Learn To Be A Fix & Flip Investor

Sunday, March 25, 2018

Tactics for refinancing your commercial loan

When it comes to refinancing commercial loans, you naturally want to qualify for the largest loan with the best terms. Learn some strategies to help you refinance your commercial mortgage

Once your commercial mortgage matures, why should you refinance, rather than selling the property? Refinancing can improve your monthly cash flow and if your property has appreciated in value, refinancing will enable you to pull out additional equity tax-free.

There are some significant differences when comes to refinancing commercial real estate. A Residential mortgage is usually fully amortized and can have terms of up to 30 years. Commercial mortgages have shorter lifespans of 5 to 10 years, and commercial borrowers typically need to refinance their mortgages on a regular basis. But The biggest difference between commercial and residential refinancing is the impact of net operating income on commercial property values.

Improve the income you receive from commercial property to improve the terms of your commercial loan

Net operating income has a considerable impact on commercial real estate values.

The value of commercial property increases if it can generate more income, regardless of property values in the immediate area.

Before refinancing the best strategy is to increase the amount of income your property generates. By maximizing the profit you receive from a property, you increase its value and can refinance to a larger mortgage with better terms. Some strategies to maximize cash flow could include improving the number or quality of your tenants or using renovations to raise rents.

Other things to consider when it comes refinancing you commercial loan

Always seek counsel about your strategy and your specific situation, but the following tactics should help you get the best loan at the best terms.

Use refinancing as a way to reposition your investment strategy or even expand your portfolio. The additional funds you get from refinancing can be used to repay your initial loan, any initial investors, or could be used to improve the property itself. Better yet you can use the additional funds from refinancing to purchase another piece of commercial property. Therefore refinancing can be used as a strategy to expand your investment portfolio and earn more money on a monthly basis.

Refinancing in all cases should improve your monthly cash flow. Refinancing to a loan with higher monthly payments and less favorable terms is of course not a good idea. Refinancing should entail lower monthly payments or should allow you to cash out any additional equity from your investment property.

Strategize to qualify for the best loan with the best terms. Know when your current loan matures and invest in the property accordingly. Over the duration of your loan ensure the condition of your property does not deteriorate. Better yet take consistent steps to improve your property over the term of your mortgage.

You should also aim for full occupancy before refinancing. Most lenders will offer favorable terms on properties with 90 percent occupancy over a period of 90 days. Losing tenants will drastically reduce the income from the property and therefore reduce its value.

In the end, the crux of refinancing a commercial loan is to optimize the profits a property can generate which will enable you to refinance at the best terms.

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

Saturday, March 24, 2018

Why Hard Money Lenders Only Fund 75% of a Property’s Value

Understanding why hard money lenders will only finance 75% of a property’s value will allow you to be better prepared for requesting a loan. It will also help you to understand what other factors can make your request more desirable to lenders.

Loan to value ratio is the most critical factor to all hard money lenders when they are evaluating a loan request. In general, the loan amount cannot exceed 75% of the current market value of the property. This is because the property is being used as the collateral for the loan, which is not unusual. Home mortgages are secured by the home being purchased as well. But in the case of commercial properties there is more information that must be taken into consideration.

Unlike home values which are fairly static, commercial property values are much more volatile. There are several events which can impact a commercial property’s value which are not considered to be factors in residential property values. The economy has a much greater impact on commercial properties the residential. A downturn in the economy or a single industry does not extend to every consumer who owns a home, but it does have an impact on every business. And as competitive as industry is in the country, a slight downturn in the economy is certain to cause some businesses to fail.

Likewise, a downturn in a certain industry would not cause all of the homeowners in a neighborhood to sell their homes or abandon them. But it could result in many businesses closing in a single area which would quickly drop the value of commercial properties in the area. All of these factors must be considered when a commercial property is being used as collateral.

