Beretta Only

Friday, March 30, 2018

Why Understanding the Basics Helps to Avoid Red Flags on Commercial Loans

Applying for commercial loans is normally a long process. It is important to avoid raising red flags to keep the process as stream lined as possible.

Understanding the basics of commercial loans is critical to completing a loan application correctly and not raising unnecessary red flags which will slow down or stop the application evaluation process. Most commercial loans are offered for between 5 and 10 years but the amortization period is up to 25 years. Requesting a loan for a longer period of time is not normally an option but can indicate to lenders that you might be concerned about your ability to pay the loan in full in the allotted time frame. A standard down payment of 20% to 25% is expected on commercial loans. Again, this is a fairly non-negotiable fact as is a loan to value ratio of 80% or less.

One of the first red flags that a borrower can trigger is by demanding an unreasonably fast loan approval process. Some loans and lenders require 90 days or more to process and fund a loan. In a best case, it will require at least 6 weeks to process a loan application even if you have previously worked with the lender and been successfully awarded funds. An experienced and confident borrower knows the timeframe involved and has planned accordingly. Trying to rush the process indicates either inexperience which could jeopardize your approval or that your financial situation is about to change and you want to get approved before your creditworthiness drops.

Another red flag jumps out if you appear to be withholding information or are intentionally providing vague answers. A lag in response time might not be because you are trying to hide information but even if it is because you are not well prepared or are disorganized, the result is still a negative mark against you. Requiring continued requests for the same information is not going to make the lender bored and cause them to stop asking. It is going to make them worried or more curious and they are going to dig even deeper to find the reason for your secrecy.

Be Realistic

Finally, requesting a loan which is in excess of the 80% loan to value standard is going to create unneeded issues. The first thought is that you have not completed you due diligence and you are unaware of the actual property value. This makes you look ill prepared and unprofessional. The other thought is that you are simply disregarding the standards set by the industry. This makes you appear to be unrealistic and also self-absorbed as if the rules do not apply to you. Neither of these will create a positive image for you with the lender.

Avoid Any Unnecessary Issues

Most commercial lenders adhere fairly closely to the industry standards for loan terms. Understanding these terms and being realistic with your request will keep the process moving at or ahead of the average pace. But trying to rush or refusing to honestly answer legitimate questions posed by the lender will only cause unnecessary questioning of your business and financial stability which could eliminate your chance of securing a loan.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Thursday, March 29, 2018

How to Get the Most Benefit from Hard Money Loans

Understanding how hard money loans function is critical to using them successfully. By understanding just a few facts, these private loans can be the key to your financial success.

Most borrowers know very little about the process and characteristics of hard money loans. They understand that the money is provided by a private lender or a group of private lenders and not a traditional bank or lending institution. And they are also aware that the money carries a higher interest rate than traditional loans. But with that very limited bit of information, most borrowers turn away from this very viable and potentially profitable source of funding.

It is very true that hard money loans can carry interest rates in the double digits which is considered to be high. But what most borrowers are not considering is that these types of loans are much more accessible than traditional loans. Long processing time frames, stringent qualification standards and predetermined terms are all facts of life when seeking traditional funding. But a non-traditional loan can offer a much less difficult process for most borrowers.

A private lender is not going to require but a fraction of the documentation that a traditional lender demands during the loan application process. Banks want to see credit history, bank statements, other loan documents, income statements and even documents defining your business and the relationship of the owners of the business. But a private lender is not focusing on that information to determine the risk of your request. So there is much less paperwork involved and therefore much less time wasted during the application and approval process. Borrowers can often have funds in hand in a week or two when working with a private lender.

What Determines a Good Risk?

A private lender is also not going to focus on the borrower’s financial stability when considering a loan request. This opens the door of opportunity for borrowers who have low credit scores or have a high debt to income ratio. What a private lender is going to base the loan approval or rejection on is the value of the collateral for the loan. In most cases the collateral is the property being purchased with the loan funds. The lender needs to be assured that the collateral will always have a greater value than the outstanding loan balance. In the event that the borrower defaults the lender must be able to take possession of the collateral and sell it to recover their investment. For this reason, most hard money loans cannot exceed 70% of the value of the collateral.

