Archive for April, 2009
Apr
30
Entrepreneurs, Major Issues When Shopping for a Commercial Mortgage
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Business owners that own a commercial property for their business, and have already been through the process of securing a conventional commercial mortgage, understand the complexity and frustration that is a can be a part of the process. There are a few major issues that borrowers should be aware of before selecting a bank/ lender, besides who’s quoting the lowest rate.
What is the banks current appetite for your building type, industry and geographical location? This is a difficult question to get straight answers on. If you’re dealing with a loan officer, for example (who has a quota and a commission at stake) at a local bank, they may try to “push” your loan through the system despite knowing that your deal has a low probability of closing. You’re at risk of losing months and 3rd party fees.
You need to get an unbiased opinions on how hungry the source is and what really fits their criteria. Commercial mortgage brokers, title companies or CPA’s that work with real estate related companies can be a source for this information.
An example, is in our state of Michigan. Many local banks are not offering commercial mortgages to businesses involved in the automotive industry, that have industrial buildings and or buildings that are located in metro Detroit, unless their absolute perfect deals. Borrowers run the risk of thinking they have a solid loan, going through the process, ordering expensive 3rd party reports only to get denied deep into the loan. If the borrower has a ballooning loan, they run the risk as well of defaulting on their current loan by not paying it off in time.
A very common mistake we see business owners make, is trying to leave issues undisclosed. The problem with this is that you, the borrower, almost always pays for this. Underwriters will discover the issue and will cancel your loan request.
For example, we recently closed a transaction with a borrower that did not reveal to their previous broker and lender that they had 2, 30 day late payments on their existing commercial mortgage. Not sure exactly what the borrower was thinking but they simply did not mention it. The borrower signed to commitment letter and submitted the $6,500 deposit fee for the appraisal, environmental and processing fee. All the reports were ordered and came in fine.
Underwriting than ordered the VOM (Verification of Mortgage) and it showed the late payments. The deal was immediately canceled and the borrower was not able to use the reports with the next lender… they had to reorder them which was another $5,000.
Our suggestion would be to disclose all issues in the very beginning. Move on until you find a source that you really believe can get around whatever it is, than spend your time and money with them.
Another mistake we see is that business owners assume they will get their best deals from their existing bank (that has their deposits, etc), and consequently do not shop. There is often the idea that if the business owner runs into hard times, they will be better able to work with and reason with their bank. We often hear “you have a better loan program sure, but I’ll need my local bank to back me up”. We just as often hear prospective clients say “I can’t believe my bank called my note. In 15 years that I been with them, I’ve never once been late. They said they no longer liked my industry and have called my note for no good reason”. Just like a mutual fund, it pays to be diversified.
In the same vein, many entrepreneurs also believe that all commercial mortgages are the same. There are many options, that you may not be aware of. For example, there’s a little known commercial 30 year fixed mortgagethat has rates and fees right in line with bank financing, but the loan is fixed for 30 years.
Get out there and find the best deal for your situation. Perhaps working with a credible broker makes sense, but regardless, shop and don’t assume that your existing bank has your best interest at heart, because, they have their interests at heart.
Quick House Sale
Apr
29
A Guide to Finding the Best Property for Sale in Spain
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When you are hoping to buy an overseas property for sale, Spain offers a lot of options. You can look into the real estate of Menorca, which is an island beauty. Its weather is mildly windier and fresher than the other regions of the country. This is most beneficial during summers. Property prices in Menorca range from 140,000 to 2 million pounds. Another well-known location of Spain is Ibiza, which is recognized for its warm weather and charming village interiors. The prices of the properties within this region depend on buyer demands. This means that the most sought-after Ibiza properties are more expensive. Almeria also provides properties along the beach and within the town. This region is famous for its cobble streets and whitewashed houses.
Spain is a vast country, which is considered as one of the world’s top tourist destinations. It is popular for its Flamenco dance and music, pristine beaches, bull fights, and sunshine. The country has several charming towns, as well as bustling cities. Its architecture ranges from old monuments to modern establishments. Each of its regions is different from the other in one way or another. With all the great opportunities that the country has to offer, it is a wonderful idea to consider purchasing a property for sale. Spain real estate market has hundreds of selection for you to choose from. This is why you need to have a proper plan and guide before you transact with a dealer.
Whether you want to buy an Almeria property development or a villa in Ibiza, there are certain considerations that you have to keep in mind. You need to educate yourself with basic Spanish terms. This will allow you to transact with the property dealer. But if you find it hard to learn the language, you can hire a reliable translator. The process of property buying is easier and faster if you let a real estate broker or agent assist you. You can hire an agent from local real estate agencies or from the Internet, such as Clover Estates. If you want to make an investment out of the property, you have to secure a number for tax identification (NIE). This number will allow you to comply with property purchase formalities. This is obtained from a solicitor.
