Commercial Mortgage Loans 101

A mortgage is a way of using the inherent value of your existing or incoming non-liquid (non-cash) assets as a guarantee that you’ve got the means to pay a loan, instead of having to present only cash savings as proof. In personal home mortgages, for instance, a bank will lend you the money you need to buy the house you want, with that actual house or rather, its perceived resale value, as the guarantee. And if you fail to pay that loan in the future, you’ll face what’s called a “foreclosure” and lose the house.

But mortgages aren’t just for personal loans for buying homes. There are also commercial real estate loans for small to medium businesses and corporations, which are frequently in the form of a mortgage.

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Fastest Way to Get a Loan

If you already own a small business or have started your own company, getting a commercial loan is relatively straightforward: make an appointment with a bank or financial group, and an agent processes that loan for you.

But the fastest way, however, is to go to your own bank or your company’s bank. The bank you currently have an account with already has a record of your financial background, and will require less paperwork from you. Even better, they may be more generous with an existing client. You can get a bigger loan than you would at any other institution, at less collateral.

If you’re just starting your business, be prepared with detailed proof of the value of your company, prior to getting that loan. But don’t worry too much; there are banks and lending institutions that have experience in assessing the potential value of a new business, and would be able to give you the loan you need to begin operations.

Of course, it’s even a lot easier and faster to get a loan if your company or business isn’t the new kid on the block. Banks and financial companies give a little less scrutiny to small-to-medium enterprises that have already been running for at least a few years.   

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When Commercial Mortgage Loans Make Sense

Whether you’re starting out or are already running one, there are right—and wrong—times and ways to get such a loan. 

Get a loan for your business expansion only when, after assessing opportunities and risks, it makes more sense to borrow money now rather than wait until you’ve got enough profits to finance the expansion.

You’ll also need to consider the way your mortgage loan is set up.  Get the financial product with the lowest interest rate, considering the bank or lender’s added percentage on top of what you already owe. You must also watch out for those tricky “processing fees” banks or financial companies charge; make sure your lending bank or group has low processing fees.

After making careful considerations, you’ll find that most of the time, opting for a commercial mortgage loan may just be the one thing that can save and make your business grow!  

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Learn About Bridge and Rehab Loans

If you are considering stepping into the real estate market, either to both buy a new home and sell your current home, or to try your hand at buying homes in disarray, remodeling, and reselling, then you may need a certain type of loan, or more than one, to offset remodeling and other costs related to your endeavor. Before you begin pursuing such loans, it’s important you understand what it is you are taking on and exactly what type of loans you may need to take out. There are two types of loans common to this type of industry, bridge loans and rehab loans, usually obtained from hard money lenders.

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A bridge loan is used during an interim time when you need cash flow immediately but may not yet have access to a more permanent financing solution. Bridge loans are used by both individual people and businesses and can be tailored to your needs. The way a bridge loan works, for example, is when you expect to have a larger loan, or financing, but it will not be secured for several more months. While waiting for that money to come through you still have outstanding debts and costs happening now that need immediate solutions. A bridge loan covers this situation by providing you with the cash flow you need to cover costs until the other is secured. This situation happens often in the real estate market in the time between the sale of one home and the purchase of another.

A rehab loan is used mostly in the remodeling of a home or some other type of structure. You can get a rehab loan from a traditional money lender and usually more easily than a bridge loan because these types of loans are most often times insured by the government. The government views this type of loan as a promising investment into bringing up property values in neighborhoods that may have experienced decline. To qualify for a rehab loan, the potential borrower must be able to pass an intensive credit check and have collateral that is acceptable to the lender, usually other property.

So, to bring it all together, what this means is if you are interested in buying a home while also trying to sell a home or you are interested in the idea of flipping a house (meaning to buy it, remodel it, and resale for profit), a bridge loan can help you with immediate cash flow while you await a more long term financing option. A rehab loan will help you with funds to remodel the home or even to finish purchasing the home with an extra amount of money provided for that option. It requires a good deal of credit and collateral to undertake either type of loan and it is very important that no loan be accepted lightly. Speaking with a lender beforehand will enable you to understand the process of loan and repayment more fully, as well as the penalties associated with a missed payment or default.

