Tag Archives: commercial real estate loan texas

Understanding Loan to Value Ratio for Hard Money Loans Arizona

May 27, 2018Uncategorizedbad crdit, bad credit, commercial real estate loan texas, commercial real estate loans in texasbigdaddydennis

Understanding the loan to value ratio for hard money loans Arizona is critical to knowing how much money you can request. Without knowing the LTV you have no idea what lenders would be willing to fund.

Because hard money loans are secured with real estate, it is critical to understand how lenders determine the dollar amount that they are willing to lend. This determination process uses the loan to value ratio which is the loan amount divided by the property value. In most cases a hard money lender will fund up to 65% to 75% of the current property value. What this means for anyone who wants to use funding from hard money loans Arizona to make a purchase is that they must have cash or other financing for the remaining 25% to 35% of the purchase price.

It is important to understand what the loan to value ratio is on the property that you are purchasing so that you can be prepared to pay the remaining balance to complete the purchase. Some borrowers will seek a partner to contribute the remaining funds or others will use other properties as collateral to borrow the remaining funds.

On some rare occasions lenders will use an alternative ratio called the after repair value. This is basing the value of the property on its potential value after the buyer makes the repairs. It works in the borrowers favor as he or she is able to get a larger amount for the hard money loan. The down side is that this type of loan poses a greater risk to the lender who is likely to demand that the borrower pay a higher interest rate as compensation.

Hard Money is Always Secured

Understanding that hard money loans Arizona are all based predominantly on the value of the property being purchased is Important. It is also important to know that the lender will only offer a percentage of that property value as a way to ensure that the property is always worth more than the balance of the loan. This is so that in the event of a default on the loan, the lender can sell the collateral property and recover the full loan amount.

More Risk=More Cost

Hard money lenders are in business to make money just as real estate investors are buying properties to make money. All lenders calculate the amount of hard money loans Arizona in the same way. The only reason that some are willing to offer a higher percentage is because they are willing to assume a greater risk. And in return for that greater risk, the lender is going to require that the borrower pay a higher interest rate on the loan. But if you have no other way to secure the funds needed to close the deal, then paying a higher interest rate is better than losing the deal all together. You will always have the opportunity to refinance the loan in a more traditional manner at a later point in time to improve the interest rate.

The Dark Side Of Commercial Real Estate Loans In Texas – What are the Drawbacks Investing?

November 3, 2017Uncategorizedcommercial real estate loan, commercial real estate loan in texas, commercial real estate loan texas, commercial real estate loans, commercial real estate loans texas, texas commercial real estate loansbigdaddydennis

If investing in commercial real estate properties were easy and a sure thing, then everyone would be able to do it successfully. However, there is a tremendous amount of risk inherent in pursuing commercial real estate loans in Texas, considering the number of factors that are outside of the control of the investor.

There are most definitely opportunities present for anyone to get involved in commercial real estate. So why doesn’t everyone do it? Because for every reward, there is also a great deal of risk. Only those who are able to manage the risks, while capitalizing on the rewards are going to be successful in putting a commercial real estate loan to work for them with an investment property.

One of the biggest drawbacks of pursuing and following through with a commercial real estate loan and the property that will be acquired with it is the time that the owner is going to have to commit. With a commercial property, you are going to be dealing with many different leases of different time frames and terms, shared areas that are the responsibility of the owner, and an image to uphold. All of this takes a tremendous amount of time and energy. If a borrower has never owner commercial property before, the amount of time it takes for even the simplest of maintenance tasks is most likely to surprise.

Another hurdle that investors and owners will need to overcome with commercial property is the realization that it is impossible to do it all yourself. With the amount of maintenance, as well as their complexity, an owner is going to need commercially certified professionals. This often comes as a surprise to many owners who like to take care of things themselves. Not only does this establish a further layer of liability protection, but it will also save time. Just because you have the commercial real estate loan on the property does not mean that you should try to save on costs by lowering maintenance standards.

Commercial properties are also different than residential properties and this can be a drawback for investors that are not properly prepared for what that means as far as foot traffic is concerned. The reality is that the volume of people coming in and out of a commercial property is much greater than in a residential property. While this might seem like a no brainer, the implication is that the potential for damage to the property or to those who frequent it go up significantly. Everything from a minor accident in the parking lot to a significant injury to a patron has the potential to happen. This additional risk is often not realized by potential owners until it is too late.

