In this episode of the Close More Deals Podcast, host Scott Dillingham breaks down one of the most critical calculations in commercial real estate financing: net operating income (NOI). Whether your clients are purchasing a business, acquiring commercial property, or investing in real estate, understanding NOI can mean the difference between loan approval and rejection. Scott explains how this fundamental metric helps lenders determine maximum loan amounts and why working with a specialized commercial mortgage team can dramatically increase approval success rates.Net operating income is calculated by taking a property or business's total income and subtracting all operating expenses. This straightforward formula becomes the foundation for determining debt service coverage ratio (DSCR), which most commercial lenders require to be at least 1.2 or 20% surplus over expenses. Scott walks through exactly how lenders use this coverage ratio to calculate the maximum loan amount a borrower can qualify for when purchasing a business or commercial building.One of the most valuable insights Scott shares involves how amortization periods dramatically impact loan sizing. Using a real client example involving a trucking facility purchase approaching four million dollars, Scott demonstrates how one bank offering only a 15-year amortization could not provide enough funding for the deal to work. However, another lender offering a 25-year amortization on the same property with the same DSCR requirement resulted in a significantly larger loan amount that made the acquisition possible. This real-world example highlights why comparing multiple lenders is essential for commercial transactions.Scott emphasizes the importance of pre-qualifying deals before investing significant time in offers and showings. For realtors working with commercial buyers, having clients consult with a dedicated commercial lending team first can save countless hours and dramatically improve close rates. The LendCity commercial team offers complimentary phone consultations where they run NOI calculations in real-time, giving buyers immediate clarity on maximum loan amounts for specific properties or businesses.Beyond the numbers, Scott addresses the emotional component of commercial purchases. Some buyers become attached to properties that simply do not make financial sense based on their NOI analysis. The debt coverage ratio requirement acts as a protective filter, preventing buyers from acquiring underperforming businesses or properties that could become financial burdens. This disciplined approach to commercial lending ultimately protects both the borrower and the lender.For real estate professionals, understanding how commercial lenders evaluate deals provides a significant competitive advantage. By incorporating NOI analysis into your client consultation process, you position yourself as a knowledgeable advisor who helps clients make informed investment decisions rather than emotional purchases that may not qualify for financing.Key TakeawaysNet Operating Income Formula: NOI equals total income minus operating expenses, forming the foundation for commercial loan qualification and determining maximum borrowing capacity for business and property acquisitions.Debt Service Coverage Ratio Standard: Commercial lenders typically require a DSCR of 1.2, meaning the property or business income must exceed debt payments by at least 20% to ensure adequate cash flow coverage.Amortization Period Impact: Longer amortization periods significantly increase maximum loan amounts; a 25-year amortization can qualify borrowers for substantially larger loans than 15-year terms using identical DSCR requirements.Industry-Specific Lending Challenges: Certain sectors like trucking facilities and office space currently face tighter lending criteria with some banks scaling back programs, making broker relationships essential for finding willing lenders.Pre-Qualification Benefits for Realtors: Running NOI calculations before showing properties or submitting offers saves time, increases closing success rates, and prevents clients from pursuing deals that cannot be financed.100% Financing Possibilities: Depending on loan size, location, business type, and overall income profile, some commercial deals may qualify for up to 100% financing through specialized programs.Emotional Decision Prevention: The debt coverage ratio requirement acts as a financial safeguard, preventing buyers from acquiring underperforming properties or businesses based on emotion rather than sound investment fundamentals.Links to Show ReferencesLendCity Mortgages Commercial Team: lendcity.caCommercial Loan Pre-Qualification Consultation: Contact LendCity for complimentary phone analysisClose More Deals Podcast: Subscribe for weekly real estate financing strategies

