Archive for July, 2009
Jul
31
Commercial Mortgage Lenders – Overview
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There are essentially four sources of capital from commercial mortgage lenders. Basically all commercial mortgages come from theses sources, which are commercial private money lenders, conduit or CMBS lenders, SBA lenders and portfolio bank/lenders. Though these distinctions can be somewhat blurred, for example some national banks pool and sell their loans like CMBS lenders, these four categories are what make up the commercial mortgage market. Let’s take a brief look at each individually.
Commercial Mortgage Lenders - Private Money
This category is comprised of individuals to private hedge funds that loan their own money secured by commercial real estate. These sources also go under the names bridge loans and or commercial hard money. There terms are usually short at 12 -24 month, with interest only payments with rates and fees on the high side. Borrowers should expect to shell out 3 -6% on the front with rates between 12% – 16%. These programs are often used by individuals that have short time frames and or have been turned down by banks.
Commercial Mortgage Lenders – Conduit or CMBS Lenders
CMBS or Commercial Mortgage Backed Securities type loans have been getting a lot of press lately as this category has been dragged down by the residential subprime mess. Basically this is the Wall Street side of the business where commercial loans are originated and then pooled together in batches often over $100 million and securitized into bonds. These bonds are than sold to large investment companies such as insurance firms or pension funds. The main benefit for the banks and lenders is the liquidity created by selling the loans off rather than holding onto them. By freeing up their capital, they are in the position to reinvest into other commercial mortgages. The main benefit for borrowers with these types of loans are many, such as long term fixed rates, longer amortization periods and competitive rates.
SBA Lenders
Lenders and banks that are set up with the SBA boast a few strong advantages over traditional bank loans. I.e. 90% financing and longer fixed term rates are 2 examples. It’s important to note that the SBA does not lend its own money but guarantees banks, in case of borrower default, that the bank will receive all or a portion of their money back. Think of it as an insurance program for the bank. The funding bank or lender are often more aggressive with their terms because of these guarantees. Unfortunately SBA loans are only for businesses that occupy their building and not available for investors.
Commercial Mortgage Lenders – Portfolio
Portfolio banks or lenders essentially loan their own money which they often receive from deposits. This is the most traditional type of banking and was the norm in the past. These banks that still operate in this fashion are often smaller local banks that often only cover one or two states. They do have some flexibility with their underwriting as they are making much of the decisions to fund on their own. However most portfolio lenders are conservative in nature. It’s interesting to note that portfolio lenders are experiencing good growth (relative to the whole banking industry) right now as many are in strong positions as they are not dependant on Wall Street for their capital.
Rent Back
Jul
29
Real Estate Mfs and Reits Come Cheap
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They say bureaucracy in India can be slower than the most patient snail. So, more than seven years after the proposal was first mooted, the Securities and Exchange Board of India (Sebi) came out with its draft guidelines for real estate mutual funds (MFs). This move has brought much joy and relief to the MF industry.
Now, the industry is out to convince domestic investors that the move could not have come at a more opportune time. In these volatile times, real estate acts as a good diversification option due to its low correlation with equity and bonds. Besides, retail investors can now invest in actual real estate projects with amounts as low as a few thousand rupees.
“Sebi’s move to launch realty MFs will not only foster diversification in the MF industry, but will also promote wider participation in the real estate sector,” says Vineet K Vohra, MD & CEO, ING Investment Management, a fund house that helps manage around $200 billion in various real estate projects around the globe.
Mr Vohra says the move will help bring the Indian market place closer to global norms. As for delivering returns, sample this… ING’s Global Real Estate Fund, which invests in shares of international real estate companies, emerged unscathed in the recent stock market turbulence.
The fund not only took the crash in its stride, but also delivered positive returns over the same time period. If you had invested Rs 10,000 separately in the BSE Sensex, BSE Realty index and ING Global Real Estate Fund on January 10, ’08, your investment would be worth Rs 7,900, Rs 5,500 and Rs 10,800, respectively , as on April 22, ’08. Sebi has given approval to two kinds of real estate funds. The first category is of real estate MFs, which will invest in real estate projects and mortgage-backed securities.
These will be closed-ended funds, listed on the exchanges. As their net asset values (NAVs) will be declared daily, investors will have the option to exit any day. So, you can now say goodbye to the old tradition of illiquidity in real estate investments. Real estate investment trusts (REITs, in short) constitute the second category of real estate funds.