Are there ways to mitigate the risks associated with my commercial real estate loan and commercial property in Texas?

Each state handles the issue of insurance differently, so it is critical to understand what the local laws are in regard to liability, maintenance fees and licensing. The last thing you want to have happen is to lose your livelihood and open yourself up to a lawsuit over something that you did not know was an issue. The best way to lower the risk and overcome these draw backs is to seek the advice and help of someone who has dealt in commercial real estate and commercial real estate loans before.

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

Interest and Fees You Will Pay for Commercial Real Estate Loans Texas

September 20, 2017Uncategorizedcommercial real estate loan, commercial real estate loan texasbigdaddydennis

Considering the long and arduous application process, you might be happy to simply get approved for any commercial real estate loans Texas, but you need to evaluate the cost of each loan. Selecting the loan with the lowest interest and fees will save you a great deal of money.

Whenever you are shopping for a loan, the first item that you look at is the interest rate and that is also important on commercial real estate loans Texas. The rate that you will be offered is going to depend on the type of business that you are in, the financial condition of your business and also you creditworthiness. In some cases your business will not have enough credit history to secure the loan and you will need to provide your personal credit and financial information to secure a loan as a guarantor on the loan.

The interest rate on commercial real estate loans Texas tend to be a bit higher than on a residential mortgage because of the increased risk that it represents to the lender. Because the value of commercial property is more volatile, lenders want to get a little bit better return on their investment. It is not uncommon to find rates ranging from 3.5% to around 6% depending on the type of lender that you are working with. The loan to value rate of the property can also influence the interest rate. The more money that you put down the lower the percentage of the price of the property you are financing. This means that the lender is willing to give you a slightly better rate. The primary reason is that they are concerned with the property holding enough value to cover the outstanding balance on your loan should you default. So the larger down payment means that you have instant equality and the lender is more confident that they will always be able to recover their investment in you.

Understand the Fee Structure and Payment Timeframe

In addition to paying interest you will pay fees to get commercial real estate loans Texas. You will be required to pay for the property appraisal, legal costs, the loan application fee, the loan origination fee and also the survey fee. Some lenders want these fees to be paid prior to the loan approval and others will simply apply the fees annually. If you are not sure that you will qualify for a loan then you will want to be careful to select lenders who will waive the payment of fees until after the loan is approved. Also, you will need to pay the appraisal and survey fees to all lenders as they are legally bound to complete those tasks themselves and cannot “share” the appraisal or survey documents.

Know the Total Cost of Borrowing Money

There are many terms and costs that are unique to commercial real estate loans. Knowing what all of these terms mean and how they will impact your ability to make payments is important. But the most important factor is knowing the total cost of the loan that you are requesting. Adding all of the fees to the interest will allow you to better compare your options and select the loan that is truly the best deal to meet your needs.

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

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

Mistakes to Avoid When Applying for Commercial Real Estate Loans Texas

September 20, 2017Uncategorizedcommercial real estate loan, commercial real estate loan texasbigdaddydennis

Understanding the process for securing a commercial real estate loan Texas will help you to avoid wasting time and being declined. The process requires more than most business owners grasp or are prepared for.

Businesses can seek a loan for many uses but one of the largest loans that you might be seeking is also the most complex. Seeking a commercial real estate loan Texas is a process that needs to fully research and understood to ensure that you are successful in getting your loan and also that you get the best loan to suit your needs. Avoiding a few of the most common pitfalls along this journey can insure that you enjoy a successful application process and can purchase the property that your business needs. The first step in the process can be one of the most critical. You need to shop for the right lender who is offering terms that fit into your budget. This also means that you will need to be familiar with the terminology of commercial real estate loans to be able to accurately compare the terms being offered. It is also important to remember that even though you have an existing relationship with a bank, you will want to explore other options to seek what is currently available.

Your next selection can be equally as important as the lender that you select. As with any legal document, you will want to be certain to have a lawyer review the agreement prior to signing it. Selecting a lawyer with experience working in commercial real estate loans Texas is critical. This will insure that the loan paperwork is in order, that you are getting the deal that you asked for and that the terms are fair and legal.