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Notes for Sale – Boost your Portfolio

The real estate game is still at one of its most competitive environments ever. While the last few years have seen the economy and even the real estate market start to recover, it can still be hard to stay ahead in the field, whether you're a lender, an agent, or anything in between. There are plenty of different options out there, and for many now is still one of the best times to look for notes for sale. With the market slowly recovering, buying now could reward you big in the future. It's not something everyone will want to do, but it's certainly something worth looking into.

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If you're planning on buying notes you'll still want to keep a few things in mind. It's not something you should do if you're not willing to spend a bit of time researching the different variables and making sure you're making a smart purchase. For starters, avoid any websites that seem to be high-pressure. Buying notes online is a great way to find good prospects, but you need to be sure that you don't make the mistake of using the wrong ones. Doing so could cost you thousands and make you regret ever thinking of buying notes.

Look for a trustworthy site that is professional. Take a few minutes to research its history and then pay very close attention to its policies. Some may expect you to make a purchase within a certain timespan or require immediate participation. You need to find sites that actually allow you to take the time to do your research and make decisions without pressuring you into them. Also try to find sites that offer fair rates on their sales and that don't just list blind listings that you essentially have to gamble on when you make a purchase. In other words, look for a site you feel you can trust.

It doesn't matter what kind of notes you're looking for, whether you want residential ones are looking for commercial real estate loans. When you find a source of notes that you can trust everyone wins. They'll get your repeat business and you'll get the exact notes that work for you and your company. Simply put, take the time to do some research and you should have no problem at all finding exactly what you need. Investing now is the best way to ensure your future success, so don't ignore the opportunities.

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Commercial Mortgage Lender – Getting Help for your Business

There's no question that the American economy relies heavily on loans in order to move forward. It's also true that businesses of any size are the backbone of the economy. But those who are starting a business, trying to help their current business evolve, or are planning a sudden deal for their company will all find that they need help with financing from time to time. A commercial mortgage lender is generally the best option for those who are facing the need for cash, no matter what the exact purpose of it is. They've been relied on for years to help businesses move forward.

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Basically, these lenders extend loans that are structured just like a personal mortgage on a home, only designed for businesses and commercial property. In these loans the collateral used to secure the loan is commercial real estate or property and generally if a default occurs the company that takes out the loan will lose the property but not the actual business itself. Terms will vary and it's important for any company to make an arrangement after they've fully reviewed all of the specifics of the loan including interest rates, terms, penalties, and more. Like any business move, research prior to the deal is vital.

In some cases a company will likely find that they need to find a lender that provides bridge loans. These are generally used in the business world as well although in rare cases an individual may need to utilize one also. These types of loans are short term loans that are usually repaid within a matter of two or three weeks. Interest rates are normally ten to fifteen percent, and the loan can be extended to one year in some cases or maybe longer. But generally they're designed to be short term stopgap loans that make it possible to close deals quickly.

For instance, if a company finds a property that is on the market but needs to close on it quickly, they can secure one of these loans and close the deal, then go through the longer and more time-consuming process of securing a traditional loan. There is less red tape involved in these short-term loans and as such they can be obtained quickly and are invaluable for those who are involved in business. No matter the type of loan that you need, finding the right lender is important. Take your time and research your options and you'll find the one that's right for you.

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Commercial Mortgage Lending- What You Should Know

Mortgages are tricky business. When it comes to commercial mortgage lending, things can get even more difficult if you're not aware of what you are getting into. When you are doing a commercial mortgage, it is similar to a residential mortgage where the lender controls the property and the title while the owner pays off the note over the years. Ultimately, this mortgage is designed to help business owners own the buildings that they operate in. While many companies are content with leasing, some prefer or have a need to actually own their business.

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Commercial lenders are always looking for notes for sale, allowing them to buy commercial mortgages and retain ownership over them to increase their assets. In the world of commercial mortgage lending, there are different rules for different types of businesses. For example, if a sole owner is late, their assets can be seized, including personal assets unless there is an exclusion in the note that limits this capability. If there is a partnership, the liabilities extend to everyone that is involved and their level of responsibility depends on their level of investment. If things are set up under the business's name, the business is held accountable for the loan.

