Private Hard Money Lender in California, Texas and Arizona: January 2018

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Wednesday, January 31, 2018

Commercial lending related to multifamily developments boosted by new tax bill

2page_img2-bigCommercial real estate loans tied to multifamily developments should be on the rise as a result of specific provisions in the recently passed Republican tax bill.

Developers of multifamily real estate will benefit from higher deductions. Specifically under the new law corporations can now deduct of 30% interest paid on debt. This provision will likely make new lending less expensive for corporations and real estate developers. The total deduction is expected to be reduced over time, but real estate entities remain a notable exception and will likely be able to retain the deduction for longer period.

Not only will developers benefit from higher deductions on debt interest, pass through companies which own the majority of commercial real estate can now deduct more of their income. Pass through companies can now deduct 20% of of their investment income and now enjoy an effective top tax rate of 29.6%. This new lower rate is expected to expire in 2025, which creates long-term uncertainty for some pass through companies. For the time being pass through companies, real estate trusts and other developers will be able to hold on to more of their income. In the short term these changes will likely boost commercial real estate investment.

Demand for rental properties could also be boosted by new caps on property tax deductions by individuals. “Rental markets in those areas could really, really benefit. They’re not huge apartment markets, but they’re significant enough that demand for them could really increase,” said Barbara Byrne Denham, senior economist at real estate investment research firm Reis Inc. “John Q. Public has been sold by the home-building industry that it’s better to own than rent because you’re getting subsidized by the government because you have all these deductions,” said Ric Campo, chief executive of Camden Property Trust, a real-estate investment trust that invests in apartments. “That equation will change [under the new law.” The new limits on property tax deductions create a new incentives for individuals to rent apartments rather than purchasing a home. The change will likely benefit multifamily developers in the near future.

Commercial lending tied to affordable housing will not directly impacted by specific changes under the new law.

The tax exempt status of private activity bonds was repealed under early versions of the law. Private activity bonds finance the majority of affordable housing projects. Had the tax-exempt status of private activity bonds been repealed some research projected a decline in available affordable housing by some 700,000 units over the next decade. Fortunately under the the bills final version retains the tax-exempt status of private activity bonds.

Commercial lending for affordable housing projects could rise, as private investment in affordable housing declines as a result of lower corporate tax rates.

Affordable housing developers will likely need to seek new sources of capital, as fewer investors are likely to seek tax-deferred investment vehicles as a result of lower corporate taxes. Although the final bill maintains the tax exempt status of private activity bonds, it did little to strengthen tax credits related to affordable housing. “The threat of a lower corporate rate is now a reality of lower corporate rates. That depresses pricing and means that more credits need to be put into a particular project in order to produce it,” said Rick Goldstein, a partner at Nixon Peabody LLP.

Higher deductions, lower corporate taxes and other changes to the tax code will benefit full price multifamily developers. affordable housing developers will need to find new methods to attract investors. Whatever the outcome, the Republican tax plan will no doubt reshape the commercial real estate market.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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

OCC Chairman will pursue charter for alternative commercial lenders.

Attending a conferenceThe idea for a national charter for alternative commercial lenders has proven controversial, as it stands such groups must refer to the regulations of each individual state. The charter initiative would provide a unified regulatory framework for online small business lenders.

The OCC's new chairman,Joel Otting, claimed that he will continue to pursue the charter initiative at a recent press conference. ““The question is, what are the requirements on that fintech to get that charter? … We are going to study it,” said Otting.

Otting claimed that financial technology firms are an essential source of credit for many small businesses. When it comes to small dollar loans Otting remarked “ (Fin techs) are coming into a space that they see as unfulfilled, and they’re prepared to fulfill that need.” The new chairman believes that traditional banks have largely stopped providing the smaller loans many small businesses need, largely as a result of regulation. “We as a regulatory body have forced banks out of that space,” said Otting.

The OCC began pursuing the idea of a singular charter for Fin Techs began under the previous chairman Thomas Curry.The idea of a national charter for online alternative lenders has proven controversial among state regulators and liberal consumer advocates. A coalition of these groups attempted to stall the OCC's efforts by way of lawsuits in federal court. One of these lawsuits was recently dismissed this November due to a lack of standing. However the controversy continues.

Alternative commercial lenders have become a vital source of credit for small businesses.