Making Private Loans Make You Money

Clearly, private loans can be obtained in a very short time as compared to traditional loans. And these loans can also be obtained with less than perfect credit. If you are willing to pay a little higher interest rate, then a privately funded loan is an option for a borrower who has been denied due to a low credit score or who needs funding quickly to secure a great deal. There is always the option to refinance later at a lower interest rate from a traditional lender. But private lenders can be the answer when time is critical to closing a deal and not missing out on a great money making opportunity.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Get the Most Benefit from Hard Money Loans

Understanding how hard money loans function is critical to using them successfully. By understanding just a few facts, these private loans can be the key to your financial success.

What Determines a Good Risk?

Making Private Loans Make You Money

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Lenders

Shopping malls are turning into mixed-use developments and online shopping has increased the demand for distribution centers. Investors in this segment are looking for commercial real estate lenders that are familiar with this segment of CRE.

We’ve all seen the boarded-up shopping malls with empty parking lots and decaying signs. And so have commercial real estate lenders. Sears, J.C. Penney, Macy’s, CVS and RadioShack have all reported bankruptcies and store closures, leaving lenders looking for a different venue, or at least a different take on an old classic. Shopping malls have become mixed-use developments that include housing, boutiques, outside concert venues and chef-driven restaurants. And maybe a golf course or two.

The truth is that several of the major delinquent loans are backed by shopping centers. According to REBusinessonline, “Major loans that have fallen past maturity in the past year include several that are backed by shopping centers formerly owned by the Westfield Corporation that were later sold to other REITs.”

This includes the $240 million Westfield Centro Portfolio, the $140 million Westfield Chesterfield and the $110 million Westfield Shoppingtown Independence. Rouse Properties purchased Independence Mall after a few years of foreclosure proceedings. Their goal is to create an “open-air retail destination” with a focus on upscale dining and a grocery market as an anchor. This shopping center giant has been in a restructuring mode since 2014 and just recently announced its sale to a French company. Unibail-Rodamco will reportedly pay $15.7 billion to take over Westfield Corp. It will operate as a REIT in France, the Netherlands, the United Kingdom, and the U.S. Its uncertain if Westfield’s previous plans to seek approval to flatten the Promenade Mall in Woodland Hills, CA and build residences, offices, boutiques, restaurants, hotels and a concert venue is still on target, though chances are the French global property leader will have a similar remodeling plan in mind.

From Retail to Warehouses

Some have blamed the demise in retail and shopping centers on the online giants such as Amazon. But this expanding trail that leads from brick and mortar to mouse and keyboard has left an interesting opportunity for commercial real estate lenders and investors—industrial warehouse and distribution centers. According to American Banker, e-commerce sales are expected to reach $700 billion by 2022. And all those online purchases need a home. While most distribution centers are built on demand, there is a growing number of commercial lenders shelling out the bucks for speculative centers—centers that are selling just as fast as they can be built. In fact, with increasing demand, building in this sector is booming, vacancies are at an almost record low, and rents are rising. Mini-distribution hubs are on the rise as well. Atlanta, Dallas-Fort Worth and Chicago all made the top five in the amount of construction space geared for new warehouse and distribution centers.

Those in the business are looking for commercial real estate lenders who understand the business.

Level 4 Funding has been in the industrial/warehouse segment for over 20 years. We work with over 200 private investors and understand the sectors that they specialize in. With this type of rolodex, we can get you the loan you need at the best possible rate. Closing can occur in as little as a few days, giving you the money you need to purchase that next warehouse, build a distribution center, or develop a mixed-use supercenter in record time. Call us for a no-obligation quote.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Wednesday, March 28, 2018

How to Make Money Using Hard Money Loans

Hard money loans are not suitable for every borrowers needs but they are perfect to meet some specific needs. Using this loan correctly can be a great way to grow your wealth.

Nothing in this world is perfect and likewise, there is no single type of loan that is perfect for every scenario. But there are several situations which are tailor made for hard money loans. Understanding the correct time to select a non-traditional loan is the first step to using this financial tool to generate financial security for yourself and your family.

