page by page, and highlight every source of income that can be used, and explain why.
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We present 2 Debt Coverage Ratio Analysis on the subject property. The first shows the properties income without the borrowers rental income. The second shows how the property cash flows with the rental income included.
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We calculate the borrowers personal expenses and subtract out what has already been reported on other sections of the tax returns.
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We provide a spread sheet that organises all sources of income and expenses and show how we calculated the total Net Operating Income of the deal (Global Income) and the Debt Coverage Ratio.
Buy Now and the commercial mortgage broker training manual will be emailed to you instantly. Normally $39.95, now only $24.95. Will go back to normal pricing 8/1/08. And yes there is a 100% money back guarantee for those of you that are as cynical as I am.
Jeff Rauth
President
P.S. Remember, YOU risk NOTHING. I'm giving you a 100% money back guarantee and taking all the risk. So buy it now! Read our book over and over. Soak it up. At the end of it if you don't agree its worth every penny, send me an email and we'll refund it. And you are free to keep your manual just for taking a chance in working with us.
Than, send us some deals that you have thoroughly screened.
