The Information from this checklist will assist K2 Commercial Finance in understanding your loan request and quickly identifying the best potential lender for your unique situation. When contacting us, please be prepared to discuss as much information as you can from this list.

1. what is the propertty type? Purchase or Refi?

2. Who is the Borrower? Credit Score?

3. Owner Occupied or Investment Property? What percentage does owner occupy?

4. Number of units? Fully leased? What type of leases?

5. How much is your loan request for? How much do you think the property is worth?

6. Tell me about the existing financing. Rate? Terms? Is there a balloon?

7. Are 3 years worth of business and personal tax returns available?

8. Is the property under contract (purchase) or when was the property acquired and for how much?

9. What are your goals for the property? Does the property have positive cash flow?

9. Have there been any recent renovations? When was property built?

10. Are there any environmental concerns?

11. Do you have any timing or other special requirements?

12. What else do we need to know about your loan request or the property?

Typical steps are:
1) Stratify properties by type of facility (e.g., free-standing facility, mall location, leased or owned property, etc.).
2) Perform a cost segregation study on a sampling of properties within each stratum.
3) Based on the results in Step 2, develop a standard model for each type of facility.
4) Apply the costs derived from the model(s) to the population on a percentage basis. For example, the model may indicate that 10% of the project costs are allocable to 5-year property. This same percentage is then applied to each facility within the same stratum.

A frequent issue is the accuracy of the sampling results. In some cases, the sampling method may not be statistically valid. In addition, a population less than 50 could limit the accuracy of a sampling technique, unless an appropriate sampling error is considered. Also, despite the fact that facilities within certain strata may appear to be very similar, variations in building codes, geographic location, and material and labor costs may make it difficult to determine an appropriate model.

It should be recognized that this method generally does not reconcile project costs. In general, residual costs are not estimated or checked for reasonableness. A proper and “reasonable” residual cost should always be determined and then added back to the total of all short-lived asset costs to check if the total project cost is reconciled.

It should also be understood that different estimation techniques for short-lived assets can produce a skewed result in favor of § 1245 property (e.g., § 1245 property based on single-unit costs for high quality construction, while the building is based on gross square footage).

The detailed estimate approach is methodical, relying on solid documentation and utilizing construction-based documents such as blueprints, specifications, contracts, job reports, change orders, payment requests, invoices, appraisals, etc. When estimates are required, they are based on costing data, either from contractors or from reliable published sources (e.g., R. S. Means or Marshall Valuation Service). The sources of estimating data are clearly referenced, including identification of the specific volume, page, and item number. Further, the same estimating techniques and unit cost data sources are used for all of the items that comprise the actual cost.

In essence, the steps for this approach are the same as the detailed cost approach, except for Step 7 (in which costs come from contractor estimates or estimating guides). However, if detailed cost estimates are prepared by qualified individuals, and the estimates are reconciled to actual costs, then reasonably-accurate cost allocations are possible.

This approach is generally applied only to new construction, where detailed cost records are available. For used or acquired property and for new projects where original construction documents are not available, an alternative approach (e.g., the “detailed engineering cost estimate approach”) may be more appropriate.

The detailed cost approach typically includes the following activities:
1) Identify the specific project/assets that will be analyzed.
2) Obtain a complete listing of all project costs and substantiate the total project costs.
3) Inspect the facility to determine the nature of the project and its intended use.
4) Photograph specific property items for reference. Request previous site photographs that illustrate the construction progress as well as the condition of the property before the project began.
5) Review “as-built” blueprints, specifications, contracts, bid documents, contractor pay requests, and other construction documentation.
6) Identify and assign specific project items to property classes (e.g., land, land improvements, building, equipment, furniture and fixtures, and other items of tangible personal property).
7) Prepare quantitative “take-offs” for all materials and use payment records to compute unit costs.
Apply unit costs to each project component to determine its total cost. Reconcile total costs obtained from quantitative take-offs to total actual costs.
9) Allocate indirect costs, such as architectural fees, engineering fees, and permits, to appropriate assets.
10) Group project items with similar class lives and placed-in-service dates to compute depreciation.

The detailed cost approach is the most time consuming method and generally provides the most accurate cost allocations.

1. Detailed Engineering Approach from Actual Cost Records
2. Detailed Engineering Cost Estimate Approach
3. Survey or Letter Approach
4. Residual Estimation Approach
5. Sampling or Modeling Approach
6. “Rule of Thumb” Approach

If you answered yes to all of the questions above, we look forward to presenting a detailed cost segregation savings proposal at no cost to you!