Know What You Can Afford

You have obviously reviewed your business finances to be certain that you are ready to take on a commercial real estate loans Texas, but you need to have a strong plan in place. Your business plan is a good starting point as that was drafted as a guideline for the growth and progress of the business. But now you need to include how you are planning to pay off the debt of your new building. This might include reducing other costs and expenses, increasing your product line or offering products to a larger market. Not only will this help you to be certain that you can repay the loan but it will also help to give your lender confidence in your ability to make the payments.

Be Prepared On All Fronts

As a business owner, you are familiar with the stresses brought on by the ever changing business landscape. For this reason, you need to be very well prepared both financially and professionally. Having cash on hand for unexpected expenses or to cover the cost of the fees of your loan is important. This planning also demonstrates your financial responsibility to your lender. In addition, you need to have all of your financial documentation in order. This includes all of the profit and loss statements, bank statements and balance sheets current and available for the lender to review. It is also important that you have your personal finances in equally good order. These could be important if your business has little credit history or is only a few years old. Avoiding these common issues will make your application process much less stressful and will increase your chances for a loan with great terms.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

The Process for Commercial Real Estate Loans Texas

September 20, 2017Uncategorizedcommercial real estate loan, commercial real estate loan texasbigdaddydennis

As the name implies commercial real estate loans Texas is the means that you will use to borrow money to purchase a business property. But what you might not know is how the process works and how you need to prepare.

When you begin to look at commercial real estate to purchase for your business, you will find that the prices are quite high. The only reasonable approach to purchasing a property is to get commercial real estate loans Texas. But don’t fool yourself into believing that this is just like getting your home mortgage loan only a little bit larger. The process is much more complex and will require careful and detailed planning on your part to be successful.

The first important fact to know is that commercial real estate loans Texas are secured by a lien on the property that you are buying. This is a document that gives the lender the legal right to seize the property if the borrower does not make the payments or fulfill any of the other terms of the loan agreement. In some cases there are very detailed clauses in the lenders agreement about the types of other loans that the borrower can enter into or the types of business partnerships or agreements that they can enter into during the time frame of the loan. This is just one reason that you would want to have any loan document reviewed by your legal professional prior to signing it. If you fail to meet any of the terms, even those that are not associated with making the payments, you could be in violation of the agreement and face a foreclosure.

In addition to the security of holding a lien on the property, the lender is going to require that you build instant equity in the property by making a down payment of 20% to 30% of the cost of the property. This is because the value of commercial real estate is more volatile than residential property. The economy can cause the price to fluctuate more quickly and drastically and the lender wants to be certain that the value of the property is always in excess of the loan amount. This insures that if the lender is forced to seize the property, then they can sell it to recover their full investment.

Learn the Terminology

In order to fully understand your commitment to the lender, you will want to take some time to learn the terminology that is common in commercial real estate loans Texas documents. This is how you will learn about the time period that you have to repay the loan and also how you will determine the total cost of the loan, the interest and the fees.

Have Your Documents in Order

It is also important that you have all of your businesses financial documents in order prior to applying for a commercial loan. You will need current and historical bank statements, rental agreements, balance sheets and tax records. If the business has no credit history, is only a few years old or has no previous loans then you will also need to be prepared to submit your personal financial information to the lender. This could be used to determine your creditworthiness to personally guarantee the loan for the lender. Knowing this information can help to make the process less stressful and more successful for your business.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Understanding the Repayment Terms of Commercial Real Estate Loans Texas

September 20, 2017Uncategorizedcommercial real estate loan, commercial real estate loan texasbigdaddydennis

It is important to understand that the repayment terms of commercial real estate loans Texas are not like a personal mortgage for your home. Not only is the dollar amount larger but the terms are often much shorter.

Many business owners have some very unrealistic expectations when they start to look at commercial real estate loans Texas. They are expecting the same type of terms that they would get on a residential mortgage and are alarmed when they learn that is not the case. Where a residential real estate loan is typically 30 years, commercial real estate loans are broken into two main categories regarding their length of repayment term. The shorter of the two types is an intermediate term loan and it is three years or less and the longer term loans range from five years to twenty years. So the shorter term can make it much more difficult to repay the large loan amount needed for a commercial property purchase.