Traditional banks have consistently withdrawn from small business lending in recent years. Small community banks continue to be consolidated by larger lending institutions. Once these smaller banks were the main source of loans for small businesses. The expense of underwriting and historically low interest rates have made lending to small businesses an unprofitable venture for larger traditional banks. As more small banks are consolidated, small business owners are consistently turning to online alternative lenders.

Ottings affirmation of the charter initiative in spite of recent controversy demonstrates his belief in the vitality of alternative commercial lenders.

Otting expressed his belief that financial services will continue to evolve with technology, saying “The old way of doing a lot of things are evolving, and I think the financial-services industry has to evolve as well.” No doubt the new chairman also believes that regulations must evolve as well. The new chairman downplayed concerns about the threat alternative lenders pose to the stability of the financial system as a whole.”Fintech companies function with “underwriting standards that maybe a bank wouldn’t want to put on their balance sheet,” said Otting. But “if it’s a group of private investors, and it doesn’t have the ability to disrupt the financial system, then that’s their choice as an investor.” Otting believes the risks posed by online lenders can be contained such groups do not act as traditional depository institutions. Whether Mr. Ottings assumptions prove true or not remains uncertain; however it seems likely that the OCC will continue to pursue the charter initiative in spite of the groups changing leadership.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

Impact of Tax Cuts and Jobs Act on commercial real estate lending

Banner_imgCommercial real estate and commercial lending stand to benefit from specific changes under the Tax Cuts and Jobs Act. The full impact of these changes however remains ambiguous.

Specific changes that will benefit the owner's commercial real estate include new deduction options both for investment in pass through companies and value-add projects. Perhaps most importantly the bill retains the carried interest provision.

Pass-through entities, more commonly known as LLCs or partnerships, own the majority of real estate and conduct the majority of real estate investment. Investors in pass throughs can now deduct up to 20% of their total investment in these groups under the new law. This change will encourage investment and expansion by these pass through entities, such as real estate trusts. Commercial real estate will no doubt benefit as a result of these new deduction options.

Commercial property owners also stand to benefit from new deduction options. Under the new law the cost of value add projects on nonresidential property can be deducted. Specifically the bill revises and expands Section 179 of IRS code. Under Section 179 the amount that can be deducted for value-add projects is effectively doubled, from 500,000 to $1 million. The types of expenses that can be deducted by commercial property owners has also been expanded under the new law. “Roofs; heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems,” can now be expensed under the new law, according to Allistair Nevius of the Journal of Accountancy. In essence the new law will encourage commercial property owners to invest in and add value to their existing properties.

Commercial real estate lending and commercial real estate will benefit as the law retains the carried interest provision.

The carried interest provision allows returns on specific investments such as real estate to be taxed at a lower rate. Under the carried interest provision returns on investments can be taxed as capital gains rather than income. Hedge fund managers and real estate investors can continue to take advantage of the carried interest provision under the new law. However the new law does make some changes to carried interest provision. Specifically investors and investment groups must now retain investments for a period of three years In order to take advantage of the provision. Real estate investment is unlikely to be heavily impacted by this change, as these investments are usually held onto for longer periods.

The pace of commercial real estate transactions and commercial real estate lending could slow as a result of the specific changes to the carried interest provision.

“There is the possibility that it could reduce the number of CRE transactions that occur on an aggregate basis,” said Vince DeCrow of Origin Investments. “The reason for this is that the chunk of CRE investments that are typically held for less than 3 years, CRE developments for example, would then have comparably higher odds of changing hands at a slower relative pace once the construction is complete (if complete in less than 3 years).” New developments completed in less than three years are likely to be held on to by investors for longer periods, so that these investors can take advantage of the carried interest provision. With fewer new developments on the market the price of commercial real estate could rise as a result of the specific changes to the carried interest provision. The full impact of the new tax law on commercial real estate remains uncertain.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

Tuesday, January 30, 2018

Commercial mortgage backed securities add uncertainty in 2018

Handsome young man looking confidentlyThe wave of commercial mortgage backed securities in need of refinancing will linger in 2018. These mortgage bonds issued prior to the great recession will continue to mature at a steady pace over the coming year.

Approximately 41.7 billion in CMBS securities needed to be refinanced last year. 2017 was marked by dire predictions about these loans, but it appears such predictions were seemingly unfounded as a vast majority of these loans were successfully refinanced. The CMBS market remains stable and the predicted wave of defaults did not occur.

