How to underwrite a hotel loan

Commercial real estate mezzanine finance: The increased conservatism of lenders, partly in response to regulatory requirements and partly in response to commercial mortgage-backed securities CMBS market demands, has created a gap between what lenders will provide and what borrowers want from debt sources. Mezzanine finance has emerged to fill the gap. The result has been increased segmentation of the capital structure for specific real estate transactions.

How to underwrite a hotel loan

how to underwrite a hotel loan

In addition to a significant increase in functionality and an update to reflect the 11th edition of the USALI, Version 5. The software provides an accurate, consistent, and cost-effective way for hospitality professionals to forecast occupancy, revenues and expenses and to perform hotel valuations.

Using established methodology, the Hotel Valuation Software is a sophisticated tool for lodging professionals. The tool consists of three separate software programs written as Microsoft Excel files and a software users' guide.

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The three software modules are: Enables the analyst to evaluate the various competitive factors such as occupancy, average room rate, and market segmentation for competitive hotels in a local market.

Calculates the area-wide occupancy and average room rate, as well as the competitive market mix. Produce a forecast of occupancy and average daily rate for existing and proposed hotels in a local market.

The program incorporates such factors as competitive occupancies, market segmentation, unaccommodated demand, latent demand, growth of demand, and the relative competitiveness of each property in the local market.

Resume Overview

The program outputs include ten-year projections of occupancy and average daily rate. Fixed and Variable Revenue and Expense Analysis: The key to any market study and valuation is a supportable forecast of revenues and expenses.

Hotel revenue and expenses are comprised of many different components that display certain fixed and variable relationships to each other.

Loan-to-Value Ratio: This is the ratio that makes sure that the collateral - a piece of commercial property - is worth materially more than the amount of the loan. Debt Service Coverage Ratio: This is the ratio that makes sure that the property alone is generating more than enough net rental income to cover the proposed payments on the new. Aug 26,  · Adam Petriella is the mortgage intermediary commercial property owners in California turn to again and again to finance transactions valued from $3 to $30 million. Multi-family properties, shopping centers, industrial, office, and hotels are among the property types Adam has closed over the course of his long and successful career in commercial. Typically, SBA loans are structured with a first mortgage from a commercial lender for as much as 50 percent of the total project cost, an SBA second mortgage of as much as 35 percent, and at least 15 percent down from the hotel owner.

This program enables the analyst to input comparable financial operating data and forecast a complete year income and expense statement by defining a small set of inputs: The expected future occupancy levels for the subject hotel Base year operating data for the subject hotel Fixed and variable relationships for revenues and expenses Expected inflation rates for revenues and expenses Hotel Mortgage-Equity Valuation: A discounted cash flow valuation model utilizing the mortgage-equity technique forms the basis for this program.

Values are produced using three distinct underwriting criteria: A loan-to-value ratio, in which the size of the mortgage is based on property value. A debt coverage ratio also known as a debt-service coverage ratioin which the size of the mortgage is based on property level cash flow, mortgage interest rate, and mortgage amortization.

A debt yield, in which the size of the mortgage is based on property level cash flow. By entering the terms of typical lodging financing, along with a forecast of revenue and expense, the program determines the value that provides the stated returns to the mortgage and equity components.Originating & Underwriting.

We provide information, training, job aids, and more to assist in originating loans for sale to Fannie Mae. Underwriting Manual for Office, Retail, Industrial, Multifamily, Hotel, Self Storage, Mixed Use, and Healthcare properties (96 pages) Property specific customizable loan applications (PDF and Excel).

Our loan program is designed to provide acquisition, bridge, debtor-in possession, recapitalization and construction financing for commercial real estate projects located throughout the U.S.

We have a strong track record of providing capital to the hotel and resort industry, given that many traditional real estate capital sources avoid the hospitality sector, and we also actively pursue. The prerequisite of mortgage underwriting is the complete knowledge about the qualification regarding the acquisition of a specific mortgage.

The knowledge about the procedures to be followed for its pre-approval as well as final approval. Manual Underwriting A mortgage that received an Accept recommendation must be downgraded if: • The mortgage file contains information or documentation that cannot be entered into, or evaluated by TOTAL Mortgage Scorecard; • Additional information, not considered in the AUS.

requirements and improved Mortgage underwriting and appraisal processes, Freddie Mac will help Seller/Servicers minimize the risks and costly impacts associated with defaults and repurchases.

In order to improve underwriting quality and, ultimately, performance of the Mortgages we purchase.

"Hotel Valuation Software 5th, Version " by Jan A. deRoos and Stephen Rushmore