Understanding debt ratios is one of the most powerful yet overlooked tools real estate agents can use to close more deals and help clients secure properties at higher purchase prices. In this episode of the Close More Deals podcast, host Scott Dillingham breaks down the complexities of debt-to-income calculations and reveals how different lenders evaluate these critical numbers in dramatically different ways.Most agents know that banks typically use a 44% debt-to-income ratio as their benchmark. This means for a client earning $100,000 annually, approximately $44,000 can be allocated toward total debt payments including mortgage, credit cards, and lines of credit. However, what many agents don't realize is that this 44% figure carries completely different meanings at different financial institutions, creating opportunities for savvy agents who understand these nuances.Scott reveals how certain banks apply hidden handicaps to their debt ratio calculations. Some lenders take credit card limits and calculate payments as if the cards were maxed out, using 3% of the total limit as a minimum payment regardless of actual balances. This seemingly small difference can significantly impact a client's qualification, turning an approval into a denial without the client ever understanding why.The episode explores how various income sources receive dramatically different treatment across lenders. Child tax benefits, maternity leave income, rental income, and self-employed earnings are all evaluated using different methodologies depending on which lender processes the application. For agents working with first-time homebuyers carrying student debt, understanding how different lenders calculate student loan payments can mean the difference between closing a deal and losing a client.Scott introduces B lenders as a powerful alternative for clients who don't fit traditional banking criteria. These alternative lenders typically accept debt ratios ranging from 50% to 60%, but more importantly, they evaluate income and debts using more favorable methods. B lenders can incorporate guarantor income without attaching to the guarantor's credit bureau, use actual credit card payments instead of the 3% rule, and assess self-employed income through bank statements rather than tax returns.For situations where even B lenders cannot provide solutions, private lenders offer yet another pathway to deal closure. Private lenders focus less on strict debt-to-income numbers and more on the overall financial story and exit strategy. Whether clients need financing for properties in poor condition, are between jobs, or have other unique circumstances, private lending can bridge the gap that traditional financing cannot cross.The key message for real estate agents is clear: when a bank tells your client their debt ratios are too high, that's not the end of the conversation—it's just the beginning. By partnering with experienced mortgage brokers who understand the full spectrum of lending options, agents can rescue deals that would otherwise fall through and help clients achieve homeownership goals they thought were out of reach.Key TakeawaysDebt Ratio Variations: The same 44% debt-to-income ratio means different things at different lenders due to varying calculation methods for credit cards, student loans, and income sourcesCredit Card Calculations: Some banks use 3% of your total credit limit as a payment, even if balances are zero, significantly impacting qualificationIncome Treatment Differs: Child tax benefits, maternity leave, rental income, and self-employed income are evaluated differently by each lenderB Lender Advantages: Alternative lenders accept 50-60% debt ratios, use actual payments instead of calculated minimums, and allow guarantor incomePrivate Lender Options: When traditional financing fails, private lenders focus on the overall story and exit strategy rather than strict ratiosNever Accept First No: If a bank declines based on debt ratios, consult a mortgage broker who can explore all available lending optionsLinks to Show ReferencesLendCity Mortgages: https://lendcity.ca

In this episode of the Close More Deals Podcast, host Scott Dillingham breaks down the essential differences between conventional bank financing and CMHC-insured programs for multifamily properties with five or more units. For real estate professionals and investors working with apartment building purchases, understanding these financing options can mean the difference between a deal that works and one that falls apart at the numbers stage.Scott explains that conventional bank financing for commercial multifamily properties typically limits borrowers to 25-year amortizations and 75% loan-to-value ratios, with some exceptions reaching 30 years and 80% LTV. These restrictions significantly impact how much investors can qualify for because commercial lenders calculate loan amounts based on the property's cash flow rather than personal income. When that cash flow is analyzed over a shorter amortization period, the resulting loan amount is substantially lower than what could be achieved through alternative programs.Understanding CMHC MLI Standard and MLI Select ProgramsThe episode focuses on two powerful CMHC programs that transform multifamily financing possibilities. The MLI Standard program offers up to 85% loan-to-value with amortizations extending to 40 years, providing significantly better terms than conventional options. However, the MLI Select program takes these benefits even further by introducing a points-based system that rewards investors for meeting affordability, energy efficiency, and accessibility criteria.Under MLI Select, projects earning at least 100 points can access financing at 95% loan-to-value with amortizations stretching to 50 years. This represents double the amortization period available through traditional bank channels. The program evaluates three key areas: the proportion of units with rents at or below 30% of median income, energy efficiency improvements, and the percentage of accessible units within the property. Higher scores translate to better financing