The Hard Money Lenders Thought Process

Knowing that the value of commercial properties can fluctuate a great deal and can change very rapidly, the lenders want to be certain to always have a way to recover their investment. This means never having the current balance of the loan near the current market value of a property. Over the years, the 25% margin has become an acceptable industry standard among hard money lenders.

How to Use This Knowledge

Knowing that the market value of a property is critical to getting hard money approved, there are ways that you can build additional confidence with a lender. Selecting a property in an area that is thriving is always smart. Also, selecting a property which is not dependent on a single industry is helpful. Knowing that any business could use the property provides more options to rent or sell the property at a better price in the future. In addition, location can have a huge impact on the perceived value of the property and therefore its actual value. Being easily accessible is important for any business who relies on consumers visiting their location. So a property near an expressway or major street is more desirable than a location in a rural area or one that is difficult to drive to. Consider all of these factors and try to select a property which will hold its value well. This will make your loan request much more appealing to a lender.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Think Like Hard Money Lenders

When you are seeking a private loan, it can be helpful to learn to think like hard money lenders do. This will help you to prepare for the process and to know which information will be critical to the decision to fund or reject your request.

When you are making your first request for hard money, it can appear to be a very odd change from completing the myriad of paperwork required by a traditional lender. It might even feel as though you are ill prepared for the meeting because you are not carting in piles of bank statements, credit reports and income statements. And if you are, then you are going to be surprised and embarrassed when your lender is less than impressed and wants nothing to do with all of your paperwork. Hard money lenders are a different breed and they are looking for completely different information to evaluate your request and determine if they will approved your loan.

The key to securing hard money is nailing the loan to value ratio. This is the ratio between the amount you are requesting and the current value of the property. Most hard money lenders are looking for an LTV of 65-75%. There are some lenders who will also consider the property’s after repair value as well but that is not a standard practice. With that in mind, those lenders will also want to see your business plan to renovate the property and your budget to make sure that the numbers are in line with their estimate for the renovated value of the property.

Know the Critical Term

Knowing that the loan to value ratio of the property is the key to getting a loan, you need to be certain that you have enough of a down payment to make the loan request fall into the desirable range for the lenders. Understand that the lender is protecting his or her investment by only lending up to 75% of the value of the property. In the event that you are unable to make your loan payments, the lender will need to take possession of the property and sell it to get their investment back. And the only way to be sure that they get their full investment back is to know that the property will always be worth more than the balance of the loan. Hard money lenders are not being unfair or trying to take advantage of borrowers, they are simply practicing good business and protecting their investment.

Think like a Lender

Understanding the lenders point of view will only help you to better prepare yourself for requesting a loan. Knowing that the most important factor is the LTV and not your credit score or credit history will save you a lot of time and paperwork. You can then invest that time into researching the current value of the property and procuring funding to make the down payment you will need to meet the LTV ratio. In addition, you can invest your time in creating your renovation schedule and budget to demonstrate that you will be quickly and efficiently adding value to the property as soon as you take possession of it. All of this information will help to ensure that your hard money request gets funded.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Find Hard Money Lenders

There are various reasons that people turn to hard money lenders, but knowing the benefits is only half of the challenge. Now, you have to find the one that is right for you.

Hard money loans are often issued by individuals or companies. At one time, they were considered “last resort” loans for people or businesses with imperfect credit. In today’s world of fix & flip investors and contractors in need of quick funding, they are a part of most businesses and individuals lending portfolios. People often turn to hard money lenders when they are in need of a bridge loan that keeps them afloat until a property sells or is renovated. Other’s use this type of loan due to time constraints and when initial capital is required in a matter of weeks instead of months, such as when a hot property hits the market.

So, just where do you go to get these quick-to-fund loans? Ideally, it’s best to work with a lender that specializes in your specific business model or real estate segment. For instance, a hard money lender that understands construction loans will offer monthly quick-payout draws as well as interest-only payments, both of which are designed to take the stress off you and your company as you progress through the building process.

