Commercial Lingo
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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. Click on a letter to browse the full glossary.
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.
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