In general, hard money loans have a higher interest rate and therefore the money is costing the borrower more than a traditional loan. But for every negative there is also a positive. And in the case of these private loans, the positive comes in several forms. The first of which is that the loan approval is based on the value of the collateral unlike a traditional loan which requires good credit scores and a strong credit history to secure a loan. Not only does this fact reduce the amount of documentation that a borrower needs to provide but it also streamlines the lenders approval time. All the lender needs to do is establish the current market value of the collateral to determine if the loan will be funded or rejected. This time savings can be critical when you are trying to purchase a property before another buyer makes a better offer.

Private lending options offer borrowers a faster turnaround time, less paperwork and do not rely on personal credit or financial stability. All of these facets of private lending make this a very viable solution when considering deals such as fix and flips, land loans or construction loans. In all three of these cases it can be very difficult to secure traditional finding. And without funding, it is impossible to make these deals and reap the rewards once the project is completed. But using a private lender will allow you to complete the funding and the deal to realize the profit in the end.

How and Why It Works

As you might have noticed, all of these potential money makers are short term investments which are time sensitive. It can be very difficult to secure a loan fast enough to purchase a great fixer upper to flip or to purchase unimproved land for a new construction project. Banks are not willing to lend money for these more risky ventures nor are they willing to expedite your request. But a private lender is willing to work with you to provide more flexible terms and a faster approval and funding to allow you to meet the shorter time line. Then, with the property secured, you can invest some time in finding less costly financing and refinance or you can make the necessary improvements and flip the property quickly for a large profit.

Making Private Loans Work for You

Hard money loans are not the solution for every deal or opportunity. But they do offer certain features which can make them the perfect financial tool to use to make money and increase your financial security. When used properly by a borrower who understands the process, the risks and the rewards, this type of loan offers a great return on investment.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

OCC Study reveals risks from Commercial loans

The OCC warns in its semi-annual risk report that relaxed underwriting standards may be putting some commercial loans at risk of default. Should you be worried?

The report warns that specific influences on the credit market may be causing some banks to lower borrower standards. "The credit market continues to be influenced by strong competition, particularly from non - bank lenders, and heightened asset valuations," the report claims. In effect, strong competition for new loans may be pressuring some banks to lower standards on borrowers.

The report also warns that the recent economic boom may be making some lenders complacent and that lenders may need to take greater caution in case of an economic downturn. "In addition, the long economic recovery and expansion may collectively increase lender complacency. In this environment, lenders need to focus on maintaining sound credit standards within risk tolerances and understanding the potential credit risks that may be exposed under less benign economic conditions."

The report claims banks need to be cautious and may need to diversify their lending activities. The authors of the report, the National Risk Coalition, cite commercial mortgage growth as a specific area of concern. The NRC claims,"increasing concentrations of commercial real estate (CCRE)loans highlight the need for sound risk management processes and the effectiveness in managing concentration risk for some banks."

In spite of the dangers key commercial loan metrics remain are strong

The report claims that key metrics of commercial credit quality such as delinquencies, nonperforming loans, and net charge-offs remain positive. These key measures improved over the second half of last year and remain elevated above historical averages. Commercial credit quality is stronger than any time since the 1980s according to the statistics. New business loans have moderated from the 25% growth levels seen in recent years but remain above GDP according to the report. Non-depository groups such as investment firms and finance companies receive the majority of these new loans.

Smaller banks may be relaxing underwriting standards to fuel commercial loan growth, which could be a dangerous trend should an economic slowdown occur

Assessments by OCC evaluators reveal a gradual easing of borrower standards at many banks. Since the first quarter of 2016, the majority of banks have relaxed lending standards, rather than tightening them. The trend reflects a gradual easing of underwriting standards which began in 2013, as the economy started to recover from the recession. Even though banks are relaxing their standards, the report concludes that the majority of banks are still lending within their risk tolerances and are maintaining relatively safe underwriting practices.

