Arizona Short Sale Specialist: commercial real estate

Friday, June 24, 2016

Commercial Mortgages: How To Evaluate Your Eligibility

Before you consider commercial mortgages, it is important to know what you need to qualify for one. Lender requirements are often just the beginning.

Commercial mortgages i.e. non-residential mortgages are nothing to sneeze at. In other words, you’d be surprised how much of an impact commercial mortgages have on the overall financial future of companies. Consequently, when it comes time to enter the vast world of non-residential mortgages, it is extremely important to your eligibility. Of course, you may be asking yourself, aren’t non-residential mortgages loans similar to most mortgage loans? Well, obviously the answer to that question is no.

In general, non-residential mortgages are viewed as high-risk loans for most lenders, banks, and insurance companies. Due to this industry fact, most lenders or banks have several requirements that a borrower must meet. Moreover, if a borrower is unable to meet all the requirement set out by the lender or bank then there simply is no commercial mortgage in that borrower’s future. At first glance, this may should a little harsh, but as previously mentioned these particular mortgages have a direct impact on the future of the company, which means the borrower’s ability to meet their repayment terms often rest on these requirements.

At this point, you may be fearful of your lender’s requirements for commercial mortgages. But, you shouldn’t be. Your eligibility and your potential lender’s expectation do not have to be at odds if you know what you are up against.

Understanding Your Lender’s Expectations For Commercial Mortgages

Thus without further ado, these are the standard requirement for most commercial lenders—clear documented property value that is equal to the value of the mortgage, a steady net property cash flow and a named guarantor of income and assets.

A clear document property that is worth the mortgage is just another way to ensure that there is a loan-to-debt ratio that is acceptable. Typically, this means that a minimum of 75 percent for a non-residential loan.

A steady net property cash flow is just the long way of saying that your business income needs to be more than your carried debt—at least 20 percent more to be specific. Lastly, a guarantor of income and assets is a fancy title for, generally, the business owner. But, nevertheless, a guarantor of income and assets is someone who agrees to pay in the event of the business defaulting. With a guarantor, it is important to note that most lenders will require the standard financial documentation (credit history, personal income, other assets, etc.) to verify that the person left potentially holding the bag can, in fact, pay.

Avoid the Pitfalls of Commercial Mortgages

Now that you know what is required of you for a non-residential mortgage make sure you avoid the pitfalls along the way. This means plan, plan and plan some more. As a future commercial property owner you should always have a clear vision for that property, you should make it a point to shop around before choosing a lender, you should clearly care about the interest rate but make sure it isn’t the only thing you care about and finally make sure there is a true financial future in the property you seek. Taking the time to do all of the above will ultimately save you from unnecessary hardship.

Dennis Dahlberg Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
www.Level4Funding.com

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.

Commercial Bridge Loan and You: What You Need to Know

Dreaming of an Investment Property? Well, find out if a commercial bridge loan is your dream come true or a nightmare.

In any industry things can move quickly, commercial real estate or investment properties are no different. Sometimes, it is your best interest to move quickly with a purchase. For instance, say you are interested in a foreclosed property time is usually of the essence i.e. you need to move quickly in order to purchase said property before someone else does. This particular scenario is when most commercial buyers consider applying for a commercial bridge loan. Other instances where many companies looking into bridge financing is when their current mortgage is due and they have yet to find or rather secure a replacement mortgage or if a company needs to cover shortfalls in regards to general capital say for an upcoming balloon payment.

If you are not quite sure what a bridge loan is? There’s no need to panic, as you will become very familiar with this kind of commercial loan, especially if you are interested in moving fast on future investment property. Thus, without further ado, a bridge loan, as suggested is a quick fix to financing. In essence, this particular type o f loan is a short-term loan (can over a period as short as two weeks or up to three years) and it essentially gets its name from bridging the gap between until long-term financing is secured.

Generally, a commercial bridge loan is not overly complicated or difficult to apply for. Nevertheless, the real issue with this particular kind of commercial loan is that for all its advantages such as a possible lack of prepayment penalty, there are definitely some setbacks to this kind of financing options. Thus, it is important that you manage your expectations when looking for short-term financing.

Managing Your Expectations with a Commercial Bridge Loan

Of course, managing your expectations may sound daunting, but what this really means knowing what you are getting out a commercial bridge loan. In other words, you are getting short-term solutions at a higher and more expensive interest rate. Moreover, as previously mentioned, understand your definition of short-term financing. If you need short-term financing but do not fall within the standard timeframe, then it’s probably time to get creative versus applying for a bridge loan for your commercial property or business. Lastly, it is common practice to pay off or repay your short-term financing in full upon receiving your replacement loan-term capital (new mortgage loan, new tenants, refinancing or selling and purchasing) and by time the necessary improvements have been made. Clearly, this common practice of repayment in full as soon as possible makes perfect sense due to the higher interest rates and overall costs of utilizing a non-residential bridge loan.

Learn More

Ultimately, if you still have questions or think that a bridge loan i.e. short-term financing will work for your commercial needs then it never hurts to do your own research in addition to speaking with a lender that has experience with non-residential bridge loans for more details.

Dennis Dahlberg Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
www.Level4Funding.com

111 Congress Ave |Austin | Texas | 78701

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.