We all know the saying – “You never get a second chance to make a great first impression.”

The purpose of this article is to help you make your first impression with your mortgage broker or loan officer a great one.

And how do you do that?? You have a current and complete Personal Financial Statement filled out and ready to share.

The starting point for all commercial real estate loans is the Personal Financial Statement (PFS) with a Schedule of Real Estate Owned (SREO).

PFS & SREO_Template is free for you to download and get started.

Even though the asset ultimately qualifies for the loan, lenders must know the borrower(s) meet a simple credit profile. Having your PFS ready to go, quickly answers this question for a lender and allows them to move forward with underwriting the loan for the property.

In simple terms the PFS is a summary of your net worth. The document -usually a spreadsheet – allows you to list all your assets and liabilities that will show your net worth. It isn’t complete without the detailed Schedule of Real Estate working in tandem with the PFS.

We get a reoccurring question – “what should I include?”

The answer in a word is everything!

By way of summary here is a list of what to include in your PFS:

Assets

1. Summary of your Real Estate (more on the SREO below)
2. Automobiles
3. Vacation Properties
4. Notes Receivable
5. Precious Metals
6. Cash (Bank Checking & Savings Accounts)
7. Stocks and Bonds
8. Retirement Account (IRA’s, 401k’s, etc.)
9. Cash Value of Whole Life Insurance Policies
10. Equity in Business Interests (Including Real Estate Syndications)
11. Personal Property

Liabilities

1. Accounts Payable (credit cards, bills, lines of credit, etc.)
2. Notes Payable
3. Unpaid Taxes
4. Any liabilities associated with the assets your own
5. Other Liabilities

Schedule of Real Estate Owned

The Schedule of Real Estate Owned, often abbreviated to SREO, is a list of all the properties in which you have an ownership interest. It is a key component of your Personal Financial Statement.

This list gives an overview of the attributes of the portfolio – primarily the amount of equity, and the debt assigned to each property.

A good SREO will also show a lot of information that is useful to a lender when assessing the credit worthiness of a borrower. Primarily how much experience borrower has, and how well they operate their properties.

Here is a comprehensive list of the items to include that will show lenders you are good credit risk to them.

1. Property Name
2. Property Address – street, city, state zip
3. Ownership Percentage – how much of it is yours. You can and should include partial ownership.
4. Status – meaning is it stabilized, under development, etc.
5. Asset Type – is it multifamily, office, retail, industrial, single family residence, land, etc.
6. Number of Units
7. Year Built
8. Current Occupancy
9. Date Acquired
10. Ownership Entity Structure – LLC, TIC, Partnership, etc.
11. Lender – who has the loan
12. Loan Maturity Date
13. Outstanding Loan Balance
14. Annual Principal and Interest Payment
15. Gross Income
16. Operating Expenses
17. Net Operating Income
18. Current Market Value

No need to start from scratch if you need to build your Personal Financial Statement and Schedule of Real Estate Owned.

PFS & SREO_Template is free for you to download and get started. It asks for all the information listed above and neatly summarizes it in a 1-page document. Please note there are 3 tabs or worksheets in the Excel file.

We recommend updating your PFS & SREO on a quarterly basis. Once you’ve done it the first time, updates are quick and also fun to see how things are progressing for you.