Commercial mortgage lending is a little complicated, but it's nothing to sweat when you have so many resources to help you learn all about the business. Companies are consistently looking for notes for sale in the commercial lending industry so that they can help others out and make a profit doing it. There are a lot of different securities or 'collateral' that can be used in a commercial loan, when it is required. This isn't always a stipulation, however, so you will have to check with the lender to see what is required.

Mortgage lending isn't easy to understand and commercial loans are often more complex. However, if you are involved in the world of commercial mortgage lending or you are trying to be, you have to do your homework. Make sure that you learn about these commercial loans and how they work so that you are prepared for whatever you are getting into. Use the internet to get to know commercial lending solutions and how they can help your business. It's all about getting the help that you need and with more knowledge, you'll have better odds of success in the commercial mortgage world.

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Commercial Mortgage Lending – The Ins and Outs of Mortgage Notes for Sale

If you're interested in making money off of the real estate market, there are numerous ways to go about this. Mortgage notes are one aspect of financing to think about when you are looking at buying a commercial property or trading in properties. Commercial mortgages are a common way to buy buildings or land for business purposes. When you are going about commercial mortgage lending, you will give the lender the legal right to the property until this loan is fully paid. This is where mortgage notes come in, which are the legal documents involved. Third parties can look for mortgage notes for sale to buy the obligation to pay back this mortgage amount.

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From one end of this type of financial transaction, then, you have the lender who is responsible for putting forth the money to the buyer. This commercial mortgage lending can take place to help the buyer expand, buy their own office premises, or get away from their lease agreements when renting. On the other hand, you have investors who can then purchase the mortgage notes for sale, which work like bonds. They offer the investors a steady stream of mortgage payments.

In the world of commercial mortgage lending, these mortgage notes for sale can be sold on the secondary market. They can also be part of a larger mortgage-backed security. Notes are valuable because they are signed by the buyer or business owner, who promises to pay the amount of debt as well as the rate of interest. This is what determines the value of the note. If mortgage payments are skipped and the property ends up in foreclosure, the foreclosing party may need to be able to produce this note to prove that they own the debt, making it a valuable document.

It's important to note that commercial mortgage lending only applies to properties that are used for business purposes, rather than residential properties. These particular notes for sale then generate income which can be sold for a lump sum of cash. The seller of the property gains access to the principal amount of money that has already been paid into the real estate, plus any equity that may have accrued. Whether you're thinking about borrowing money to buy your own commercial property or want a form of investment in the real estate market, these mortgage notes are worth learning more about.

Is Your Bridge Loan a “Bridge to Nowhere”?

bridge

Pronunciation: /brij/

Noun

1:  a structure built to span obstacles for the purpose of providing passage over the obstacle.

The definition of a “bridge” connotes a number of challenges that need to be managed successfully before the engineers & politicians can pop open the champagne to christen the bridge a success.

What makes a bridge successful?

1)      Correct identification and evaluation of the nature of the “obstacles” the bridge is intended to ease.

2)      Finding the right group to build the bridge on time and at reasonable cost.

3)      Making sure the bridge works, in that it takes you where you want to go, safe & sound.

The bridge analogy is great when the discussion switches to bridge loans.  A successful bridge loan conquers the same challenges as constructing a brick & mortar bridge over the Mississippi.  (I understand there are over 220 of them.)

First identify the financial obstacles, then determine the right loan structure, and finally make certain the bridge loan takes you to where you need to go.  A bridge loan without a sound exit strategy is about as advantageous as the proverbial bridge to nowhere.  Both inevitably lead to a good soaking!

What is a bridge Loan?

Bridge loans are designed to provide temporary passage over a financial obstacle or rough spot.  Like the concrete bridge that serves a short distance of the entire journey, the bridge loan is designed as a temporary financing strategy, in place only until permanent financing can be arranged.

