HOW LENDERS USE NOI
Lenders may use the numbers differently than you think. They are the ones who decide if they are going to fund the purchase, so the estimates are up to them. Here is an example. If your calculated NOI is $250,000, the lender can adjust that number based on a lower number of your income and a higher price of the building, based on current market values. They have been known to play with the numbers a bit, to get a more conservative NOI. This is because they want to minimize their risk and take for any potential changes in your NOI into account. This is even truer if you plan on renting out a portion of your space. To lower their risk, the lender will usually put the lowest rates possible according to the current market. This is another reason why using a lender that your broker brings you can make a huge difference. Like the story I told in the first chapter, where the purchaser had to get special financing from their broker’s lending partner to get approved for the right amount and in time, a partner of your broker’s can change everything. Before you start your search, ask your broker to refer you to his preferred lender. Then see what type of loan you can get approved for before your search. Once you have your property picked out, make it final and use your NOI.
PROS AND CONS OF USING NOI AS A BASELINE
The NOI is such an important factor in commercial real estate,
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