Another difference is that only some commercial real estate loans Texas are amortized. An amortized loan is one in which the loan gets repaid in fixed installments until you have paid back the entire amount. It is the same type of payment that most consumers have on their home mortgage. You make payments each month, at a fixed amount, which covers both principle and interest. But many commercial real estate loans Texas are not amortized so at the end of the term you are facing a balloon payment. The balloon payment is usually quite large but the reason many business owners elect to use this type of loan is that the monthly payments are lower. During the course of the loan, the borrower is paying only the interest on the loan amount so the balloon payment ends up being almost the entire amount of the principle. When this occurs, most businesses are forced to refinance the balloon amount to a new loan.

Beware of Prepayment Terms

As a homeowner, you are looking forward to any opportunity to pay a little extra on your mortgage to save some money on interest. But that is not normally the case when you are talking about a commercial real estate loan. There are several clauses that are added to the contract to protect the lender from the loss associated with an early payoff. A prepayment penalty is a fee or penalty that is calculated by multiplying the current outstanding balance by a specified prepayment penalty. An interest guarantee is a specific amount of interest that the lender is entitled to even if the loan is paid off early. And a lockout states a specific time period in which the borrower cannot pay off the loan. It could be a stated as a 5 year lock out and the borrower would need to wait longer than 5 years to pay off the loan.

Understand What You are Agreeing to Prior to Signing on the Dotted Line

There are many differences between a commercial real estate loan and a residential real estate loan. The biggest difference is the dollar amount but the differences in the terms are what you need to be aware of. Knowing the different repayment terms and clauses will help you plan how and when you will repay your loan.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tips to Help Manage Your Expectations When Seeking Commercial Real Estate Loans Texas

September 20, 2017Uncategorizedcommercial real estate loan, commercial real estate loan texasbigdaddydennis

Getting commercial real estate loans Texas is more complex than you might expect. Knowing these few tips will help you to understand what to expect and how to succeed when submitting your application.

The greatest frustration for most borrowers who are new to commercial real estate loans Texas is the time frame that it takes to complete the application process. Most lenders will paint a rosy picture about getting you a response in just a few days and that the money could be in your hands in just about a month. That is pretty much just salesmanship to get you to complete the application with them. In most cases the lead time to get funding is around three months. Some lenders will say that is only if the borrower does not follow the application process to the letter, but there are many forms and documents required.

You also need to expect the fees that you will be charged for the loan application, the loan origination and also survey and appraisal fees. All of these are part of the cost of getting commercial real estate loans Texas. But what you also need to know is that you don’t need to pay all of the fees before you are approved for the loan or at least have a good chance of getting the loan. A lender will issue a term sheet which is a good faith estimate of the fees and terms that would be included in your loan documentation. This is a good sign that you are on your way to getting the loan you requested. Once you see that document, then you can feel a little more secure in paying for the appraisal fee and the loan doc fees.

When it comes to the appraisal fee, you might be tempted to have the appraisal done yourself to try to save a few bucks. This could make a lot of sense if you are applying to a few banks and want to pay for only a single service. But commercial lenders are required by law to request their own appraisal. So don’t get talked into paying an extra appraisal fee thinking it could save you time or money.

Beware of Individual Lenders

When you are reviewing your options for commercial real estate loans Texas, be sure that you know who you are doing business with. There are many dishonest people who will claim to be an investor only to get you to pay high fees to apply for a loan. They might promise that the fees are all rolled back into the loan or that they offer a much lower interest rate than a bank but it is all a scam.

Pick the Right Size Lender

Matching the size of your loan request to the size of the lender will make the process go much more smoothly for you. Taking a small request to a national bank who lends billions each year is only going to frustrate you. You will be thrown into a process that is very detail oriented and you might not even speak to the person who is you loan officer. Likewise, taking a huge request to a small local bank is likely to get you very little help or a loan. They will be overwhelmed with the large request and not have the processes in place to work at the scale that you need. Making a good decision about a lender is the first step in a successful loan request.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Key Terms to Understand When Considering Commercial Real Estate Loans Texas

September 20, 2017Uncategorizedcommercial real estate loan, commercial real estate loan texas, commercial real estate texasbigdaddydennis

Commercial real estate is valued differently than residential real estate. Knowing some key terms will improve your understanding of commercial real estate loans Texas.