These products are very popular abroad. The most common version of this class of funds allows an investor to earn fixed income like returns through rents of commercial properties . Most REITs are listed on the exchanges and have tax incentives for investors.
Put simply, REITs work like fixed income instruments (rents as coupons), while realty MFs will seek capital appreciation (like a stock price going up) by investing in properties. For years, real estate was synonymous with lack of transparency in transactions and absence of an index, making it difficult to track prices.
Various fund officials like ING’s Mr Vohra hope that the introduction of REITs in India will change all that. They are betting on such products ushering in greater liquidity to this asset class, as well as freeing up developer capital for further investment, changing the dynamics of the sector as well.
With the current real estate boom and no signs of any fall in demand for homes or offices, this may be the best time for investors to own a share of the lucrative realty sector. Real estate MFs and REITs offer the cheapest and most convenient way to do so. However, let’s hope that smoother legislative framework and a clear taxation policy will be put in place for these products, making them investor-friendly .
Quick House Sale
Jul
28
Refinancing Commercial Property
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The refinancing of commercial property often occurs for the same reason a person might refinance their home – to reduce high interest rates. The owner may also be looking into refinancing in order to obtain cash from the equity that has been built into the property over time. Regardless of the reason there are few points to remember if you are thinking of refinancing your commercial property.
1. Any capital obtained from the refinancing of the property should be reinvested in the property itself. Any other use of the cash and the interest paid on the new portion will not be tax deductible. This cash-out amount will be considered a consumer debt if its use was found to be outside of the property and is therefore no longer tax deductible.
2. Because loans for commercial properties are typically much larger than those for residential properties, it will pay to consider the type of loan you have in depth before committing to a large loan that will take many years to repay. Compare your options for both fixed rate and variable rate loans. Does the variable rate loan have a cap? How many times is it expected to change? These details can often be inferred from the investment index that is linked to the rate. Be wary of any lender unwilling to discuss these details with you.
3. If you decide to refinance, check to see if the new loan has a “due on sale” clause. This clause works to the benefit of the lender in that it prevents the property from being sold without the approval of the lender.
4. Make sure you know what kind of paperwork will be involved. Professionally prepared stated income reports may be all you need for many types of commercial property, depending on the circumstances. Corporate tax returns, profit and loss statements, and balance sheets may not be required. In rare situations, full appraisals or environmental reports may be needed. The more complex the situation surrounding the refinancing, the more complex the required documentation may be.
5. Hefty penalties that must be paid off for pre-payment of an existing fixed-rate loan may prohibit some borrowers from refinancing. Check the details of your original loan to see if there are any pre-payment penalties.
6. Interest rates on commercial real estate loans have reached as low as 5 percent for a 10-year term. Make sure you get the best rate you can if you decide to refinance. It may be best to lock in long-term debt now – interest rates may or may not get any lower.
7. Consider selling if it is an option for you. Prime commercial real estate is a hot investment in many areas today. Test the market and see what kind of offers come back.
8.If your business is doing the refinancing of the building it occupies, acquiring a term loan may be an option. Term loans usually mature between one and ten years and can give small businesses the operating cash they need.
Quick House Sale
Jul
26
Commercial Tenant Representation
Posted by: | CommentsIn today’s business world, there are a lot of options to consider when choosing the right location for your business. You have to consider area demographics, rental rates, size of the space for today and for growth, tenant build-outs and much, much more. For the general business owner, whose mind has to be on running the business, this may be too much to handle. This is where a good commercial real estate tenant representative comes in.
Many business owners would prefer leasing over buying a property because it frees them from the responsibility of having to keep up with the maintenance of the property; it costs less and does not tie the business owner to the property long term. But leasing is not as cut and dried as it used to be. Having quality Commercial Tenant Representation can help ensure that the tenant (business owner) is getting a good rate, a good deal and is getting the space that is needed for the business.
Many tenants have a lot of different preferences and tastes when it comes to choosing a space to lease. Do my customers live in the area? Is it accessible to public transportation? Is there quality ingress & egress? Are there competing businesses nearby? Are there other businesses around that may help draw customers? Will the space be built-out to my needs? What are the total costs I will incur each month? What kind of rate increases should I expect? And the ultimate question: Is the rent affordable and negotiable? Having Commercial Tenant Representation means that all these and a myriad of other questions can be answered while you keep your mind on your day to day business.