Even though the dire predictions of last year did not materialize, a large amount of pre-recession debt will need to be refinanced in the coming year. Uncertainty lingers over the CMBS market. Analysts expect approximately a hundred billion securitized commercial mortgages will need to be refinanced in 2018. The pace of CMBS maturities is expected slow, but the same difficulties remain for the holders of this debt when it comes to refinancing. Market conditions might make refinancing even more difficult than it was last year. “Against the backdrop of slowly rising interest rates and a narrowing yield curve, however, refinancing may prove more expensive than it has in the past, suggesting a potential headwind for commercial REITs,” said resource portfolio manager for Real Estate Diversified Income Fund, John Snowden.

Rising interest rates and tighter lending standards could make refinancing more difficult for the holders of these commercial mortgage-backed securities.

Refinancing this CMBS debt will likely be a more expensive proposition in 2018, as a result of rising interest rates. Higher interest rates make loans more expensive and have lingering effects on commercial property values. Higher interest rates reduce the amount of income commercial property can achieve lower the value of that property as a result. In addition some property owners might not be able to refinance to the total value of their mortgage as a result of higher lending standards. Prior to the recession an owner may have qualified for $3.6 million mortgage on a $4 million property. Under current lending standards that same owner will likely only qualify for a $3.2 million mortgage. That owner will therefore have to take on $400,000 out-of-pocket in order to fully refinance their loan.

The holders of some of these commercial mortgage-backed securities might be tempted to sell their mortgaged property, but this presents its own difficulties.

Some property owners can avoid the difficulty of refinancing to a higher interest rate with less favorable terms by simply selling their mortgaged property. These property owners face new uncertainties should they choose to sell their leveraged commercial property. The overheated real estate market prior to the recession was marked by inflated property values. some property owners might not be able to achieve a sale price that pays for their mortgage, as commercial property values has since come back down to earth. In addition the sale of any piece of real estate takes time, some owners may not be able to sell their mortgaged assets before their loan matures and a wave of defaults could follow.

The future remains uncertain for the holders of the $100 billion in mortgage debt that needs to be refinanced in the coming year.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

SBA lowers equity requirements for new commercial loans

Arizona-Home-Loan-Team-Matt-and-Judy-Callahan-300x199As of January 1 the SBA announced it would lower equity requirements for new 7a loans. 7a borrowers will only need to finance 10 percent of future projects to qualify under the program.

The SBA 7a loan is the agency's most popular lending program. The 7a loan provides 5 million dollars of capital to finance new projects, startups and business expansion. There are few restrictions on 7a proceeds when compared to the SBA 504 loan. 7a proceeds can be used to finance construction costs, business acquisition and can even be used to refinance existing debt. Lowering the equity requirement will help more small businesses finance expansion and acquisition projects over the course of the coming year.

Under the new requirements more borrowers will undoubtedly be able to qualify for an SBA 7a loan and the program is likely to continue to expand at a rapid pace. Even under the previous requirement of 25%,the 7a program has rapidly expanded in recent years. The SBA has backed 3 billion in new loans from the start of the fiscal year beginning last October, an 11% year-over-year increase. in 2017 the SBA backed a record 25.8 3 billion in new 7a loans. the lower requirement will no doubt help the agency break last year's record for new loans.

Commercial loans related to business acquisition will increase under the new equity requirement, which matches demographic and economic trends.

“We have an aging ownership population. … The baby boomers are starting to reach their retirement years, so we’re seeing a lot of entrepreneurs who started successful companies looking for transition plans,” said Tom Pretty director of SBA lending at TD Bank. Pretty remarked that the lower equity requirement marks a “powerful change” in standard operating procedure at the agency. A recent survey of borrowers at TD Bank revealed a third of small business borrowers sought loans related to business acquisition, expansion and partner buyout. The lower equity requirement will help finance the sale of businesses owned by baby boomers, as this population continues to retire over the coming year.

The lower equity requirement will help boost commercial lending related to business acquisition.

Loans related to business expansion acquisition are considered risky by most banks. These loans usually involve little in the way of collateral on the part of borrowers and therefore most banks are unwilling to underwrite these loans. The lower qualifications under the 7a program will help more borrowers qualify for acquisition loans partially guaranteed by the government. This government guarantee will encourage more banks get involved in financing the deals in the future.