However, there remains a concern that the growth in commercial mortgages may be putting some lenders at risk. Specifically smaller banks with less than a 1 billion dollars or less in assets. While business lending declined overall last year, the majority of new business loans originated from these smaller banks. Data indicates that these groups are supplementing a declining volume of residential mortgages with commercial mortgages. This narrow and specific focus on commercial mortgages may put these smaller financial institutions at risk if economic conditions change and more borrowers default.

However, the report also claims underwriting standards remain reasonable, credit quality is high, and that the economy is strong. Whether banks will heed the conclusions of the report remains to be seen.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tuesday, March 27, 2018

Triple Your Chances for Getting Hard Money Loans

Using a few tips can greatly improve your chances for securing hard money loans. You might also find that these same tips will increase your profit as well.

Applying for any type of loan can be stressful, and one of the best ways to avoid that unnecessary stress is to be well prepared. Knowing what to expect and how to best present your request can not only reduce your stress level but can increase your chances of getting hard money loans.

The first item that you need to understand is that a lender is only going to consider the loan request if the amount is within the industry standard 65-75% loan to value range. This means that the loan cannot exceed 75% of the value of the property. With that in mind, you need to be prepared to pay any additional cost above that 75% in cash. Understanding the LTV concept allows you to ask for a reasonable loan amount and also prepares you for the down payment which will be required. You will appear very well prepared and professional when the lender mentions the down payment amount and you tell the lender that you already have those funds available.

Another important question that you need to be ready to answer is about your exit strategy. Every lender wants to know what your plan is for the property and how you plan to achieve your goal. This could be completing a renovation and then renting the property or it could mean selling it after a renovation. But this is basically you explanation about how you plan to be able to repay the loan.

Compare Your Offers

The final strategy is to seek several hard money loans in an effort to have multiple offers to choose from. This is the same method that you would use to select any service provider and it allows you to shop for the best terms and overall cost of the loan. Be sure to calculate any loan origination fee, funding fee or early payment penalty that might be included in the terms of each offer to determine the true cost of each option.

Improve Your Chance for Success

There is a lot of information that you need to understand before securing hard money loans. But if you are willing to invest the time, then you can secure multiple offers. This allows you to select the best loan offer to meet your needs. In addition, preparing to answer the questions of the lender about your exit strategy and down payment funds is a good opportunity to fine tune your business plan for the project. Planning for the down payment and your exit are both smart business decisions that will help you to land a loan as well as increasing your potential profit at the end of the deal. It can be tempting to rush into a purchase when you find a great property with a lot of potential. But investing a little time in the planning phase will provide a great foundation for the project and better potential for your return on investment.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Beretta Only

Friday, March 30, 2018

Why Understanding the Basics Helps to Avoid Red Flags on Commercial Loans

Applying for commercial loans is normally a long process. It is important to avoid raising red flags to keep the process as stream lined as possible.

Be Realistic

Avoid Any Unnecessary Issues

Thursday, March 29, 2018

How to Get the Most Benefit from Hard Money Loans

Understanding how hard money loans function is critical to using them successfully. By understanding just a few facts, these private loans can be the key to your financial success.

What Determines a Good Risk?

Making Private Loans Make You Money

How to Get the Most Benefit from Hard Money Loans

Understanding how hard money loans function is critical to using them successfully. By understanding just a few facts, these private loans can be the key to your financial success.

What Determines a Good Risk?

Making Private Loans Make You Money

Commercial Real Estate Lenders

Shopping malls are turning into mixed-use developments and online shopping has increased the demand for distribution centers. Investors in this segment are looking for commercial real estate lenders that are familiar with this segment of CRE.

Wednesday, March 28, 2018

How to Make Money Using Hard Money Loans

Hard money loans are not suitable for every borrowers needs but they are perfect to meet some specific needs. Using this loan correctly can be a great way to grow your wealth.

How and Why It Works

Making Private Loans Work for You

OCC Study reveals risks from Commercial loans

The OCC warns in its semi-annual risk report that relaxed underwriting standards may be putting some commercial loans at risk of default. Should you be worried?

Tuesday, March 27, 2018

Triple Your Chances for Getting Hard Money Loans

Using a few tips can greatly improve your chances for securing hard money loans. You might also find that these same tips will increase your profit as well.

Compare Your Offers

Improve Your Chance for Success

About Me

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