With Commercial Tenant Representation, the tenant can feel confident that they are getting the best deal in the property that he will be leasing. The reason for this is because a good representative will always have access to a wide selection of properties up for lease that they can easily match the tenant with what he needs. Also, using Commercial Tenant Representation ensures that the tenant knows his rights and privileges as well as his responsibilities to the property that he leases. Negotiations can be handled through the representative and any problems that may arise from the rental of the property can be addressed through this rep.
Having Commercial Tenant Representation means that the tenant will be given an analysis of several locations, selected based on the specifications given such as cost, size, and accessibility. With this analysis, the tenant can now have an overview of his choices of property and be able to make an intelligent and informed decision on a property that will best suit his needs. Getting Commercial Tenant Representation makes life as a tenant much easier and safe. And even the landlord will thank him for it.
Quick Property Sale
Jul
25
the sale of his deceased fathers commercial property sells. What kind of documentation should I have drawn up or can I purchase Promissory note forms and have him sign it. What kind of terms should I have put in the Note ? Do I mention he is to pay me once he recieve the inheritance money ? He is not currently working . What would you do ??? I am getting the feeling I have made a BIG MISTAKE . What can I do now ? Thanks for you help .
Sell and Rent Back
Jul
24
Investing in Commercial Real Estate
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Are you looking for a good return on your money? A better return than you can ever get from a bank or money market investment? Why not invest in commercial real estate. Although the residential real estate market has pretty much bottomed out throughout most of the United States, the commercial real estate market is thriving. If you have always wanted to invest in the real estate market but are hesitant about the current residential market, invest in commercial real estate.
When you invest in commercial real estate, you need to understand that there is a vast difference between commercial real estate and residential. Not only is the market different, but so are the laws. Due diligence in commercial real estate is different than that in the residential market. You still want to make sure you get an inspection of the property prior to the settlement as well as a survey of the property. You also have to make sure that you get any easements included in the sale if they are needed.
Most people think of easements as those that burden the property, such as those for utilities and sewer. With commercial property, there are often easements that benefit the property. In some cases, in order to get to a property people have to drive their vehicles over other property owned by other people. In such a case, the person who purchases the commercial real estate will want to make sure that they get the easements needed for parking or entering and exiting. These can be included in the deed or in an easement agreement.
The only way to see if you need easements is to get a survey of your property depicting not just the property but any easements that pertain to the property. The title insurance commitment should also reflect a legal description of the easements. The title company needs to search not only the commercial real estate property that you are purchasing but also any other property in which you are receiving an easement. The reason for having this property searched includes the following points:
1.You need to know that the person who signs the easement agreement or deed is legally entitled to convey interest in the property;
2.You need to know that there are no burden on the easement property that would prevent you from using it;
3.You need to know that the taxes on the easement property are current. It would be unfortunate to purchase commercial real estate property that is dependent on easements and discover that the property is in a tax sale. A person who purchases the property could insist that you pay money to use their property; they may even erect a fence to prevent you from using the land.
When you invest in commercial real estate, make sure that you have an attorney who is well versed when it comes to commercial real estate, not just residential real estate. Commercial real estate is an entirely different than residential real estate and your attorney should be knowledgeable in this aspect of the real estate industry.
Sell and Rent Back
Jul
23
Commercial Mortgage Loans – Help Grow Your Business
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Commercial mortgage loans are executed using real estate to collateralize the loan. Commercial mortgages are similar to residential mortgages, except that the collateral used to secure the loan is a commercial (business) building rather than a personal residential home. If the borrower defaults on the loan, the lender can seize the collateral (building) to recover the loan proceeds.
Commercial mortgage loans are not available to persons, but rather to businesses, which include partnerships, incorporated businesses, limited companies, etc. The business must be sound financially and the process to verify the business income can be more complicated than verifying the credit worthiness of a specific individual. That is why traditional commercial mortgages can take six to nine months to underwrite.
Commercial loans are procured for a variety of reasons: to buy the premises of an existing business, to make improvements or enlarge existing premises, to make commercial and residential investments or to develop the existing property in other ways. An example would be to buy already constructed business premises, like offices, shops, restaurants, or pubs. Additionally, they can also be used to buy business assets such as plant equipment and specialized machinery.