Entrepreneurs looking to finance partner buyouts, expansion plans, business acquisitions and other projects will no doubt turn to the SBA as a vital source of financing.The lower equity requirement means such borrowers will only need to provide ten percent up front in order to qualify under the program. The lower equity requirement will help small businesses receive sufficient capital in order to expand as they see fit.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

Commercial real estate transactions and commercial real estate loans expected to rise in 2018

4page_img3-bigThe sluggish pace of commercial real estate lending seen in the first half of last year is expected to improve in the coming year. Commercial real estate transactions are on the rise, but are likely to be tempered by new fears among investors.

The first half of last year was marked by new lows in terms of real estate transactions. By the midpoint of 2017 commercial real estate investment trusts have completed only $46.7 billion in sales, far below the 71 billion in sales the same trusts achieved over the same period in 2016. Investors were gripped with uncertainty about interest rates and the new political realities of the incoming administration. “The slowdown in transactions at the start of [2017] came with the jump in interest rates and the [uncertainties of the] election. As people have readjusted to the new order, deal flow has started to pick up,” said 10-X Chief economist, Peter Muio. As investors adjusted to these realities the total sales volume of commercial property rose by 15.6% over the second quarter of 2017. Transaction volumes are also expect to continue to increase over the coming year.

Buyers and sellers of commercial property also had varied expectations about the commercial real estate market at the beginning of last year. “The other challenge is the falloff in transaction activity due to the wide gap between seller and buyer pricing expectations,”said Muio. “This widening of the bid-ask spread was sourced over doubts over the continuation of the cycle on the buy-side, a rise in interest rates heading into the year and seller expectations for robust pricing increases. We believe this gap will begin to close in 2018, and it will do so due to sellers accepting the new paradigm.” In other words property owners held out for higher prices in the expectation of rising property values while real estate investors remained unwilling to pay these higher prices. Both sides are expected to continue adjusting their expectations as the year continues, which will make buying and selling easier.

As sales of commercial real estate increase, commercial real estate lending is likely to increase as well.

Investors have adapted the new realities of last year and both buyers and sellers of commercial real estate have new more realistic expectations in terms of pricing. These trends which helped boost commercial real-estate transactions last year are expected to continue into 2018. Analysts perceive a large amount of capital set aside specifically for investment in commercial real estate. “ After a year of slow activity we are hopeful that sales volumes will rise in 2018. One important reason for this is the large amount of capital targeting real estate,” said principle economist at Kushman and Wakefield, Ken McCarthy.”There is an estimated $152B in dry powder waiting to be deployed. And while investors were cautious in 2017, we anticipate the healthy economy at home and abroad [will] give investors more confidence, leading to stronger sales.” Analysts predict most of this money will be used for investment in multifamily and industrial real estate. Sales of office ,retail and hotels will continue to struggle in 2018.

Investors in commercial real estate face new uncertainties this year which makes the pace of commercial real estate lending hard to predict.

Commercial real estate transactions are unlikely to reach last year's historic lows. The dramatic spike in sales, which began in the second half last year, is expected to wane as the year continues. investor face new uncertainties about an upcoming market correction and ambiguity remains about the impact of the recent Republican tax bill. as investors address these issues commercial real estate transactions are unlikely to rise dramatically over the coming year, but are expected to return to historic averages.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

Monday, January 29, 2018

2018 shaping up to be a good year for commercial lending

2page_img3-bigRising interest rates, business friendly environment in Washington and the strength of the economy will help bolster commercial lending in the coming year

Interest rates are expected to go up this year and banks could realize new profits from small business lending. Interest rates are expected to rise the as economy improves in spite of the recent change of leadership at the Fed. The Fed has slightly raised interest rates at least four times since 2015 and this trend is expected to continue in the coming year. Banks and borrowers to both realize benefits from rising interest rates. Higher rates incentivize small business lending by big banks and this means more small business borrowers could see their applications approved. As of last November,The Biz2Credit small business lending index showed approval rates were on the rise among every category of lender. Even big banks approved 25% of all new small business loan applications.

The Trump administration is expected to continue taking steps to ease financial regulations in the coming year and create a regulatory environment which is friendly for banks. The administration recently backed a resolution which would restrict class-action lawsuits against banks. The Treasury has also tentatively announced plans to ease restrictions on loan securitization by banks and to reduce the frequency of bank stress tests. The administration has also essentially neutered the Consumer Financial Protection Bureau. All of these steps taken by the administration to ease regulations will to make it both easier and more profitable for banks to issue new loans.

