Jonathan CroninREI Accelerator, Rei Accelerator · Multifamily Real Estate Investor & Coaching Leader

Structuring Non Recourse Loads (Better Financing)

17 Feb 2025

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Non-recourse lenders underwrite based on the property's cash flow, not the borrower's balance sheet. A lender spread is the premium over an index: if the 10-year Treasury is 4.60% and the spread is 150 basis points, you pay 6.10%. The loan structure hinges on collateral, sponsor covenants, and pricing.

Questions this video answers

4.60% ("buy a 10 year treasury today at 4.60%")

6.10% (example result of index plus spread: "they're actually achieving a 6.10% rate")

"1:60 spread above that" (spoken phrasing in transcript; implied to produce the 6.10% rate)

The lender because they're making a non recourse loan. They're only making the loan based on actual current in place cash flow. So they're basically going to say we're making this loan 80% based on. Well, we're making it 100% based on the property, but we're still going to look at the sponsor. We need them to hit these minimum thresholds. The spread is the premium that the lender receives in rate above the index. So they could buy a 10 year treasury today at 4.60% but they'll lend you this money and secure by a first mortgage in real estate for a 1:60 spread above that. So they're actually achieving a 6.10% rate versus that. So that's what the spread is.