Archive for December, 2010
Dec
17
what is the difference witween a mortgage broker and a commercial loan broker?
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Dec
15
Commercial Mortgage Loans – What the Bankers are Looking at Today
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Even today, in these challenging economic times, there is no shortage of investors, and developers seeking commercial real estate mortgage loans. The problem is lenders are not funding deals like they were just a year or so ago.
If you want to better your chances of securing an approval and closing your deal, bring these things to the table.
Cash = Commitment
100% financing is extinct. Some borrower cash in the deal is now a strict requirement of all legitimate lenders, including private and “hard money” lenders. From a lenders perspective, the bigger the borrower down-payment the better, but, if there is enough equity in a building or project, lenders will work with as little as 10% down. They might build in a mezzanine facility or structure in some preferred equity, but, quality deals can get done with small amounts of borrower cash. That-being-said, don’t ask for 100% financing. Lenders today are looking for commitment and nothing represents commitment like cash in the deal. (Note: If a lender, or broker tells you they offer 100% financing, beware, chances are good that, in-the-end they won’t be able to fund and you’ll lose your deposit and due diligence money.)
Credibility
Lenders are looking for credibility. Now is not the time to ask a lender to fund your experiment. Don’t try to buy your first hotel during a credit crisis. Finance companies will ask about your experience in the hospitality industry and will be nervous if you lack a track record in the industry. The same goes for retail, office and industrial. Now is the time to go with what you know or partner up with an investor with experience in a particular industry you’re trying to break into. Trust me; lenders are going with what they know and they know first-timers are high risk.
Credit
You don’t have to have perfect credit to get approved for a commercial loan, but your credit report better not portray as a dead-beat either. If you are credit score challenged, be prepared to be able to mitigate that negative factor with either a co-signer, a larger down payment or cross collateralization of other real estate you own. Lenders don’t know you personally but they know precisely how many times you’ve been 15 or more days late on all of your mortgages and all of credit card payments. They look at your credit report as a report on your financial character. This may not always be fair, but to be fair to lenders, it’s really all they have to go on.
Equity
Equity is protection to a lender. If you can show equity in a building or a tract of land lenders will feel more secure and will be more likely to place the money in the escrow account and schedule a closing date. There are simple ways to increase a lenders protective equity (I said simple, not easy). The most obvious is to make a bigger down-payment; another is to ask the seller to carry-back some portion of the debt. One effective method to also consider is to increase the value of a property by taking steps to getting it fully entitled. Sometimes some simple engineering can drastically increase the value of a project. A change in zoning has been known to double real estate values and can often be accomplished simply by petitioning the local zoning authority. Inexpensive site work may also have a dramatic effect on how a bank views a property and they will definitely appreciate your spending money on the deal.
We are facing challenges today in the credit arena, but deals are still getting done, buildings are being bought and developments are still moving forward. If you want your deal to be one of the ones that gets funding take steps to show the lenders what they want to see.
MasterPlan Capital LLC – Financing for all types of Commercial Real Estate – Purchase / Refinance / Development – Simple (1 page) Application Online at: www.masterplancapital.com Quick Answers – Fast Closings – Commercial Mortgage Loans From $1MM – Equity Financing / Joint Ventures From $10MM
Glenn Fydenkevez is a former officer at one of Wall Streets biggest investment houses. His company, MasterPlan Capital, is involved, nationwide, in the financing of and investment in commercial real estate. E-mail him at glenn.fydenkevez@masterplancapital.com
Quick Property Sale
Dec
13
I am looking to get into a mortgage career in California, and was wondering the difference between how commercial loans and residential loans commision splits are handled, since there is a larger amount of money people are borrowing between the two? ( if the is one) ….
If they vary between companies. Could I just get a basic example of each split? ( i.e. I know with Res. loans, you can make commision off of “points” or % of the loan), does that system work for Commercial as well with certain companies? Or is it something totally different?
Rent Back
Dec
06
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
Dec
05
Commercial Mortgage Rates in the Credit Crisis
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The question isn’t “what’s your current commercial mortgage rates” but rather “can you actually get this done”. All too often we get new potential customers that come to us seeking commercial mortgages and within the first moments they ask what are commercial rates are. We don’t blame them, they’re just trying to protect their time, and secure the best deal for them, but many borrowers have not faced up to the realities of the current credit crisis.
Obviously it’s no secret what is going on, on Wall Street. The government has provided the biggest bail out since the great depression. One of the surprises for many borrowers is that even though many index’s, like the treasuries have had substantial drops, the actual interest rates on commercial mortgages have in most cases gone up (for those banks that are still lending money). Basically the banks have further raised their margins to make the loans more profitable and or to better cover future risks. In some cases banks have had their own credit rating dropped and as a consequence their cost of capital has shot up. So when they quote rates, or fund commercial mortgages, the rates they offer are seriously affected.
But again this is beside’s the point. Borrowers should really be investigating if the bank, lender or broker can really close the prospective loan. Questions like “When was the last restaurant (or what ever building type your looking at) you closed? How tough are your new standards? What is your current turn down rate? How clean does the loan request really have to be to get it funded?” You need the representative to level with you. You really have to go deep. Having your loan tied up with a bank for months, that has a low chance of closing from the beginning, is a huge waste of time for all involved.
The best way to get a loan qualified is to be totally upfront with the source on whatever the issues are. And there are always issues. Tell the bank and or broker all the good and bad news up front. After they have enough information, they should be able to give you some meaningful answers, including quotes. Obliviously this will take some patience, but not as much that would be needed if you pick the wrong bank that looks at it for a few months than declines the file. And believe me it happens all the time now.
We further discuss other impacts on rates in another article at commercial loan rates.
Repossession
Dec
02
How much does it cost to set up a coffee shop in a strip mall/plaza type place?
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I want to open up a coffee shop and I would like to know how much $ you need upfront for building, etc. and what is considered a cheap lease vs. an expensive one (I know it’s based on location, but how do you know when you’ve got a good deal or when you’re getting ripped off?). Also, do I need to currently have a job in order to get a small business loan? Any suggestions??? Thanks!
Extra Notes: I have good credit, I’ve owned a home (and sold it), and have restaurant experience (my parents owned it). But I don’t own anything right now that could be used for collatoral (except 2 pieces of land that I sold but they haven’t been paying me and I’m foreclosing on). My parents own their home though… if they co-sign with me, would that improve my chances of getting a loan? How much will I need to borrow approximately?
Not just coffee… teas, smoothies, boba, some foods (like sandwiches).
Sell and Rent Back
