Page 7 - refi book proof 2

that are larger with the same underwriting costs. The costs and time it takes to underwrite a
small deal are the same costs to do a large scale deal.

Different studies cite 80% of commercial loans are denied by banks ​Source

Three reasons responsible for the denial is because small business owners may have credit
challenges,, insufficient income on tax returns, and banks assume business owners & investors
have a higher default risk.

Large Balance Commercial Loans

Large balance loans range from 5 million and up. Traditional sources prefer these deals
because usually these deals have multiple parties involved with investment banks, insurance
companies, and the individuals that qualify for these deals usually have an equivalent net worth
of the funding transaction. Most of these deals are for hotels, city redevelopments, apartment
buildings, and retail centers.

Bigger deals are what the banks like, plain and simple. Their money is protected in those deals
thru partnerships with insurance companies and other banks.

With a large balance loan their are some differences in pricing terms to do a refi -cash out on a
commercial property. So for the scope of this book we will focus on small balance loans under
5 million.

Refi Cash out Benefits & Challenges

The goal in every business is scalability and turning over your equity. In real estate this concept
is key to increasing your cash flow, increasing property values, and the key to getting your
money out and into a new deal.

Once you have equity in your holdings and you want to take it out you have one option to do
so... You must use other people’s money to get it out. ​ ​Real estate is a relationship business
first. You need resources in key positions to help you achieve your goals along with you
meeting the criteria that those resources have to get the gold.

However, cashing out is one of the most challenging loans to get because its a regulatory
nightmare for traditional lenders. These lenders are scarred from the 2008 crisis and believe
that people looking to cash out their equity in their property will take the money and run which
will fuel the next crisis. Its seen as “risky” in their eyes and in your Uncle Sam’s eyes to
because he knows he can’t charge you taxes on that money.

Video- ​Benefits & Challenges