While there is a guide for purchasing a property for sale; Spain also provides you with property buying advices. This way, you will get the most out of your money and the property that you have bought. Consider different options and never forget to visit the property’s site. While you are inspecting properties, refrain from buying on the spot. Make sure that the transaction is legal and obtain the Spanish law protection. Seek the assistance of reliable Spanish lawyers to help you with the transaction. Make sure that the documents and deeds are legal before you sign anything. You should not only look into the price of the property but also its structure.
When you want to purchase an Almeria property, check out Clover Estates. This online real estate agency specializes in property sales within the region. You can choose from resale properties, newly-developed properties, and luxury villas. These are offered at a wide range of prices, which you can fit into your budget. The property developments of Clover Estates are located within the inland Andalucia. You can also look for a property within coastal resorts like Mojacar, Vera, or Garrucha.
Repossession
Apr
29
Commercial Mortgage Refinancing
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There are many pitfalls that can eliminate or create problems on a commercial mortgage refinance. Whether or not your particular situation will qualify, depends on several factors. Understanding your potential loans strengths and weaknesses will save you time and ensure your best chance of a successful commercial refinance. Below are some basic questions and concepts to keep in mind regarding your commercial mortgage refinance.
Commercial Mortgage Refinancing – Ownership
First, how long have you owned the subject property? Has it been less than 12 months? The lender will use the purchase price plus any documentable improvements you’ve put into the property – not the appraised value. Many borrowers are often surprised by this, and this rule is getting more and more prevalent as the credit crisis continues. It’s often referred to as a seasoning issue.
For example, if you bought the subject property 9 months ago, and put down 20%, you will not have sufficent equity, even if you’re convinced you “stole” the property. The banks will look at your loan request at 80% and most will only consider commercial mortgage refinances at 75% loan to value or less.
Commercial Mortgage Refinance – Value
Related to above, value or more specifically to commercial mortgage refinancing, loan to value is becoming more and more important. Obviously most banks have increased their loan to value standards. For example most banks wouldn’t go beyond 80% -75% on a commercial mortgage refinance a year ago. Now 65% – 75% is the norm. For example if you purchased a property 5 years ago with 85% financing and now you can only get 70% financing on your commercial refinance AND the value has decreased, you’ve got a problem.
In addition, the problem is dynamic in that commercial real estate values are tied to financing. For example the debt coverage ratio (which is a measure of the properties/business cash flow) has a direct impact on the level of debt that can be placed on the property. Most buyers for example (on a purchase) are only interested in putting 20 -25% cash into a property as their down payment. If they have to put more into the deal, just so the property cash flows, many buyers will just come to the conclusion the property is overpriced. So the seller will have to drop the price in order for buyers to be interested and in order to get financing.
If the current owner has a 30 year amortization schedule, and the buyer can only find 20 year financing, there will be a cash flow issue and the only way to overcome this is by 1. The buyer brings in a higher down payment or 2. The seller reduces the price. This sale will be registered with appraisal companies and have an impact on the general commercial real estate values in the properties city.
Commercial Mortgage Refinance, Current terms
What are your current mortgage terms? Are you refinancing because you want a lower rate? Longer amortization and or fixed period? Want to pull cash out? Or do you have a ballooning loan? One of the biggest questions to ask yourself is, “what are my prepayment penalty?” This clause can kill your deal.
Prepayments come in a couple of different forms. Some are fixed or declining but all are tied by a percentage to the existing loan balance for a certain amount of years. For example a 5% flat, 5 year prepayment is common. Another example is a 5% declining. Meaning 5% in the first year, 4% in the second years… down to zero.
Lockouts are another issue. They are a form of prepayment penalties but are normally harsher. For example on a 3 year lock out you would owe the lender 3 years worth of interest if you were to sell/refinance the property. Which often, adds up to hundreds of thousands of dollars or more depending on the loan amount.
Commercial Mortgage Refinancing, Property Charteristic
What type of commercial property are you refinancing? Different building types get of vastly different terms. 75% loan to value on a restaurant refinance will not fund, while a 75% loan top value on an office building will.
If your business occupies some of the space, what percentage? Is it more than 25%? Is it more than 50%? Many lenders will consider it an owner occupied deal if you’re in more than 25%. Virtually all lenders consider it owner occupied if your business occupies more than 51% of the subject building, which will often give you better terms.
Despite the credit crisis commercial mortgage refinancing is still viable. Take your time and work with experienced professional to make sure you get the best terms available.
Sell and Rent Back
Apr
28
I’m thinking of investing on commercial property. However, I still don’t know what happens when an existing lease expires! Does the landlord pay back the amount of lease to the tenent? If so, is it calculated according to the current market value or is it as much as was paid in the first place?
Sell and Rent Back
Apr
28
The lease seems water tight so I have just stopped paying. What will happen to me will I loose everything my house etc. I was very badly advised by my conveyancing agent. She never suggested a get out clause or even putting it in my limited company name, what would be the chances of sueing her company as I only have my word.
Quick Property Sale
Apr
27
Commercial Mortgage Brokers – the Difference Between Mediocrity and Excellence
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Of course there’s a lot that goes into being a successful commercial mortgage broker like marketing, contacts, sales skills, technical knowledge of the industry, market knowledge, bank contacts, proper administration set up, etc so I’m not trying to over simplify the issue; but in general why are there commercial mortgage brokers that make seven figures incomes and many that can’t break $100,000 per year?