terms, including reduced insurance premiums.Why CMHC-Insured Financing Changes the GameScott emphasizes that the mathematical impact of these differences cannot be overstated. A property analyzed under a 40 or 50-year amortization will qualify for substantially more financing than the same property evaluated under a 25-year period. This means investors can either purchase larger properties or put less money down on their acquisitions. Current interest rates for CMHC-insured multifamily mortgages are running in the low to mid-three percent range, which compares favorably even to residential variable rates.The trade-off involves a CMHC insurance premium that gets added to the loan amount, similar to how residential mortgage insurance works. However, the combination of lower interest rates, longer amortizations, and higher loan-to-value ratios typically makes this premium worthwhile for most multifamily investors.The Critical Role of Mortgage BrokersA key takeaway from this episode is that most banks do not offer CMHC-insured multifamily programs. They only provide conventional financing options, which means investors who go directly to their bank may be limiting their purchasing power without realizing it. Working with a mortgage broker who specializes in commercial and multifamily financing ensures access to the full range of available programs and helps investors maximize their qualification amounts.For realtors working with multifamily buyers, understanding these financing differences positions you to add significant value to your client relationships. Guiding investors toward the right financing solutions before they start shopping can help ensure deals actually close rather than falling apart during the qualification process.Key TakeawaysConventional bank financing for 5+ unit properties typically offers 75% LTV and 25-year amortizations, significantly limiting how much investors can qualify for compared to CMHC-insured optionsCMHC MLI Standard provides up to 85% LTV with 40-year amortizations, while MLI Select can offer 95% LTV with 50-year amortizations for projects meeting affordability, energy efficiency, and accessibility criteriaCommercial multifamily loans are calculated based on property cash flow, meaning longer amortization periods directly translate to higher qualifying loan amountsCurrent CMHC-insured multifamily rates are in the low to mid-three percent range, often better than residential variable ratesMost banks only offer conventional commercial financing, making mortgage broker relationships essential for accessing CMHC programsMLI Select uses a points system where projects earning 100+ points qualify for the best financing terms, with points awarded for affordable rents, energy improvements, and accessible unit designLinks to Show ReferencesLendCity Mortgages: lendcity.caCMHC MLI Select Program Information: cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/multi-unit-insurance/mliselect

In this episode of the Close More Deals Podcast, host Scott Dillingham reveals a powerful mortgage qualification strategy that most bank clients never hear about. When homeowners decide to keep their current property as a rental instead of selling, traditional lenders typically only allow 50% of the rental income to count toward qualification—creating an artificial shortfall that limits purchasing power. Scott explains how specialized rental worksheet programs available through select mortgage brokers can use up to 100% of rental income, dramatically increasing what buyers can qualify for when purchasing their primary residence.The rental worksheet approach fundamentally changes how lenders calculate debt service ratios. Rather than treating half the rental income as a loss on paper, these programs allow brokers to input actual rental figures and subtract real expenses, resulting in a much smaller—or even positive—cash flow calculation. This difference can mean tens of thousands of dollars in additional purchasing power for qualified borrowers. Scott shares a compelling case study where a client was initially approved for only $250,000 through their bank, but after applying the rental worksheet program, qualified for $450,000—nearly double the original amount.This strategy is becoming increasingly relevant as Canadian real estate markets experience longer selling times and more homeowners choose to hold onto their properties as investments rather than sell. With the ability to purchase a new primary residence with as little as 5% down payment while keeping an existing property as a rental, homeowners can build wealth through real estate without depleting their current equity position. The key distinction is that this program specifically applies when purchasing an owner-occupied primary residence while converting an existing home to rental property—a scenario that major banks simply cannot accommodate with competitive qualification amounts.Scott emphasizes that these rental worksheet programs are not available through traditional banks and require working with mortgage professionals who have access to specialized lenders. For realtors, understanding this program creates a significant opportunity to help clients who might otherwise be stuck renting or unable to find suitable properties within their bank-approved budget. The episode underscores the value of seeking second opinions on mortgage pre-approvals, particularly when clients are navigating the transition from homeowner to landlord-investor.Key