There are also hard money lenders that specialize in the fix & flip or buy-and-hold real estate segments as well as multifamily, office, warehouse and storage complexes. If you do not have a direct reference from a fellow business associate, you can turn to the many listings on the internet. If using this approach, be sure to look for recommendations from established businesses and don’t be shy when addressing your concerns. If you find a qualified lender that you can trust and has a large rolodex of private lenders to draw on, you will most likely find yourself turning to this funding source time and again for many of your capital needs.

Things to Consider When Interviewing Lenders

There are a few basic questions that you will want to address when undergoing an interview with a potential lender. One of the most important is their loan-to-value ratio (LVR). Because hard money loans are asset based, the loan value is determined by the appraised value of the property. Some lenders will use the potential value of the property once renovation has been completed, otherwise known as the after-repair-value or ARV. This approach, however, is very risky and, for those lenders willing to take this chance on you and your abilities, will often mandate a higher-than-average interest rate. Many lenders stick to about a 70 percent loan on the value of the property.

At Level 4 Funding, our loan-to-value goes as high as 90 percent with 100 percent of rehab for fix & flippers.

Of course, loan-to-value is just part of the equation. The other all-important consideration is the interest you’ll be paying on your loan and the terms the lender offers. At Level 4 Funding, our interest rates start at 7.99 percent with terms anywhere from 3 months to 5 years. Call us today for a no-obligation quote.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Why You Should Repair Your Credit Score to Obtain Commercial Loans

If you can rebuild your credit score, you have a much higher chance of getting approved for *commercial loans**. Most lenders want to see a clean credit history and a high credit score, so Level 4 Funding offers ways to build and restore your credit to help you get the loan you need.*

Before you can repair your credit, you need to know what state it’s in. First, obtain your current credit report from one of the three recognized credit bureaus. You should be patient and take plenty of time to review your credit report and history. You should also look at your previous business patterns and habits. Do you continue to make the same bad decisions? If you can recognize a pattern with the way you handle your finances, you can change your habits for the better… and begin to improve your credit score. If you have less than desirable credit, it’s going to be a lot tougher to obtain approval for commercial loans, so you should really put all your effort in here. You need to take some time to review your credit history by obtaining your report from one of the three recognized credit bureaus. Really scrutinize your business habits that have led you to earn less than desirable credit. Seeing the report can also help you recognize how you can break these patterns so you can make progress towards improving your credit.

Yes, most people in America have debt and it’s okay — and even good — to have some debt. But too much is… too much. It will make lenders wary about your ability to pay back their loan, and that’s not good when it comes to trying to get loan approval. Try to pay down debts and the amount you owe as much as possible. Take a close look at your financials, your budget and figure out how you can tighten things up so you don’t have to get too far into debt. You can also consider having all your outstanding credit combined onto one card to you can consolidate payments and perhaps even negotiate a better interest rate for your commercial loans. Having just one payment can help you keep track of on-time payments as well.

If you have good business relationships with your suppliers and vendors talk to them about your loan plans and ask them to make a report on your behalf. Make sure you make timely payments to supplier and vendors because being in good standing can help your credit score improve.

If you have any unused, paid off accounts, closing them can affect your credit score too – this can improve your chances of getting approved for your commercial loans needs.

Once again, review your finances, see which accounts you have paid off but that are still open and then for any of those that you are no longer using, send a request letter for those to be closed. You can ask for a return letter from the creditor that proves your account balance is zero and that the account is now closed.

It’s not a quick route to perfect (or near perfect credit).

The bottom line is it takes time to build or repair your credit. However, it's a lot easier to secure commercial loans via traditional lenders if you have stellar credit. Ultimately, it will benefit you and your business, as you will be in a better position to negotiate better rates. Making some big changes in the way you handle your business finances is a must when repairing poor credit. Start small and make little changes that will eventually pay off in a big way. It’s not impossible and though it may take some time, it is worth it once you’ve got your credit on track and you are able to move head with your business with a loan that you secured with your new high credit score!