Residential property value is determined greatly by the location and the size of the property as well as the amenities and finishes. But commercial real estate is a very different entity. The greatest value in a commercial property is the usable square footage. The ability to make money through the use of the property is all that really hold value so the current condition and features are not really as important as they would be in a residential property. Knowing and understanding the key terms used when evaluating commercial real estate will help you to better understand commercial real estate loans Texas and why certain properties hold more value than others.

Net operating income is a critical factor in determining the potential value of a commercial property. NOI is determined by evaluating the property’s first year gross operating income and then subtracting the first year operating expenses. As you would expect, you want to have a positive NOI. When a property makes money in its first year it is a strong indicator that it will continue to turn a profit and that is what increases the value of a commercial property. When a property has a positive new operating income then that property is going to be great collateral for commercial real estate loans Texas.

Cap rate is a term that is also used to evaluate an income producing property. This is an important term if you are purchasing a property and will be using part of it for your business and renting out the remaining portion of the property. The cap rate is used to project the net present value of the future cash flow generated by the property. Again, a property that is demonstrating good income is always going to be favored in commercial real estate loans Texas over a property which is not providing as much income. Purchasing a property with a strong income history will increase your potential for a commercial loan at a good interest rate.

Know What Lenders Are Looking For

When you are seeking a loan on a commercial property, lenders are concerned with the financial stability of your business and also your creditworthiness. But they are equally concerned with the value of the property that you are purchasing. Not only are they looking at the current market value but they are also looking at the earning potential of the property.

Finding the Best Property for Your Needs and the Loan Criteria

When you are shopping for a commercial property the requirements are somewhat different than shopping for a residential property. The residential property must meet only your needs. But a commercial property is often more desirable if it meets your needs as well as the needs of your lender. That means that if the property can generate income to decrease the risk on your loan then it is a better choice. You might not have considered being a landlord but having tenants who are helping to pay your monthly mortgage can be a big advantage for you.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Level 4 Funding Private Hard Money

Arizona, California, Colorado, Florida, Idaho, Oregon, Texas and Washington

Tag Archives: commercial real estate loan texas

Understanding Loan to Value Ratio for Hard Money Loans Arizona

Understanding the loan to value ratio for hard money loans Arizona is critical to knowing how much money you can request. Without knowing the LTV you have no idea what lenders would be willing to fund.

Hard Money is Always Secured

More Risk=More Cost

The Dark Side Of Commercial Real Estate Loans In Texas – What are the Drawbacks Investing?

Are there ways to mitigate the risks associated with my commercial real estate loan and commercial property in Texas?

Interest and Fees You Will Pay for Commercial Real Estate Loans Texas

Considering the long and arduous application process, you might be happy to simply get approved for any commercial real estate loans Texas, but you need to evaluate the cost of each loan. Selecting the loan with the lowest interest and fees will save you a great deal of money.

Understand the Fee Structure and Payment Timeframe

Know the Total Cost of Borrowing Money

Mistakes to Avoid When Applying for Commercial Real Estate Loans Texas

Understanding the process for securing a commercial real estate loan Texas will help you to avoid wasting time and being declined. The process requires more than most business owners grasp or are prepared for.

Know What You Can Afford

Be Prepared On All Fronts

The Process for Commercial Real Estate Loans Texas

As the name implies commercial real estate loans Texas is the means that you will use to borrow money to purchase a business property. But what you might not know is how the process works and how you need to prepare.

Learn the Terminology

Have Your Documents in Order

Understanding the Repayment Terms of Commercial Real Estate Loans Texas

It is important to understand that the repayment terms of commercial real estate loans Texas are not like a personal mortgage for your home. Not only is the dollar amount larger but the terms are often much shorter.

Beware of Prepayment Terms

Understand What You are Agreeing to Prior to Signing on the Dotted Line

Tips to Help Manage Your Expectations When Seeking Commercial Real Estate Loans Texas

Getting commercial real estate loans Texas is more complex than you might expect. Knowing these few tips will help you to understand what to expect and how to succeed when submitting your application.

Beware of Individual Lenders

Pick the Right Size Lender

Key Terms to Understand When Considering Commercial Real Estate Loans Texas

Commercial real estate is valued differently than residential real estate. Knowing some key terms will improve your understanding of commercial real estate loans Texas.

Know What Lenders Are Looking For

Finding the Best Property for Your Needs and the Loan Criteria