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This is not true. Lenders are not stupid, they are not going to be fooled by giving away 11 months free and charging a higher rent for 1 month. Or for giving
by lotsofpulp 2y ago
This is not true. Lenders are not stupid, they are not going to be fooled by giving away 11 months free and charging a higher rent for 1 month. Or for giving away 1 month and charging a higher rent for 11 months.
Commercial real estate loans will have a provision to periodically analyze the property’s revenue (not just monthly sticker price). See debt service coverage ratios.
https://www.investopedia.com/terms/d/dscr.asp https://www.investopedia.com/terms/d/dscr.asp
- kurthr 2y agoIt's not about fooling. It's about the contract. The property can have met the debt service (cash flow) ratio, but still be in violation of the the rental price covenant. Those covenants require immediate repayment of the loan.