Your Questions Answered
With rapidly evolving markets and opportunities, these are the answers you need to know.
An overview of commonly used terms in real estate investing.
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Any loan where the primary purpose is for the borrower to acquire the property where the intent is generally subsequent financing.
Asset Repositioning is the process of implementing capital improvements into an already existing property in a way that often completely changes the building’s purpose and function. This can be done to bring the building more in-line with comparable buildings in the area, or to transform the building’s purpose to meet the needs of the builder. An example of Asset Repositioning is taking an existing hotel and rehabbing it into a multifamily investment property.
Balance Sheet Lending
A balance sheet lender is a private lender who is not affiliated with a bank. A balance sheet lender provides a monetary loan for a short-term duration. The lender maintains the full debt until the borrower completes their term and pays back the loan. Unlike traditional lenders, it is rare for a balance sheet lender to sell the debt to another lender. The benefit is a simplified process that includes in-house underwriting and servicing.
A bridge loan is where the primary purpose is to provide the borrower with sufficient time to lease and stabilize or restabilize an asset with sufficient cash flows to obtain permanent financing or sell the asset.
Build to Rent (BTR)
A loan for a developer to construct housing with the intention of renting it upon completion.
Commercial Finished Lots
A developed lot that typically has roads, curbs, gutters, and utilities complete entitled for commercial construction.
Commercial Paper Lots
A lot entitled for commercial construction, which would typically begin with horizontal improvements.
Single family units within a building structure that are each separately owned, surrounded by common areas that are jointly owned. Condo units typically do not have ownership of the land.
Construction Lending Glossary
With an industry brimming with real-estate jargon, even the most seasoned investor can have questions. Here are some common phrases in the industry.
Debt Service Coverage Ratio (DSCR)
DSCR is a measure of the cash flow available to pay current debt obligations. Lenders will analyze a borrower’s DSCR to determine whether or not they have enough liquid assets and income to pay off debts.
A two unit attached residential building that is built with the intent to rent out upon completion.
Land that has gone through the public hearing process or zoning, as well as obtained site permits or approval for a specific use.
Any loan where the primary purpose is to provide the borrower with funds to build or install horizontal improvements (e.g. utilities, roads, sewers etc.) on real property.
A multi-unit residential building that is built with the intent to rent out on a short-term basis upon completion.
A property in which the primary use is non-specific manufacturing and other light commercial uses.
Any loan where the primary purpose does not neatly fit into the other loan purpose categories (e.g., cash out refinance, partnership buyout etc.)
Any loan where the primary purpose is to entitle land, obtain specific zoning, permitting, or legal use to further develop or accept the property.
Loan to Cost (LTC)
Loan to Cost compares the financing amount of a commercial real estate loan to its cost. It is calculated by dividing the loan amount by the anticipated construction cost.
Loan to Value (LTV)
Loan to Value measures the amount of a real estate loan month’s mortgage, compared to the appraised value of the property. The higher your down payment, the lower your LTV ratio.
At Broadmark, our Market Experts are highly skilled loan originators. They specialize in the intricacies of real estate investment financing solutions to ensure each client has their needs met. They guide clients through our 5 step loan process to ensure successful project completion.
A property zoned and constructed for corporate/business (banks, law firms, start-ups etc.) tenants.
A private real estate lender loans their money directly to a borrower. Private lenders and private lending companies are not affiliated with traditional bank lenders. Private lenders set their own terms, conditions, and interest rates.
A four unit attached residential building that is built with the intent to rent out upon completion.
Any loan where the primary purpose is to provide the borrower with funds to renovate (including adaptive reuse projects) or improve the physical existence of real property.
Residential Finished Lots
A developed lot that typically has roads, curbs, gutters, and utilities complete and is entitled for residential construction.
A five+ unit residential building that is built with the intent to rent upon completion.
Residential Paper Lots
A lot that is entitled for residential construction, which would typically begin with horizontal improvements.
A five+ unit residential building that is built with the intent to use as an Assisted Living, Memory Care and/or Independent Living Facility. Typically these facilities require specific licenses to operate from the state and/or municipal authorities in order to operate.
SFR- For rent
A free-standing single family residential building that is built with the intent to rent out upon completion.
SFR- For sale
A free-standing single family residential building that is built with the intent to sell upon completion.
A five+ unit residential building that is built with the intent to rent to students upon completion.
Single family terraced housing with a small footprint on multiple floors. Typically has ground floor ingress/egress to the unit.
A three unit attached residential building that is built with the intent to rent out upon completion.
Urban Infill is when builders construct new residential units on underutilized or undeveloped land that is inside of already developed areas such as neighborhoods. The new construction is typically surrounded by already existing buildings and is therefore “filling in” the remaining gaps.
Any loan where the primary purpose is to provide the borrower with funds to build or install new vertical improvements on real property.
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