Commercial lending is being boosted by the strong economy and both banks and borrowers are finding new confidence.

As the economy continues to improve more small businesses feel increasingly confident about their ability to pay off new loans. The SBA indicates both regional and community banks are processing a record number of new loan applications. Moreover these applications are being approved at a higher rate than in the past. Small banks approved 49% of all new business loan applications in November of 2017. Online alternative lenders also approved more loans over the same time period and approved 56.9 percent of all applications. In particular more of these applications were from lower quality borrowers. Borrowers with higher credit profiles are now more willing to approach traditional banks, which eases the ability of smaller businesses to qualify for loans from alternative lenders. The strong economy encourages business expansion , business lending and improves the confidence of both banks and borrowers.

2018 could be a landmark year for commercial lending.

Banks could realize new profits from small business lending as a result of higher interest rates. The pro-business environment in Washington will encourage banks to issue and approved new loans. However the state of commercial lending will largely depend on the state of the economy. Confidence in the economy gives businesses confidence in their ability to take on new loans and banks confidence in the ability of businesses to repay these loans. Without this confidence in the economy credit could rapidly dry up as banks stop financing new loans and businesses stop borrowing.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

Defaults on commercial loans related to retail expected to slow this year

4page_img8-bigCommercial loans tied to retail properties will find new strength over the coming year, as retailers find new efficiencies.

The record pace of retail defaults and store closures will likely slow in the coming year. retailers are benefiting from newfound efficiencies and an improving economy. Analysts believe that even struggling to department stores, like Kohls and Macy’s, could see their situation improve in 2018.

Moodys analysts anticipate a better outlook for retail across the board. Moodys predicts that the owners of retail properties could see growth in operating income between 3 1/2 to 4 1/2% over the coming year. 5 out of 14 categories of retailer may even see profits grow higher than 5% in 2018. Moodys claims particularly strong players will include online sellers, dollar stores and home improvement retailers. Warehouse clubs, department stores, office supply stores, auto retailers, apparel sellers and drugstores will continue to struggle.

2017 was particularly dire for brick-and-mortar retailers. Store closures grew by 224% over the course of last year. Retailers planned to shutter a total 6879 locations by the tail end of 2017. 6,163 store closures had already taken place at the end of last November. 2017 broke the record for store closures which was previously set during the depths great recession.

The defaults in retail related commercial loans seen last year seemed to have little to do with the economic situation.

Paradoxically, in spite of record breaking store closures, consumer confidence and retail sales overall reached all-time highs. Store closures last year seemed to have occurred mainly in long brick and mortar retailers unable to adapt to changing consumer shopping habits. The National Retail Federation found in a recent survey that last year's Christmas shopping season was the first time record for the majority of those surveyed plan to shop online exclusively. 59 percent of consumers surveyed by the group had no plans to do holiday shopping at a mall or department store.

The holders of retail based commercial loans are expected to adapt and defaults are expected to slow as a result.

The record number of defaults last year was likely among retailers who were unable to keep pace with changes in consumer shopping habits. Moodys cites restaurants as a particular example of an industry that has adapted to the needs of consumers. “Consumers are wrestling with higher non-discretionary spending needs while restaurant companies face higher operating costs — predominantly labor — and challenging traffic trends,” said Moodys vice president Bill Fahy. According to Moodys restaurants and other retailers are expected to meet these and other challenges over the course of the coming year. As retailers close more locations, these same retailers will likely find better ways to boost sales at their remaining locations. Moodys expects the wave of defaults to peak by March of this year to 10 1/2%. By this October these defaults are expected to slow with an estimated 4.9% of retail debt in default by that time.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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

Wednesday, January 24, 2018

Commercial Real Estate Loans vs Home Mortgages

cta3revCommercial real estate loans are a different animal than their home mortgage counterparts. Learn the differences so that you are prepared when walking in to the commercial lender.

There’s a few basic differences when it comes to commercial real estate loans versus home mortgages. While both require due diligence and forethought, CRE loans have increasing regulations and restrictions and are not as easy to qualify for. One of the big surprises for those just entering the market may be the balloon payments associated with commercial real estate loans.

A balloon repayment plan starts with the same terminology. It may be a 30-year mortgage with payment on both interest and principal. But that is where the similarity ends. Following a preset time of 3, 5 or 10 years, a balloon payment is due, at which point the entire outstanding balance is payable. Needless to say, this is where many a business falls through the cracks.

