Commercial Banker Discusses Typical Loan Scenarios for Private Money Deals.
Commercial real estate, private money loans also know as hard money and or bridge loans are becoming more prevalent as borrowers enjoy less red tape, quicker closings and more common sense underwriting than conventional financing provides. Typically though, borrowers still relay on this type of financing as an option when conventional sources are not available.
The increased speed and flexible underwriting comes at a steep price with interest only rates often in the teens, 3- 6 points being the norm and loan terms being relatively short at 12 36 months.
Why would owners pay such high fees/rates? In short, because it makes sense for them based on their current situation. Below are examples of transactions where it made sense for our borrowers or go the hard money route.
Grand Rapids. Small office building that was previously used as the owners business headquarters. The owner wanted to move his business out and convert the property into a multi-tenant building (investment property). To accomplish this he needed to create common areas, alter the entrance and add an elevator to the property. He needed a substantial amount of cash to make these improvements happen.
The problem was four fold: Personal credit was in the 400s, the owner had virtually no liquidity, the owner had no development experience and the year to date, profit & loss and balance sheet showed that his business was losing money. These issues eliminated any type of conventional financing.
The owner knew that the property would be a cash cow, and drastically improve his overall financial position, if he could get the money needed to complete the project. For the lender the deal made sense as well, due primarily to the low loan to value (High equity).
In addition, the exit strategy was simple, after the building was renovated and leased out, the property would stand on its own and qualify for conventional finance base off the new cash flow.
Metro Detroit. Local business that owned six retail buildings and had its loan called (forced balloon) prematurely by its bank. The loan was called primarily because the business had lost money for three years in a row. The bank was nervous the borrower would go out of business. The business was forced to seek alternative financing.
Besides the above, multiple conflicting partners further complicated the matter and made conventional financing that much more difficult to obtain.
However, the properties where in solid condition and had much equity. The borrowers where able to leverage the equity and refinance their existing mortgage and roll in other business debt into the private money loan.
The result was increased cash flow enabling the business to regain profitability even though their rate was much higher than the previous mortgage.
Cleveland. A real estate investor was in the process of purchasing a 40,000 square foot mixed use building. The seller became frustrated and began to doubt the buyers ability to purchase the building as the conventional lender became cautious and dragged the process out. To the buyers shock, the lender pulled out, two weeks before the scheduled close.
The primary issue for the conventional lender was that although the current net operating income could support the proposed loan, the historical (average of the last 3 years) net operating income could not meet the traditional banks Debt Coverage Ratios.
The buyer, fearing that he would lose the property and money he had already put into the deal, used private money to meet the closing schedule. The exit strategy to pay off the private money loan was to simply continue to document the current net operating income and refinance the debt into a conventional loan one year out.
These are typically private money scenarios, others include foreclosures, distressed properties, recent bankruptcies, lack of existing cash flow, partnership buy outs, land contract refinances, need for speed,etc.
Common positive traits that make the loans financeable include loan to values less than 60% and clear exit strategies on how the borrower is going to pay back the private money lender.
Yes, hard money is expensive, but can be a viable option given the right (Or wrong) set of circumstances.
Jeff Rauth is President of Commercial Finance Advisors, Inc. based out of Bloomfield Hills, MI. He specializes in Commercial Real Estate Loans between $100,000 - $5,000,000. Offers unique loan programs such as Commercial 30 Year Fixed, private money loans and 90% non SBA financing. He can be reached at 248 990-7602.
jrauth@cfa-commercial.com www.cfa-commercial.com.
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The Purpose Of A Medical Power Of Attorney Form
The main purpose of a medical power of attorney form also known as a health care power of attorney form, is made to give some one the right to control the decisions relating to your medical care if you can not communicate those decisions yourself.
You can also use a medical power of attorney form to establish additional, non-exclusive means for an individual to exercise his or her right to withhold, withdraw, and give consent to medical treatment. This can include mental health treatment, when you can no longer have the capacity to understand or communicate health care decisions.
Another reason to use a medical power of attorney form to protect your wishes to be left on life support. If no medical power of attorney form is declared your present condition is the only factor is whether the health care agent is given authority to take you off life support, as stated in law with the exact definition under G.S. 90-321 article 90 chapter 321.
Your medical power of attorney form will be effective once your physicians decides in writing that you lack the mental capacity to make health care decisions.
Your health care power of attorney form will not be legal binding until you meet two requirements. You must have two "witnesses" sign the document and you must have the health care power of attorney form notarized by a notary.
Now that you have your health care power of attorney filled out, two witnesses signed it, and you had it notarized then send a copy to your doctor, your family members, your attorney, etc. The original document is your own personal copy, keep it where it can be found. Some suggest you talk with your family and physician about your wishes and have them known and understood before the need arises.
Nicholas Fagan is proud to be the author of
http://legalformsbank.biz where you can download do-it-yourself legal forms, books, and kits. Download your state's specific Medical Power Of Attorney Form also known as a health care power of attorney form. Download here
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How To Help Cancer Charities With Your Credit Card
Shopping, meals and holidays are just some of the items we put on our credit cards. But credit card spending does not have to be selfish. Credit card holders can use their credit cards to support worthwhile causes such as charities.
There are several ways of doing this. Credit card owners can donate to different charities using their credit cards or they can choose a charity credit card to give their chosen charity a donation every time they spend.
How Charity Cards Work
Most charity cards donate in two ways. The first is a lump sum donation given to a charity when someone first takes out a charity card. Additional lump sums may be donated if people keep the card or continue to spend on the credit card.
The second method is to donate a percentage of the money spent by the cardholder to the chosen charity. This can range from 0.25% to 1% of the amount spent, depending on the deal and the card chosen.
Giving To Cancer Charities
Cancer is a major killer in industrialised nations and so it is hardly surprising that a number of charities have launched their own credit cards to help their charity efforts. Many of these are supported by large banks.
Cancer Research UK is the UK's largest cancer charity. The organisation's credit card is supported by Halifax and works like other Halifax cards. There is no annual fee and the card offers a low balance transfer fee for six months. Halifax donates 0.25% of money spent on the card to Cancer Research UK.
Another cancer charity has raised 1,000,000 with its charity card. The Breakthrough Breast Cancer Charity Card is sponsored by MBNA. The purchase donation is the same as that offered by the Cancer Research credit card. However, MBNA also offers an additional donation for online applications.
Other Ways Of Giving To Charity
Charity credit cards work well for those who spend regularly on their credit cards. A donation rate of 0.25% means that 25 pence of every 100 spent goes to the charity. Some people may find that donating the proceeds of a cash back credit card (which gives more than 0.5% of annual spending in a lump sum each year) may be another good way to help a charity.
Shopping Around
As with other credit cards it is worth looking around for the best credit card deals for charity cards. Many charity cards offer 0% balance transfer rates and purchase rates for fixed periods. Some offer low standard interest rates as well.
There are many websites that offer comparisons of credit cards and charity credit cards. The sites look at balance transfer and purchase rates, introductory offers, standard interest rates and other incentives for credit card buyers. Shopping around allows people to get the best deal for themselves and still contribute to a good cause.
Joseph Kenny writes for CardGuide.co.uk, with the latest 0% balance transfers, and more credit info in the credit card guide. Visit today:
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