The Commercial Real Estate Loan Calculator and Cash Flow

Introduction

Commercial real estate loans are now listed among the most common types of loans being provided by financial companies. Keeping in view the ever increasing values of commercial properties, people are now becoming more and more interested in getting these types of loans. A few details regarding the loan calculations and cash flow are discussed below for your convenience.

Loan to value (LTV) ratio

The amount of the loan provided by a lender is usually calculated through a loan to value ratio (LTV ratio). LTV ratio is normally calculated by the lender by dividing the loan amount by the purchase price or appraised value of the property. For instance, the loan to value ratio for a loan amount of $90,000 received to cover a property worth $100,000 would be around 90%. Borrowers having a low LTV are more probable to qualifying for their desired type of commercial property loan.

Cash flows

As far as the cash flows associated with commercial property loans are concerned, a recent survey suggests the following trends:

Hospitality

The average increase in cash flow experienced by hospitality providing facilities was almost 6.1%. All kinds of hotels experienced a similar trend but smaller metro markets were the best performers.

Multi family

The cash flow provided by different types of multi family establishments such as apartment buildings was concluded at around 4%.

Retail buildings

In comparison to the general perception, the cash flow offered by retail buildings was sustained at a surprisingly low level of 2.3%.

Industrial buildings

Industrial buildings are associated with lots of risks. That’s the reason why their cash flows showed an average increase of only 1%. However, this number was much better in case of community banks.

Specialty buildings

Different types of special purpose facilities such as parking lots, self storage and RV parks demonstrated a cash flow growth of around 0.3%.

Offices

Surprisingly, office buildings demonstrated a decline in the cash flow by 0.1%.