Commercial Mortgage Lenders

Are you considering buying a commercial property? You’ll be getting a mortgage, and commercial mortgage lenders set up these loans. There are stringent guidelines to follow if you want to qualify, and these are different from a typical home mortgage. When you purchase a home, the mortgage is backed by an entity like Fannie Mae. With a commercial mortgage, you may be backed by the federal government so rules and requirements change. It’s a big decision and a lot of responsibility, so it requires careful calculation, preparation and consideration by the borrower. Determine how much you can really afford, and don’t borrow more than that. You must be able to prove to the commercial mortgage lenders that you can make the payments. Most commercial mortgages have a balloon payment that is usually due between three and ten years from start of the contract. You might have to refinance into another loan prior to that, which will mean incurring extra costs for closing and the possibility of higher interest rates. It is in the borrower’s best interest to work with the commercial mortgage lenders to try and secure a mortgage without the balloon payment. The lender will carefully review your financial statements prior to approving the loan. Ask your commercial mortgage lenders for a specific list of documents you need to provide. These will likely include tax returns, statements of assets, operating statements, and lease documents. Have your paperwork prepared prior to the initial meeting. Some financial institutions require a certain level of deposit with them in order to qualify for a commercial loan. Ask about all qualifying criteria before you proceed. You should be informed by any commercial mortgage lenders of all additional obligations for the loan. You may be required to provide regular financial reports for the term of the mortgage, in addition to making the monthly payments.

Be sure to have a list of questions to ask the commercial mortgage lenders so there is no misunderstanding on the type or terms of the loan. Is it assumable, or should you sell the property before it is paid off? Are there prepayment penalties, and can you negotiate a loan that eliminates them? What additional costs are associated with the commercial loan, and how much will you be required to pay for lender points and fees, property surveys, environmental or radon reports, and legal fees? Some commercial mortgage lenders assume these costs, and often there are less costly options available if you ask.

The process of getting a commercial loan can be more complicated than many borrowers assume. The property you are buying serves as your collateral. The commercial mortgage lenders will do an assessment of your ability to repay the loan, and determine your credit worthiness. The terms and conditions of a commercial mortgage can vary, so be aware of the details. In a non-recourse mortgage, the creditor is allowed to seize the property and use it to recover the outstanding loan if the borrower fails to make payments. Since the property is held as security against the loan, they sell to recover payment but cannot go after any other of the borrower’s assets, so the borrower is then released from obligation to make additional payments on the outstanding amount.

Discuss all the possible options with the commercial mortgage lenders, who should explain in detail how the loan will be structured. Look at your target property and determine if it is worth the risk inherent in any loan. You need to be confident that the income you will receive from the property is positive, and will have to convince the commercial mortgage lenders that you are able to cover the payments you will be assuming through the loan.

Alternatively, if you are unable to obtain a loan from a commercial mortgage lender, try a hard money lender that services your local area.  If you don’t know of any, simply search the internet for the phrase “hard money lender” and several should show up.  Last, but not least, go to some local self directed IRA investor meetings.  There are often people there who would like to fund a real estate deal, and can often provide competitive rates to those found with commercial mortgage lenders, and often require less paperwork.

Commercial mortgage for apartment building . . .?

Just wondering if any of you may know about this . . . I am interested in buying an apartment building. In order to be approved for the loan, do they base the decision off of the cash flow of the apartments, or my salary? Or both?

Also, if the cash flow is excellent, is it possible to get a less than 20% down payment? Thanks!

Know More About Commercial Mortgages

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Commercial Banker Discusses Timing on Commercial Loan Refinance

How can I pull the ARV equity out of a rental property without seasoning?

A mortgage would be fine. I have good credit and a rental property (single family home) that I have renovated. I have had the property for 2 months so it is not seasoned yet. There is about $50k in equity now. I want to keep the property. How can I pull it out now without waiting? I would like to buy another house and need the cash for repairs. Then I will be in the same situation of pulling the equity from the next place. My mortgage broker says that I need 6 months seasoning. I will be getting a couple commercial loans but not for a few more months. Ideas?

Besides a construction loan,How do you apply for a mortgage that will pay for demolition fees,bluprints?

I own a bunch of garages.I would like to demolish them and build a 3 story house.This requires blueprints from an architect and other crap,in order for the city to ok the building.What bank and how will this process work,without me spending a dime out of my pocket.My credit is good and this will be my first home.What loan will accomplish all this without closing costs because ther is no physical building established yet.The garages are classified as commercial property and built in 1910.I tried to use whatever possible equity against the garages and I was told commercial property like this will not allow that.

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Becoming a Commercial Loan Broker

Searching for information on becoming a commercial loan broker?  There are a few things you need to be very good at  in order to make it as a commercial loan broker.  1. You have to be very good at reviewing loan packages.  2. You need a strong lender network.  3. You need multiple, reliable sources of leads.  Becoming a commercial mortgage broker is really not that difficult and it certainly isn’t brain surgery.  But like all businesses you need to get to the point of really knowing what you are doing and why.      

A lot of time and energy goes into all deals.  Knowing how to examine a potential deal is critical.   You need to be able to sit down with a package and in 20 minutes figure out if you will work on it or pass.  It’s very easy to waste hours on a loan that doesn’t have a single chance of closing. 

Having a strong lender network in place is just as important and goes into qualifying a loan request.    Number one you have to know their programs inside and out.  You need to know what they really like, beyond what shows up on their matrix.  Also you need solid relationships with the individuals you work with.  You need quick, thorough decisions.  Having your files on top of their pile is important. 

Becoming a commercial loan broker is all about having a solid influx of deals.  You need to compete on a lot of commercial mortgages in order to find doable deals and ones in which you can have control over.  There are a lot of marketing methods out there and most of them will work in this business.   

The traditional method of developing relationships with the local investors, commercial real estate brokers, CPA’s, attorneys, bank representatives, etc is still a very good method.  This still maybe the best route to go, though it takes a lot of time and effort to build a name in your market.  Newer methods include mailers, email campaigns, ads in newspapers, etc.  Regardless of which route you feel more confident about you need some type of program that gets your phone ringing and keeps it ringing.  Be patient and survive the “green” period in your quest to become a commercial loan broker. 

Commercial Mortgage Loans – What the Bankers are Looking at Today

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

 

 

 

 

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