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Prepare to Speak to Hard Money Lenders

Being prepared is the best way to ensure that you can get offers from hard money lenders. But the secret is in knowing how to prepare.

It can be very stressful seeking a loan. Many people hate to feel that they owe someone money even when it is for a legitimate loan or mortgage. But being well prepared can help to eliminate much of that unnecessary stress and also can help to ensure that you get the loan that you need. Approaching hard money lenders for a loan is not exactly like going to a bank or a mortgage company to ask for a loan. And in some ways this is very good because the process is less complicated but that can also make it more nerve wracking.

A conventional lender is going to present you with a huge packet of forms to complete and then send you on your way until you have all of the paperwork completed and submitted. But the process of a hard money loan is less dramatic. So you will want to be sure that you are prepared prior to your first meeting so that you can give the lender all of the information that they will request. Not only does this allow you to appear very professional but it will also speed up the process even more.

Hard money lenders are really only interested in the value of the property which is going to be used as collateral on the loan. They don’t want to hear your life story and why your credit score is lower than the average consumer. So don’t volunteer too much but be ready for all of the questions pertaining to the property and your plans for it. The first question is going to be the address of the property, which is easy enough to supply. You will also need to provide a few photos of the property to show its current condition. In addition, you should provide any appraisal that you have gotten or valuation that you have completed for the property. This is the main information that the lender is going to use to determine the current value of the property and what the collateral will be worth to them.

Explain Your Plan

The next information that the lender will want to gather is about your offer price and any proposed renovations that you will be doing. It is a good idea to have a basic business plan in place to show the renovation budget, the timeline and your projected increase in the property value as a result of the renovations. The final piece of the puzzle for the lender is to understand how you plan to repay the loan. Are you planning to keep the property and rent it out? Are you going to sell the property and use the proceeds to repay the loan? And finally they will ask for the exact amount of the loan that you are requesting.

Fast and Easy

Providing all of this information in a single quick meeting not only shows your respect for the hard money lenders time but also shows that you are a well prepared professional. Having a plan and demonstrating it will let the lender know that you are serious and will be getting this loan from him or her or from a competitor.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Friday, March 23, 2018

Why potential commercial loan rate increases are making investors nervous

Inflation fears are stoking fears in the minds of investors about potential commercial loan rate increases in the immediate future.

Yields on short-term Treasuries have recently reached new heights, creating new fears that long-term borrowing costs could rise as well. As of February 2nd, short-term yields on US treasuries sat 2.825 percent, the highest since 2014.

So why are these rising bond yields causing so much panic among investors? Their primary concern is related to inflation and the potential for steep rate increases by the Fed.

Steady job growth may be a sign of rising inflation. The rising rate of employment indicated in the recent January jobs report has many concerned that the Fed will raise interest rates to reduce the risk of inflation.

The Fed usually raises interest rates when the economy overheats, increasing borrowing costs to keep up with inflation. The Fed also raises interest rates when it expects inflation in the near future, which has many investors worried.

Investors are wary the danger of steep increase in commercial loan rates

A fundamental question is why investors are so concerned about inflation? The perception that inflation will soon rise rapidly could entail immediate interest rate increases by the Fed. Drastic rate increases in response to potential inflation would obviously hamper any recent economic growth due to higher borrowing costs.

The historically low bond yields of recent years have made risky investments like stocks more attractive. Bond yields impact the cost of borrowing throughout the economy. If bond yields rise too sharply, companies will have the added burden of higher borrowing costs. Should the Fed rapidly raise interest rates, these riskier investments will become considerably more volatile, which could explain the recent stock sell-off.The anticipated steep rate increases by the Fed would have a clear negative impact on corporate performance. A mismatch between the "real" cost of borrowing and long-term bond yields is also raising concerns among investors.

Investors note the danger that attempts by the Fed to raise commercial loan rates and control inflation may not be enough

The fact that long-term borrowing costs have remained low has spawned the greater fear that perhaps is the Fed may not be able to raise rates sufficiently to control inflation. Some are noting the disparity between Fed rates and real long-term borrowing costs. In the past year yields on short-term Treasuries have risen in line with Fed interest rate increases. However, the yields on long-term Treasuries have remained low or unchanged.

