{"id":1004071082,"date":"2013-04-17T11:15:47","date_gmt":"2013-04-17T19:15:47","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004071082"},"modified":"2022-12-07T12:54:08","modified_gmt":"2022-12-07T20:54:08","slug":"what-the-market-may-bear-can-still-be-a-bear","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/what-the-market-may-bear-can-still-be-a-bear\/","title":{"rendered":"What the Market May Bear Can Still be a Bear"},"content":{"rendered":"<p><em>By Marcelo Berm\u00fadez, President, Figueroa Capital Group, subsidiary of Charles Dunn Co.<\/em><\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/bermudez_marcelo-cropd.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004046102\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/choose-wisely\/bermudez_marcelo-cropd\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/bermudez_marcelo-cropd.jpg\" data-orig-size=\"2211,2167\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;Ron Murray&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;1340111307&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;}\" data-image-title=\"bermudez_marcelo cropd\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/bermudez_marcelo-cropd.jpg?w=1024\" class=\"alignleft size-thumbnail wp-image-1004046102\" title=\"bermudez_marcelo cropd\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/bermudez_marcelo-cropd.jpg\" alt=\"\" width=\"150\" height=\"150\" \/><\/a><\/p>\n<p>Over the last six months, titles like, \u201c<em>Improvements in Fundamentals Means Big Returns,<\/em>\u201d \u201c<em>Secondary Markets Heating Up<\/em>,\u201d and even, \u201c<em>The Return of the Boom<\/em>\u201d continue to make headlines to bring encouragement to the marketplace. For the investor and broker, this is exciting news \u2013 until they fill out the loan application to finance the property.<span style=\"font-size: 13px;line-height: 19px\">\u00a0<\/span><\/p>\n<p>Similar to attorneys, those of us in the financial markets facilitating access to capital have been called \u201cthe deal killers\u201d because the due diligence process is often separate from what the market will bear in the agreed sales price.<\/p>\n<p>Investor and broker \u2026 meet debt yield. Debt yield \u2026 meet investor and broker. Let\u2019s see if we can get along.<span style=\"font-size: 13px;line-height: 19px\">\u00a0<\/span><\/p>\n<p>Debt yield is the NOI (Net Operating Income) divided by the loan amount, times 100. \u00a0It is the cash-on-cash return a lender gets assuming they had to foreclose on a property. If a property\u2019s NOI is $650,000, and the loan amount offered is $7.43 million, the debt yield is about 8.75 percent. If the purchase cap rate on the deal is 5.5 percent, (a value of $11.8M), we have a leverage point that looks like approximately 63 percent. This can be stressful for a buyer, who after a conversation with a banker or mortgage broker is promised loan-to-value ratios of upwards to 75 percent. So what\u2019s the deal?<\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/04\/Marcelo_Chart.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004071019\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/what-the-market-may-bear-can-still-be-a-bear\/marcelo_chart\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/04\/Marcelo_Chart.jpg\" data-orig-size=\"432,292\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;}\" data-image-title=\"Marcelo_Chart\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/04\/Marcelo_Chart.jpg?w=432\" class=\"aligncenter size-full wp-image-1004071019\" title=\"Marcelo_Chart\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/04\/Marcelo_Chart.jpg\" alt=\"\" width=\"432\" height=\"292\" srcset=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/04\/Marcelo_Chart.jpg 432w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/04\/Marcelo_Chart.jpg?resize=300,203 300w\" sizes=\"auto, (max-width: 432px) 100vw, 432px\" \/><\/a><\/p>\n<p>Believe it or not, some lending sources have learned their lesson and would rather use the debt yield versus the debt service coverage ratio to fend off pricing bubbles. As banks and other lending sources come back to health, there will be some flexibility in the actual dollars offered, especially if the appraisal is strong. Debt yield will continue to be the predominant metric for banks to underwrite your transaction and a helpful way to manage your expectations when approaching a purchase or reposition of a property.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Marcelo Berm\u00fadez, President, Figueroa Capital Group, subsidiary of Charles Dunn Co.: Over the last six months, headlines like, \u201cImprovements in Fundamentals Mean Big Returns,\u201d \u201cSecondary Markets Heating Up,\u201d and even, \u201cThe Return of the Boom\u201d continue to bring encouragement to the marketplace.<\/p>\n","protected":false},"author":1346,"featured_media":1004046102,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004071082","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v24.6) - 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