Shafiq Hirani CCIMReal Estate Advisor, REMAX Distinctive · Real Estate Advisor at RE/MAX Distinctive Commercial | Washington, DC | Your Guide To Profitable Real Estate Ventures

Real Estate Owners vs. Lenders: Who Wins the Valuation Game? #shorts

14 Jul 2026 · 1 min

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In this short explanation, the speaker outlines how commercial real‑estate lenders underwrite a property differently from owners. Using a 75% loan‑to‑value (LTV) ratio on a $4.8 M property yields a $3.6 M loan; with an existing $2.4 M balance this creates roughly $1.2 M of cash‑out for the owner. However, lenders do not accept the owner’s operating numbers. They rebuild the income statement, applying a higher vacancy rate (5% instead of the owner’s 3%) and imposing a standard 6% management fee on gross rents, even if the owner self‑manages. These two adjustments lower the net operating income (NOI) from $313,600 to $275,200, illustrating the more conservative assumptions lenders use when valuing a property for financing.

Chapters

The lender goes to 75% of that, so you are looking at a loan of around $3.6 million. You owe $2.4 million. Cash out of roughly $1.2 million. That is the math almost every owner does. And it is not that the arithmetic is wrong, it is that the lender will never use your numbers. The lender rebuilds your income from scratch. You used a 3% vacancy rate because that is what the building is running at. They use 5% because they have to underwrite a normal year, not your best year. And you have no management fee because you self-manage. They add one anyway at 6% of gross rents because they have to assume the next owner would pay one. Those 2 adjustments take your income from $313,600 down to $275,200.