The Interest rates for commercial mortgages are generally higher than those for residential mortgages but lower than interest rates on unsecured business loans. A fixed-rate loan is the most common commercial mortgage. It is similar to the fixed rate home mortgage loan in that the interest rate remains constant throughout the term. However, the term for most commercial mortgage loans is between 3 and 10 years but they can be extended for as long as 25 years.
The commercial mortgage loan amount and interest rate that you can receive is a direct correlation of the credit worthiness assessed by the lender with respect to your ability to repay the loan. If you have an excellent business record with a verifiable profit and loss business statement then you will have little trouble getting a commercial mortgage at an attractive interest rate.
Commercial loans are not provided without extensive scrutiny regarding your business stability and profitability. The Lender usually wants to see your last three years of audited financial statements including a Profit and Loss statement, balance sheet and a cash flow forecast. Favorable business information is critical to the lender and to you because, as stated earlier, if you default on the loan the lender can repossess your property and sell it to repay the outstanding mortgage balance.
The best place to find commercial mortgage loans is on the Internet. There are enormous numbers of commercial lenders vying for your business and they all advertise on the Internet. It is possible to compare many loan quotes side by side and determine which is best for your financial situation.
Quick House Sale
Jul
23
Van Leasing for Used Vans: is it a Better Choice?
Posted by: | CommentsWhen you think of van leasing there is a company name that by and large stands above all others–UK Vehicle Contracts. This company has been the United Kingdom’s leading business commercial vehicle specialist for more than 12 years. Businesses all over the country have always looked up to the company for their leasing needs when it comes to new vans or used vans. The comprehensive service that UK Vehicle Contracts sets into every transaction puts the customer on the driver’s seats.
With the many years of experience in van leasing and commercial vehicle finance, the company has developed strong ties with Europe’s leading financial institutions. This resulted in the company’s best deals ever offered. Whether sourcing, financing, or supplying commercial vehicles for your business requirements, no other company can beat UK Vehicle Contracts.
The services are available throughout the country. The delivery is for free anywhere in the country or collection from a local dealer. You can have any make or model of van or pick up, used vans or new ones. Your choice is the company’s command in finance packages that suit your business needs. Packages consist of finance lease, contract hire, lease purchase and contract purchase. Out-and-out purchase can be arranged if there is immediate need.
When talking about best finance deals ever, UK Vehicle Contracts is matching your financial plans of realizing the full potential of Vat and tax allowances. The company offers the most competitive rates of finance currently available and can in most cases; offer 3 years low finance, with your choice of deposit with 3 years tax deductible. It also offers 3 years no penalties and the customer retains the equity. In all its models and makes, it guarantees 3 years warranty and 3 years no MOT.
The finance packages including the tax allowance will be explained to the business users. Van leasing has been made simple and affordable at UK Vehicle Contracts. But the company always advises on new vans preference rather than used vans confident of its buying power and low finance rates.
The range of leasing options which include contract hire, contract purchase and finance lease which is available on any make or model of van or commercial vehicle.
Van leasing at UK Vehicle Contracts uses no smoke and mirrors. All vans are quoted of standard specification. The choices are many. This is due to the fact the numerous manufacturers are giving the company considerable buying power. This leads UK Vehicle Contracts to supply vans at significantly lower rates than the competitors.
Many vans offered are at available from the company’s own immediate supply or at any local dealers. If there is an immediate need UK Vehicle Contracts can supply the make or model of your choice right away.
From there UK Vehicle Contracts have taken on innovative ways of supplying and funding vehicles. Its more popular funding method is contract hire and lease purchase. This is over and above the finance lease.
Repossession
Jul
23
Basic Commercial Lease Agreement Guidelines
Posted by: | CommentsA commercial lease agreement is a contract that legally binds the property owner and the tenant. The lease agreement gives the tenant the right to use the property for commercial purposes for a certain period in exchange for money paid to the property owner.
The lease agreement also provides an outline of rights and responsibilities of both the tenant and the proprietor.
What is the subject of the commercial lease agreement?
Commercial lease agreement involves the lease of real property for commercial purposes. It usually covers the lease of a store, offices, industrial and commercial buildings.
Is there a standard form for Commercial Lease Agreement?
Unlike other contracts, commercial lease agreement has no standard or required form. The law is silent with regard to this aspect. The party can use any form as long as the basic element of the lease agreement are present.
What are the basic elements of commercial lease agreement?
