What Is a Schedule of Real Estate Owned?

A Schedule of Real Estate Owned (SREO) is a consolidated document that organizes all properties in which an individual or entity holds an ownership stake. It provides a comprehensive overview of an investor’s portfolio for lenders by summarizing property values, outstanding debts, and income streams. This allows a lender to assess the financial health of a borrower’s real estate activities beyond a standard credit report.

Information Required for the Schedule

To construct a Schedule of Real Estate Owned, you must gather specific details for every property. This includes the complete street address, the property type, such as single-family or commercial, and your ownership percentage. It is necessary to state your ownership percentage as this determines your proportional share of the property’s financial attributes.

You will need to assemble the financial data for each property’s value and debt. This involves determining the current market value from a recent appraisal or by analyzing comparable sales. You should also have the original purchase price and acquisition date. For every mortgage, you must list the lender’s name, current outstanding loan balance, interest rate, and the full monthly payment.

For properties that generate rental income, specific operational figures are required. You must document the gross monthly rental income as stipulated in lease agreements. You will also list the primary monthly operating expenses, including property taxes, homeowners insurance premiums, and any applicable HOA fees.

To validate the information, you should collect supporting documents. Lenders require recent mortgage statements for each loan, the declaration page from your homeowners’ insurance policy, and current property tax bills. For rental properties, you must have copies of current lease agreements. Many lenders provide their own SREO template, but having these documents organized beforehand streamlines the application process.

Completing and Calculating Key Metrics

A standard SREO is formatted as a grid or table, with each row representing a single property and columns for each piece of data. You will enter the property address, market value, mortgage balance, and other details into their designated columns, creating a line-item summary for each asset.

A primary calculation for a lender involves determining the qualifying rental income for underwriting. To account for potential vacancies and maintenance, lenders consider a percentage of the gross rent—most commonly 75%—as qualifying income. For example, if a property generates $2,000 in gross rent, a lender would count $1,500 as income. The property’s full monthly housing expense is then treated as a separate debt.

Another calculation is for net equity, which shows the portion of the property you own outright. This is calculated by subtracting the current mortgage balance from the current market value. If a property is valued at $500,000 and has a mortgage balance of $300,000, the net equity is $200,000.

The final step is to sum the financial columns to produce portfolio-wide totals. You will calculate the total market value of all properties, total outstanding mortgage debt, and total gross rental income. These figures provide a snapshot of your portfolio’s value, leverage, and cash flow.

The Role of the Schedule in Lending Decisions

Lenders use the Schedule of Real Estate Owned to analyze a borrower’s overall financial position in real estate. The SREO provides a view that helps underwriters understand the performance of an applicant’s existing investments. This allows them to assess risks and strengths not apparent from a single property or a standard credit report.

The rental income figures on the schedule are used for evaluating a borrower’s repayment ability. When calculating a debt-to-income (DTI) ratio, underwriters add the qualifying rental income to the borrower’s total monthly income and add the full monthly housing payment to the borrower’s total debt. For investors with larger portfolios, lenders may use a Debt Service Coverage Ratio (DSCR), which measures if the properties’ net operating income is sufficient to cover their debt payments. A DSCR above 1.0 indicates that the properties generate more income than is needed to pay their debts.

The SREO also serves as an indicator of an investor’s experience and management capabilities. A well-organized schedule showing a portfolio of properties with positive cash flow and healthy equity can signal a low-risk borrower. Conversely, a schedule revealing negative cash flow or excessive leverage can be a red flag for lenders. This analysis influences loan approval and the terms offered, such as the interest rate and down payment.