Underwriting Basics

Underwriting pic

Image: investopedia.com

Holding a bachelor of science in electrical engineering from Bucknell University as well as an MBA from the Anderson School of Management at UCLA, Frank Roessler founded Ashcroft Capital in 2014. Under the direction of Frank Roessler, Ashcroft’s underwriting strategy is based on comprehensive research and analysis.

Underwriting is the systematic and detailed analysis of a loan application to determine the amount of risk associated with making the loan. This analysis is based on the credit-worthiness of a potential borrower and the value of the property to be purchased. The underwriting process also evaluates the borrower’s financial needs, the value of collateral assets, and the ability of the borrower to repay the debt.

Underwriting a commercial real estate loan involves determining, among other things, an accurate net operating income (NOI), the loan-to-value ratio (the ratio of the loan amount to the property value), and the debt-service-coverage ratio (to verify the cash flow needed to cover loan payments is available). The information contained in an underwriting is critical for investors to fully understand the risks and potential gains of an investment.