• Property address
• Start and termination dates
• Names of all parties involved including their signatures
• Rental amount and complete detail of all deposits
• The names of the landlord and tenants and other parties involved and their signatures
• Interval of payment
• Provision of lease renewal
What is the difference between commercial leases from a residential lease agreement?
A commercial lease differs from residential lease on its purpose. Commercial lease is used by a tenant to rent space for business purpose while a residential lease is used by a tenant to rent a home or space to reside in. The parties in a commercial lease agreement have a greater negotiating and bargaining power from the parties in a residential lease agreement.
Is oral lease agreement sufficient?
An oral lease agreement is sufficient and valid between the parties. However, it does not bind third persons.
Courts also prohibit oral lease agreement because it is difficult to enforce. In cases of dispute, courts have no reference as to the contents of the agreements.
It is had to determine who the party at fault is.
Is there a maximum period for lease agreement?
The lease agreement may exist for any length of time. It may be for a short period, which will last for a year or less and for a long term to last for three years or more.
A long-term lease tenant is required to pay periodic increases in their monthly rent. The increases are provided as compensation for owner due to rising amount of insurance, property taxes, common maintenance and other utilities.
Parties in a Lease Agreement
A lease agreement has two parties such as,
• The lessor or the property owner
• The lessee or the tenant
The lessor is the owner of the property and the lessee is the one who uses the property for a certain period in exchange for a compensation called rent.
What law governs commercial agreement?
Since commercial lease agreement involves real property, the law of the place where the property is located will governed.
The commercial lease agreement is governed by the law of the place where the property is located, regardless of the jurisdiction of which jurisdiction the property owner and tenant resides.
If you have encountered any legal problems regarding your Commercial Lease Agreement, do hesitate to consult our expert Los Angeles business lawyers. Just log on to our website and fill out our free case evaluation form.
Rent Back
Jul
22
How to Achieve a Quick Property Sale in 2007
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How to Achieve a Quick Property Sale this Year
You know how it is. You’ve just found the home you were looking for and had your offer for it accepted by the seller. All you need to do is sell your current home, a goal that won’t be hard to accomplish according to your realtor. Your home gets put onto the market and there’s a flurry of interest from possible buyers during the days following . Then it quiets down. A few weeks pass, then months and still you’re no closer to selling your home than when you first started. Even worse situation, the buyer pulls out the day before the closing will take place.
Selling your property with a real estate agent may be a lengthy process. The rates are through the roof, especially after you factor in on top of the real estate agent’s fees the extra legal fees and mortgage payments you will be paying while you wait for your house to sell. If you can’t get a quick property sale you could possibly lose out on the home of your dreams too. Given these trying circumstances, it’s no wonder that relocating is said to be one of life’s more difficult affairs.
There are basically two alternatives to selling your property through a real estate agent. One is to sell privately online. The other option is finding a company that specifically buys homes direct. Such businesses advertise cash property buyer offers in newspapers or on the internet. You will find some advantages as well as disadvantages with each one of these options.
Hundreds of home owners sell their homes in the UK every month privately. You save money on agent fees, which can be as high as 3%, and you have complete control over the transaction. You also won’t have to buy a Home Information Pack from the Government when they become necessary in the summer of 2007 (private sales are exempt). There are disadvantages you need to consider. If you decide to advertise through the Internet, and need to sell a house quickly, you’ll need to commit a lot of time advertising the home. You should sign-up on several internet sites, to increase your chances, put together a detailed description of your property and add it on the web sites along with suitable pictures. Next you’ll be dealing with all of the inquiries on your own and spend a great deal of time coming up with answers to help sell the property. You will also continue to be running the risk of not locating a buyer fast or the risk of broken chains and potential buyers backing out before the sale is final.
The next option when selling privately is getting in touch with companies who work with providing quick sale services. You will get an offer from them, usually after 24 to 48 hours, and the sale takes less time to close. The condition of the house doesn’t matter, and you don’t have to spend time trying to ’sell’ it to the buyer.
However, do be prepared to take a lower than market value offer on your property. This type of company will, in return for a fast home sale, purchase at 10% to 20% discounts. If you’re willing to make a compromise on price, you’ll have a quick sale and, most importantly, one that is simple.
About the Author
Oliver Darraugh is a freelance online journalist. He lives in Birmingham. Website.
Quick Property Sale