Some fear that in the face of rising inflation the Fed could overreact and dramatically raise rates to regain control of the situation.

Still investors panic about the risk of inflation may be premature. The relationship between employment growth and inflation, known as the Phillips Curve, has not matched economic data. Inflation has been relatively moderate of late in spite of recent robust job growth. The Fed could still hold off on the rate increases many investors expect.

These concerns remain speculative the time being and rarely is sound investment strategy founded on speculation.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Learn To Be A Fix & Flip Investor

Featured Post

The Big Show is Coming to Town.

Sunday, March 25, 2018

Tactics for refinancing your commercial loan

When it comes to refinancing commercial loans, you naturally want to qualify for the largest loan with the best terms. Learn some strategies to help you refinance your commercial mortgage

Saturday, March 24, 2018

Why Hard Money Lenders Only Fund 75% of a Property’s Value

Understanding why hard money lenders will only finance 75% of a property’s value will allow you to be better prepared for requesting a loan. It will also help you to understand what other factors can make your request more desirable to lenders.

The Hard Money Lenders Thought Process

How to Use This Knowledge

How to Think Like Hard Money Lenders

When you are seeking a private loan, it can be helpful to learn to think like hard money lenders do. This will help you to prepare for the process and to know which information will be critical to the decision to fund or reject your request.

Know the Critical Term

Think like a Lender

How to Find Hard Money Lenders

There are various reasons that people turn to hard money lenders, but knowing the benefits is only half of the challenge. Now, you have to find the one that is right for you.

Why You Should Repair Your Credit Score to Obtain Commercial Loans

If you can rebuild your credit score, you have a much higher chance of getting approved for *commercial loans**. Most lenders want to see a clean credit history and a high credit score, so Level 4 Funding offers ways to build and restore your credit to help you get the loan you need.*

How to Prepare to Speak to Hard Money Lenders

Being prepared is the best way to ensure that you can get offers from hard money lenders. But the secret is in knowing how to prepare.

Explain Your Plan

Fast and Easy

Friday, March 23, 2018

Why potential commercial loan rate increases are making investors nervous

Inflation fears are stoking fears in the minds of investors about potential commercial loan rate increases in the immediate future.

Pages

About Me

Blog Archive

Featured Post

Sunday, March 25, 2018

When it comes to refinancing commercial loans, you naturally want to qualify for the largest loan with the best terms. Learn some strategies to help you refinance your commercial mortgage

Saturday, March 24, 2018

Understanding why hard money lenders will only finance 75% of a property’s value will allow you to be better prepared for requesting a loan. It will also help you to understand what other factors can make your request more desirable to lenders.

The Hard Money Lenders Thought Process

How to Use This Knowledge

When you are seeking a private loan, it can be helpful to learn to think like hard money lenders do. This will help you to prepare for the process and to know which information will be critical to the decision to fund or reject your request.

Know the Critical Term

Think like a Lender

There are various reasons that people turn to hard money lenders, but knowing the benefits is only half of the challenge. Now, you have to find the one that is right for you.

If you can rebuild your credit score, you have a much higher chance of getting approved for commercial loans. Most lenders want to see a clean credit history and a high credit score, so Level 4 Funding offers ways to build and restore your credit to help you get the loan you need.

Being prepared is the best way to ensure that you can get offers from hard money lenders. But the secret is in knowing how to prepare.

Explain Your Plan

Fast and Easy

Friday, March 23, 2018

Inflation fears are stoking fears in the minds of investors about potential commercial loan rate increases in the immediate future.

If you can rebuild your credit score, you have a much higher chance of getting approved for *commercial loans**. Most lenders want to see a clean credit history and a high credit score, so Level 4 Funding offers ways to build and restore your credit to help you get the loan you need.*