Are there RESPA requirements for Commercial loans?

No, commercial loans are not consumer/personal purpose loans and are therefore exempt from RESPA requirements.

What Is A Rent Roll?

A rent roll is a list of all tenants at the property and the details of their leases including lease start date, lease end date, reimbursements required, current rent, rent increases and increase dates, and renewal options. Unoccupied spaces are listed as vacant and the total square feet/units on the rent roll will match the total rentable square feet/units of the property.

What are operating statements?

Operating statements are a detailed report of the property’s income and expenses for a specific period of time.

What is a trailing twelve-month statement and why are these required for specific properties?

A trailing twelve-month statement (TTM) is an operating statement for the property for the preceding 12 month period. A TTM is required for properties like hotels that have income that varies daily to analyze current trends.

What is a bridge loan?

A bridge loan is a short term loan designed for a property that is in transition. Typically a bridge loan is interest only and has a floating rate. An example of when a bridge loan would be useful is if a property is only 50% leased and the buyer is bringing tenants in to stabilize the property. The buyer can obtain a bridge loan until such time as the property is stabilized, then refinance the property with a more permanent type loan.

What is a Letter of Intent (LOI)?

A Letter of Intent is the Lender’s non-binding, formal conditional letter of interest in funding a loan request.

What is a Debt Service Coverage Ratio (DSCR):

A Debt Service Coverage Ratio is a calculation used to measure if the property’s cash flow is sufficient to cover the debt service (mortgage payment) for the loan. It is calculated as Net Income divided by Annual Principal & Interest Payment.

What Constitutes Annual Income for the Property:

Annual income is usually comprised of rental income, sales overage income (retail properties only), utility and common area maintenance reimbursements, and any other income received from tenants at the property on a regular basis.

What Constitutes Annual Operating Expenses for the Property:

Annual operating expenses are any expenses associated with the on-going operations of the property.

What is a Net Lease?

A net lease is a lease whereby the tenant is responsible for their pro-rata share of the property’s taxes, insurance and common area maintenance expenses.

What is a Gross Lease?

A gross lease is a lease whereby the landlord is responsible for the property’s taxes, insurance and common area maintenance expenses.

What are Tenant Improvements?

Tenant improvements are any improvement made to the space occupied or to be occupied by the tenant.

What are Leasing Commissions?

Leasing commissions are fees paid to leasing agents in exchange for bringing tenants to the property.

What are Capital Improvements?

Capital improvements are improvements made to any part of the property other than a tenant’s space including replacing mechanicals, improvements to the common area, or improvements to the exterior of the building.

What are Reserves?

Reserves are any amount of the property’s net operating income collected and held by the lender for future needs of the property such as tenant improvements, leasing commissions, or capital improvements.