TakeawaysTraditional lenders use only 50% of rental income when qualifying borrowers who are converting their home to a rental property, creating an artificial debt shortfall that limits purchasing powerRental worksheet programs available through mortgage brokers can use up to 100% of rental income, potentially doubling qualification amounts compared to bank approvalsHomeowners can purchase a new primary residence with as little as 5% down payment while keeping their existing property as a rental investmentA real case study showed a client's approval jump from $250,000 at a bank to $450,000 using the rental worksheet program—an $200,000 increase in purchasing powerThis program is specifically designed for primary residence purchases where the borrower is renting out their previous home, not available through major banksRealtors can significantly increase deal closings by referring clients for second-opinion pre-approvals when rental conversion is involvedLinks to Show ReferencesLendCity Mortgages: lendcity.caContact Scott Dillingham: scott@lendcity.caClose More Deals Podcast: Available on major podcast platforms

In this episode of the Close More Deals Podcast, host Scott Dillingham breaks down one of the most misunderstood challenges in Canadian mortgage lending: financing properties with agricultural zoning or large acreage. Many borrowers and even some mortgage professionals assume that if a property is zoned agricultural, it automatically requires a commercial mortgage or cannot be financed at all. Scott debunks this myth and reveals that multiple residential lenders across Canada will finance these properties when they meet certain criteria.The key to successfully financing an agriculturally zoned property lies in understanding how lenders assess risk. When a borrower defaults on a mortgage, lenders need to repossess and sell the property to recover their funds. Properties zoned agricultural present a unique challenge because foreclosure timelines differ significantly from residential properties. For agricultural land, foreclosure processes in Canada typically require a full crop cycle waiting period of approximately 12 months, compared to just 3 months for standard residential foreclosures. This extended timeline increases lender risk and explains why many institutions decline these applications outright.Scott explains that the property's physical surroundings play a critical role in financing approval. A single-family home that is wedged tightly between active farming operations with silos, barns, and agricultural equipment in close proximity will present the most difficulty for financing. However, properties that are simply zoned agricultural but situated with adequate space from intensive farming activity have significantly more financing options available. The distinction between agricultural zoning on paper versus actual agricultural use in practice is crucial for mortgage approval.The episode also addresses acreage limitations and how they impact mortgage financing. Most residential lenders will finance properties with up to 10 acres without issue. Some lenders extend their policies to accommodate 15 acres or more, though options become progressively limited as acreage increases. For properties exceeding these thresholds, lenders typically value only the home and a portion of the land, requiring borrowers to fund the remaining acreage through additional down payment. This means a buyer purchasing a property with substantial land may need to bring significantly more cash to closing than anticipated, as the excess acreage value will not be included in the mortgage amount.Scott emphasizes that being told agricultural zoning requires commercial financing is simply incorrect in many cases. Working with a mortgage professional who has access to multiple lenders specializing in rural and acreage properties can make the difference between approval and denial. LendCity maintains relationships with lenders across Canada who understand these unique property types and can structure financing solutions that work for buyers seeking rural properties with agricultural zoning or large acreage.Key TakeawaysAgricultural zoning alone does not automatically disqualify a property from residential mortgage financing, as many lenders evaluate intended use and property characteristics rather than zoning classification aloneProperties surrounded closely by active farming operations including silos, barns, and agricultural equipment face the most significant financing challenges due to marketability concernsMost residential lenders will finance properties with up to 10 acres, with some extending to 15 acres or more, while properties exceeding lender acreage limits require additional down payment for excess land valueForeclosure timelines for agricultural properties typically require 12 months compared to 3 months for residential properties, which drives lender risk assessment and approval criteriaAppraisers may exclude outbuildings, excess land, and agricultural improvements from property valuation when determining the mortgage amount a lender will approveWorking with a mortgage broker who has access to specialized rural and acreage lenders is essential for finding financing solutions when mainstream lenders decline applicationsLinks to Show ReferencesLendCity Mortgages: lendcity.caContact LendCity for Rural Property Financing: Visit the website or call for a consultation on agriculturally zoned property mortgages