• Duration for mortgage bridge loans typically range anywhere from 90 days up to 3 or 5 years which is considered short term for real property or mortgage loans.
• The monthly payments are usually calculated on an interest only basis with the principal balance coming due as a balloon payment at the end of term.
• Bridge loan rates are typically much higher than their corresponding conventional counterparts.
• Bridge loan financing typically refers to loans backed by real property or mortgages.
• Some, but not all in the industry use the term “bridge loans” and “bridge loan lenders” interchangeably with “hard money loans” and “hard money lenders”.

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Who uses bridge loans?

Most types of loans can theoretically be “bridged” until more permanent financing is put into place.  Construction loans, commercial loans, rehab loans, mezzanine loans and residential loans can all incorporate bridge features.  The common denominator for the bridge loan  is the temporary nature of the loan.

Some examples:

Residential Bridge Loans:  The home buyer commits to buy a new home but is unable to sell his existing home before the closing date of his new home.  The bridge loan is secured to the buyer’s existing home and the funds are then used as a down payment on the move-up home.  When the existing home sells, hopefully within a few months, the bridge loan is retired with the proceeds from the sale.

Commercial Bridge Loans:   A commercial property buyer is offered a substantial discount on the property’s sales price if he can close within 30 days.   Conventional lenders require more time to underwrite, process & fund so the buyer seeks a bridge loan to meet the closing deadline.

Construction Completion Loans:  A builder runs into construction or project delay.  Their 2 year construction loan is coming due and their current lender has either said “no” to an extension or decided not to extend the loan past the original term.   In this case, the builder seeks an interim or construction completion loan.

Rehab Loans:  The borrower is purchasing a property in sub par physical condition and intends to rehabilitate the property and then elect to either resell it or find a tenant.  After the borrower “flips” the newly refurbished property, he pays back the loan from the sale proceeds.  If the borrower elects to keep the property and rent it out, he or she will seek out conventional financing.

Are bridge loans hard to find?   They can be.  Most lenders offer bridge loans on a custom, case by case basis.  Many bridge loan lenders are private and have specific criteria and restrictions with regard to the type and geographic location of the collateral property.  All the basic best practices of how to find a lender apply equally to bridge loan lenders:  meet many, choose carefully & commit once.   The one thing the lenders will all have in common is their willingness to underwrite a bridge loan increases proportionately with the feasibility & certainty of your exit strategy.

How best to avoid the bridge loan to nowhere? Key to avoiding the “soaker” or the bridge loan to nowhere is to have a strong exit strategy.  The ability to articulate & demonstrate that strong exit strategy to prospective lenders will help tremendously in finding, building and ultimately choosing the right lender relationship and it will help get you the best possible deal.

Notes for Sale – Getting Started in the Note Business.

While listening in on a podcast the other day, hosted by Brecht Palombo, founder of distressedpro.com some of the data points presented during the podcast were quite interesting and worth sharing.

• At the height of the mortgage boom, 14% of property financings were still owner financed, despite easy credit conditions in the marketplace.

• Today, approximately 26% of property transactions involve owner financing, which seems reasonable in context of the tight credit environment we currently face.

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Give or take a percent, these numbers imply a lot of private notes have been and will continue to be structured & created by property owners as a means to get their real estate transaction done. On the other side of the coin, there are many private note investors who are actively searching for more competitive yields in today’s low interest rate environment.   The two should meet. 

Brecht’s guest speaker was Troy Fullwood, founder of Pinnacle Investments and a 10 year veteran in note acquisition.   Relaxed, casual and informative, Troy spoke about getting started in the note business using plenty of real life examples and cases.   Troy also generously shared his strategy for sourcing owner financed notes using specific examples and novel ideas on how to reach note owners.   Finally, the podcast covered what Pinnacle was seeing in terms of rate, term and credit quality in the private market.   A good read/listen that can be found at www.distressedpro.com/blog/podcast-how-to-get-started-in-the-note-business/

A most notable quote from the podcast was  “One of the reasons I wanted to do this call with you today Brecht, was to, how do you say, for lack of a better word stir the pot up a little bit. Those people who are thinking outside the box are going to be able to capitalize on today’s marketplace.”