And what happens as the balloon payment nears? If they have not been able to put aside a substantial savings, business owners and developers begin to look for alternative funding which is not always easy to secure. But if the business has had cash flow problems or the development has hit a few snags, a balloon payment may not be a feasible option for the borrower. At this point, they must try and refinance and, depending on their last three- to five-year financials, may or may not qualify for a loan. The other scenario is a business that is doing fairly well, but the lender has decided they want to get out of that particular CRE segment.

Secure a sufficient down payment in order to increase the chances of affording your investment.

Obtaining a down-payment of 20 to 30 percent will help ease both traditional and non-conventional lenders. After all, if someone has some “skin in the game” it makes it that much harder to simply walk away. In addition to coming up with a larger down payment, requesting an initial loan that has a little cushion in case of project delays can help ease the pressure.

Come prepared with three to five years of tax records, balance sheets, cash flows, income statements and a business plan. Keep in mind the debt-service-coverage as well as the loan-to-value ratio. For conventional lenders, a good credit score is also required. Because of the increased risk, commercial real estate loans have higher interest rates and shorter terms. Be sure to check on potential prepayment penalties as well.

Unlike home loans, CRE loans are not done once the papers are signed. Some lending institutions require that you continue to provide quarterly or annual income statements. Loan covenants may include maintaining a certain debt-to-income ratio or cash flow. For those just entering into CRE investments, unconventional loans often offer the best solution. At Level 4 Funding, we work with private investors who offer hard money loans on most types of CRE projects. Approval is often accomplished within 24 hours with funding close on its heels—sometimes in less than a week. Call us for a no-obligation quote.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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

Commercial Lenders – Getting in on the Distribution Craze

businessmanDistribution centers seem to be popping up in just about every town and along every highway. Learn a little about this growing segment of CRE and how you can find a commercial lender in order to get in on the latest craze.

You are probably aware of the newest generation’s love of all things online—including shopping. While it may not be the only reason for brick and mortar’s decline, it certainly has contributed. In 2016, online sales of goods accounted for 360.3 billion dollars. By 2021, this figure is expected to rise to 603.4 billion. And, as you know, all these online shops, stores and discounted goods are going to need a home as they crisscross the country—delivery warehouses and distribution centers.

There are various logistics to consider when creating an online presence. While Macy’s is looking to close about 100 stores, their online sales are taking the lead and, while stores are closing, distribution centers are being born. In 2015, it moved into what was once Campbell Soup’s south Sacramento plant, making this location an internet fulfillment center. With Macy’s bringing about 175 warehouse jobs with its presence, Sacramento gave something back in return—a sales tax reimbursement of up to 50 percent. Just two years earlier, Macy’s built a massive 1.3 million-square-foot distribution center near Martinsburg, West Virginia. Commercial lenders are taking notice.

So, what are the different facilities that these online mega-stores require? They need distribution centers which deliver goods to stores and online fulfillment centers which complete online orders—two very different environments. Easy access to the interstate is critical to these facilities as well as a strong labor pool. And while on the subject of a labor pool, another consideration is ease of public transportation for employees as well as affordable housing. So just where are they finding these mega centers?

Warehouses have become the new retail—increasing available capital from commercial lenders.

Real-estate brokerage CBRE pointed out the increase in regional hubs as retailers “bring their supply chains closer to the final mile of distribution.” These locations are determined by their customer’s locations who live within a few hundred miles of these warehouses. Emerging hubs, as determined by CBRE, include Indianapolis, Phoenix, Reno, Central Florida, South Central Pennsylvania, Cincinnati and Bakersfield. It must be very near a hub or major mode of transportation. Some require close proximity to ports. Other important considerations include the impact on the environment.

Warehouses have shown surprising growth and return on investment these last few years, although not too surprising to those in CRE. The Urban Land Institute placed the industrial category at the top for CRE investments in 2016.

So, what’s holding you back? For some, it’s the required capital and a history of being turned down by traditional commercial lenders. If you’re looking to get into this booming segment of CRE, don’t let the past stop you. Call us at Level 4 Funding. We offer loans up to $50 million for warehouses, industrial and distribution centers. Acceptance is based predominantly on collateral, making those with not quite perfect credit scores often pleasantly surprised. In addition, funding can occur in as little as a few days, making it possible to place a quick bid on that property that just came on the market that’s aching to be a fulfillment center. Call us for a no-obligation quote.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008
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