This is a brief list of terms and definitions
that are most common in small balance commercial loans. This
list also describes a lot of the information needed to analyze
commercial deals.
Debt
Service Coverage Ratio (DSCR)
This is the Net operating income divided by the debt
service (typically we are looking for a minimum of 1.20). This
tells if the cash flow can adequately service
the debt.
Net Operating Income (NOI)
This is the income of the property minus the
expenses.
Lockout
A lockout is simply a specified period of time during which prepayments are prohibited.
For example a typical loan with a balloon in ten years may have a lockout
that expires in 3 years. Any prepayments made will not decrease the amount
of interest due during the lockout period.
Rent Roll
This is a spread sheet describing the leases and occupancy of
a building. It tells the tenant name, lease start date, lease
end date, # of units, square footage, amount of rent and how
long
each tenant has been there.
Income /Expense Statement
This gives a detailed account of all
income, rents and other income, as well as all of the expenses
associated with the property.
Multi Family
A building designated to house more than four families
(more than four units).
Mixed Use
A building that has more than 1 use. Usually residential
units and then a retail, office or industrial use with in the
same structure.
Cash Flow
Amount of money a building generates after debt service.