That’s a great approach.  Notes are being created in owner-financed real estate transactions in ever increasing numbers and will be with us a while.   If you are a real estate agent, mortgage or finance adviser here’s another area of opportunity for you to team up with quality private money lenders advisers who represent local demand for competitive yielding real property notes.   Notes aren’t exclusively the domain of the “big guys”.

Brecht Palombo, founder of www.distressedpro.com a data services site that real estate, investment and banking professional use  to find bank contacts and evaluate the REO and non-performing loan information for US banks.

Troy Fullwood, founder of Pinnacle Investments, a property investment company focused on the acquisition of residential and commercial whole loan assets and owner financed real estate notes.  Since 1997 Pinnacle has been involved in over 12,000 secondary mortgage transactions throughout the United States and Troy is a frequent speaker at industry events and conferences.

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Preparing for Commercial Real Estate Loans from a Commercial Mortgage Lender

Business real estate, indeed, any real estate can be a complicated business. When it comes to commercial mortgages, typically the commercial property itself is used as the collateral in default of payment. Finding a commercial mortgage lenderis easier than many may people think; many banks, even in tough economic times are more willing to extend loans to a business where they may not be willing to extend a loan to an individual. Commercial real estate loans will still need for the borrower to have a good credit score, however, and often seek information about previous and prospective business successes. 

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Depending upon the bank's criteria, when it is time to underwrite commercial real estate loans many companies will look carefully at the property in question. This will often include an inspection of the commercial property, and will take into account the condition, location and upgrades of the property. A commercial mortgage lender may look at what is called loan to value, which is the amount of the loan versus the amount of the value of the property. In addition, the interest rates for a property used for commercial purposes may be somewhat higher than a loan for a residential property.

If you want to open a small business or move to a different property, finding a commercial mortgage lender who is well versed in small businesses is crucial. Many commercial real estate loans for a small business may have stipulations, due to the higher risks that come with operating a small business. However, there are many sources that can help you understand the financial requirements you need. Look online, and see if there are checklists that can help you prepare for getting a commercial loan, and always check into government grants or loans, as this may be a potentially lucrative resource. 

If you want a local commercial mortgage lender, always try to look at the competition carefully. See which company offers the best terms for commercial real estate loans, and which have had the most foreclosures. If possible, make an appointment at several different companies to consult about initial terms, financial possibilities and opportunities. This may give you an added advantage when it is time to draw up the loan terms.

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Notes For Sale - What Are Notes? Who Are Note Brokers?

Are you looking for notes for sale or a list of note brokers Although there are many resources on the internet about this, some of them are not worth the “ink” they’re not printed on! As you know, note brokers are middlemen (or matchmakers, if you prefer) who connect buyers and sellers of one particular financial commodity – the note. The note is a form of debt, usually connected to some real estate. The broker is out there to find an investor who wants to buy a note, and put them in contact with the current owner of a suitable note.

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Any list of note brokers is going to include many people who have either a financial or real estate background (or both) and who are always looking for notes for sale. As the matchmaker, they help facilitate financial transactions that two parties are already in need of, but may lack the resources to put together on their own. In exchange for this valuable service, the broker receives a commission that justifies their time spent. The current note owner gets paid in cash, and the new investor owns an instrument that will pay dividends along the long term. In effect, everyone wins.

 When perusing a list of note brokers, you want to be sure that you are dealing with someone who is on the up and up. The same is true when you are evaluating notes for sale. No matter where he or she started, the note broker is someone you need to be able to trust to come through on a complex financial transaction. He or she should be someone of integrity, with a clear background in real estate, finance, or law, who has a strong reputation in the community. This can also be evaluated through membership in professional associations and organizations.

If you are interested in adding your own name to the ever growing list of note brokers, and finding notes for sale for your own business, it is not impossible for a newcomer to get started. Connect with real estate offices, banks, and others who are involved in the real property market if you plan to deal in those kinds of notes. Of course, there are other options available which might also suit your talent and background. You will have to build a roster of sources that will allow you to select the “juiciest” notes and beat out your competition, which is expected to grow.

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