The most important component to this, I believe, is the quality of the deals that the commercial mortgage broker DECIDES to work on. For many this may seem a little contrary to their fundamental “sales” outlook that operate under a more reactive basis and work on any or all loans that cross their desk. Perhaps they’re not that busy and work on weaker loan requests. But successful commercial mortgage brokers are empowered.
Excellent commercial mortgage brokers are extremely careful and selective on which borrowers and which deals they will work on. If they don’t like the deal they won’t work on it. If they don’t think they will get multiple transaction out of the borrower they’ll be less interested in working with that borrower. If they feel a borrower is just shopping them they walk or convince the borrower to take them seriously. Again, for whatever reason, they will pass on the loan request and invest their time into deals that are not only doable but will serve their long term goals.
One component to this is being excellent at screening loan requests. What’s happening here is the commercial mortgage broker is trying to determine, before they put a lot of time into the deal, if they can close it and how competitive they will be with their existing contacts. Think of it like trying to predict the future. Of course if the commercial mortgage broker doesn’t think they can close it, or won’t be that competitive, they won’t work on it. Again this is all about protecting their time.
Is it a fundable deal? They know, without having to put weeks into shopping banks, where to place the loan. They determine within a half hour if they like the deal or to walk from it. They know how to review borrower’s tax returns and financials as this is what underwriting is going to look at when they consider the loan request. Questions like: What’s the Net Operating Income? Can we hit the required Debt Coverage Ratio’s? How are the business trends, etc? Have to be answered satisfactorily.
We see many newer commercial mortgage brokers that submit loan requests that have no chance of closing because the cash flow is underwater. If the broker knew how to review tax returns they wouldn’t have bothered to work on the file from the beginning! (We wrote a training manual on how to prescreen commercial mortgages, available on our website)
Can I get multiple deals from this borrower and are the loans fat? The ideal client is one that purchases or refinances multiple loan per year and will have some loyalty. Will they sign my exclusive broker fee agreement? Rather than spending your time prospecting, you’re submitting packages and negotiating deals. Rather than sending mailers to commercial real estate brokers, you’re reviewing term sheets and scheduling closings.
Again there’s a lot that goes into being an excellent commercial mortgage broker but one of the biggest factors is how the broker chooses to spend his time and which deals he chooses to work on, or to run from.
Quick House Sale
Apr
25
Default payment on a commercial lease in Ontario?
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I leased a property (and did not sign a lease).
I missed a single payment, but first and last was already paid.
I went back to my leased place to find the locks changed.
what are my options to getting my possessions back?
Did he have legal right to lock the doors without giving a chance to rectify the problem?
What are my legal rights in this situation and what are the landlords?
Apr
25
Commercial Mortgage. $400,000.00 How much interest today? My banker is yanking my chain?
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Apr
24
An Introduction to Commercial Property
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Commercial property is real estate market is planned to use by for-profit businesses, like workplace complexes, shopping malls, service stations and for other restaurants. Commercial property might be purchased completely by a developer for prospect plans or leased by real estate broker. Commercial property falls anywhere between residential home and investment property.
Basically every included city uses a zoning method to control the use of property within its authority. In order to get permission building a new bureau complex or other profitable business, the city management needs to decide on that chosen area is certainly commercial property. The areas which divide industrial, residential and commercial property are obviously marked on the city maps. If the future business is evidently in an area zoned for commercial use, then the city would probably permit the sale to proceed for the stated use. If any part of the commercial property expands into a residential or work zone, however, then the buyer has look for a ‘variance’, special authorization to cross over a zone boundary.
Commercial property could be detained by real estate agents who treat it alike as residential property. One can also get commercial property through property auctions. Signs publicity the openness and size of the commercial property could be upright, and arrangements could as well be made to purchase or lease smaller lots. Sellers of commercial property might further also agree to make improvements to the land, like grading off rough spots or clearing out surplus trees. A professional developer might purchase enormous swatches of commercial property just to guarantee its accessibility for later projects.
A city often uses zoning laws to put off conflicts among residential homeowners and businesses. Land chosen as commercial property is hardly ever located in the middle of residential zones. City planners hearten commercial businesses to assemble along busier streets and middle downtown areas. This assists to remain traffic to these sites manageable. Some areas of the city might as well be chosen for ‘mixed usage’, that means some commercial property might be used for any other residential purposes. A quaint downtown shopping area with apartments will be an example of mixed usage.
Real Estate Professionals
Apr
24
Commercial Mortgage or Business Loan?
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My sister currently owns a daycare and will be selling in a couple of years I am wanting to buy the daycare when she is ready to sell, how hard will it be to do this? The daycare has been up and running great for almost a year so there shouldn’t be any worries about it going under but I wasn’t sure if this would affect anything. Is it harder than getting a 1st mortgage? Just needing all the info I can get.
Sell House Quick
