Exploring the main kinds of commercial real estate loans, how they’re similar and how they’re different
Introduction to the Universe of CRE loans
Course agenda
What is Bob's main problem?
What are the main sources of CRE loans?
How can you tell CRE loans apart?
CRE loans - Loan Term
CRE loans - Leverage (Proceeds)
CRE loans - Interest Rate (margin)
CRE loans - Flexibility (covenants)
CRE loans - Fixed vs Variable Rates
CRE loans - Uses / Application of Funds
CRE loans - Recourse (guarantees)
Next Steps
Recap and What's Next?
This course is for beginners in commercial real estate. You don’t need any prior knowledge about real estate or finance principles.
You will learn about the 8 different kinds of commercial real estate loans including agency, debt funds, CMBS and commercial bank loans. Then, you’ll learn about the main characteristics that differentiate each loan source and how different lenders are more or less comfortable with different uses of loan funds like construction, renovation (value-add), and permanent financing. Finally, you’ll learn about how different lenders cater to different investment strategies and how knowing the difference can save you millions of dollars and months of time.
You wouldn’t drive on the left side of the road (at least not in the US), you wouldn’t put on your shoes before your pants, and you wouldn’t have dessert before the main course. These are general rules we all follow. For commercial real estate loans, there are similar rules like: • “You don’t ask a life insurance company for a construction loan” and • “You don’t ask the Agencies to finance the purchase of a warehouse” Learning which sources of real estate financing match best with different kinds of uses (construction versus permanent), different kinds of property types (multifamily versus office), and different kinds of terms (high/low leverage and no/some flexibility) will help you save weeks of time and millions of dollars in the long run.
- What are the main sources of commercial real estate loans? - What's the difference between a CMBS vs Conduit loan, and is this trick question? - How does each lender compare on important terms like max LTV, interest rate, and flexibility? - How do different kinds of lenders specialize in different kinds of loans - How do you compare loan options with a sample term sheet comparison?
Because we've made a lot of mistakes over the years negotiating, borrowing and paying off loans across hundreds of millions of dollars of CRE investments and we want you to learn from our mistakes.
