Simple Underwriting for Commercial Loans

Multi Family

Total potential income for all units, including rent, laundry, pet fees etc.
Number of units
Deduct 5% or actual vacancy or actual vacancy
EGI or Effective Gross Income
Deduct 5% or market cost from EGI for management fees
Deduct total of all expenses. Property taxes, insurance, maintenance, labor, legal/accounting etc.
Deduct $270 per unit per year for reserves
Result is NOI or net operating income
Enter the DSCR required Debt Service Coverage Ratio.
Divide the NOI by the DSCR for the maximum amount available to pay the mortgage.

Commercial

Total potential income for all commercial space, including common area reimbursements, percentage rents, property tax reimbursement etc.
Total gross interior square feet
Deduct 5% or actual vacancy or actual vacancy
EGI or Effective Gross Income
Deduct 5% or market cost from EGI for management fees
Deduct total of all expenses. Property taxes, insurance, maintenance, labor, legal/accounting etc.
Deduct $0.20 per square foot for reserves
Deduct $0.90 per square foot for Tenant Improvements and Leasing costs
Result is NOI or net operating income
Enter the DSCR required Debt Service Coverage Ratio.
Divide the NOI by the DSCR for the maximum amount available to pay the mortgage.