You aren’t the only one who is having a tough time financing commercial property under $1 MM. Banks just aren’t lending right now on the following types of property:

· Mixed-Use Commercial under $1 MM

· Multi-Family Commercial under $500K

· Retail Commercial under $500K

Even if the properties are income-producing, qualified borrowers just can’t get their banks to do refinances much less any cash-out.

Private money may be the only option if you or your clients have an income-producing property that you are seeking to purchase, refinance, or need cash out.

Why? Private lenders are very active in this space and are looking for mixed-use commercial, multi-family, retail strip commercial under $1 MM.  Banks are not.

Any further comments on this discussion? I’d love to hear from the anyone who may have had recent experience with this property type in the current lending environment. Please share.

I was surprised to learn about a new distressed construction program and a stated income loan program for top-tier professionals.  Although not offering the lowest interest rates, these programs are evidence that investor confidence is improving in these harder to service areas.  Private money and hard money lenders are more liquid and looking for new loan options.

See below for some of the loan programs that my private lenders are making available in 2010.

As we head into 2010, any thoughts on where the values of real estate are going? Can values only go up from here, or do certain real estate sectors still have further to go in some regions?  Please contribute to this discussion.  I’d love to hear your thoughts on investing and lending in 2010.

Posted by Corey Curwick on December 25, 2009

2010 Private Loan Programs:

Eastern and Midwestern States:

OH, NY, MI, NC, TN, PA, IN, IL, MO, KS

Property Type – 1-4 family residential

Loan Amount – $50,000 to $500,000

LTV – Typically Maximum of 70% of as completed value.  Will consider slightly higher for strong client.

Interest Rate – Typically 9.5%

Points – 5% – 6%

$400 documentation fee

Credit Score – Minimum Middle Score of 680

Require Spousal Guarantees

***In Michigan, 700 mid credit score, minimum cash deposit of 10%, and maximum LTV of 65%.

CA, AZ, NV, OR:

Property Type  SFR’s, apartments, income producing

Loan Amount (sweet spot) 50k-500k and will look at deals up to 2M

LTV (as it relates to credit score) 60% max.

Interest rate and points as per loan term 12.5%, 4.5-6 points, 1-2 year term, no prepayment penalty.

Western States:

Residential and Commercial: OR, WA, CA, ID, NV, UT

Commercial only: CO, AK, HI

CONSTRUCTION FINANCING:

We typically require the land to be free and clear. (650 minimum FICO) Max loan amount is around $2m. Loan amounts between $500,000 and $2,500,000. Typically we’ll do the construction loan but will want to be taken out through immediate sale of the property or a refinance by another lender.

COMMERCIAL & RESIDENTIAL REAL ESTATE:

• Residential Loan Amounts up to $1 MM
• Commercial Loan Amounts up to $2 MM.
• Commercial: Well-located, multi-tenant, income-producing properties including: apartments, shopping centers, retail strip centers, mixed use, industrial, and office.  (No single tenant commercial or owner user properties such as restaurants, non-flagged motels and hotels, and convalescent/skilled nursing facilities).
• LTV ratios will normally be in the 50 to 65% range.

• 55% or less LTV, 60 to 65% or less LTC (Total costs include:  land cost, soft and hard costs, construction interest, points and closing costs).
• 9.99% to 11.99% interest only, 4.25 to 4.75 points to us
• Loan Terms up to 5 years

Utah ONLY:

Loan Program #1: Residential properties only.

• Short-term 1 to 2 unit residential, non-owner investment property.
• High Credit Score = Highest LTV ( 720+ Score = 80% to 85% LTV ).
• Max Loan Amount $400,000.
• No appraisal required.
• Loan Terms: 30 to 90 days.
• Interest rates from 12% interest only.

Loan Program #2: Residential and Commercial

• Loan Amounts up to $400,000.
• Up to 60% LTV.
• Loan Terms up to 7 years.
• Interest rate 14%.

California Only:

• Hard Money 50% or less LTV on NOO 1 – 4 units and commercial income properties.
  • 9.95%, I/O, 12 – 36 month terms, 4 – 5 pts, 0 – 12 month prepay.
  • Purchase / Rate & Term Refinances/ Cash-Out Refinances

• Conventional Fannie Mae 1 – 4 unit rehabs for owner-occ OR investors. Finances the lesser of 75% loan-to-cost or loan-to-after-repaired value (for purchases. refinances are AIV). Low ARM and fixed rates.

• Commercial income property loans — apartments, office, retail, mixed-use, storage. Institutional 1sts, or private 1sts and 2nds — doing lots of equity loans as 2nds these days.

• Direct Lender Fannie Mae, conforming loans: We are a direct lender in CA for conforming, conventional, A-paper deals. Our rates are competitive, but aren’t geared towards low-cost at this point.  Where we excel is in fast closings, since we underwrite in-house, and we control the appraisers who are in our AMC, limiting appraisal problems inherent with everyone else. Therefore, we’re a good source for deals that need fast closings at competitive rates, but not no-cost lending.

• USDA Rural 100% financing: SFRs in 14 northern counties in CA qualify completely for the program. Other designated “spots” in other counties available, but they’re rare in L.A., Orange, San Diego, Riverside, and San Bernardino, as well as the 7-county area around San Fran. The program provide 100% financing for qualified buyers of an owner-occ SFR who meet HUD median income guidelines.
  • NO mortgage insurance. Good rates, though slightly higher than traditional FHA or conventional.

• Residential Lot Loans: 25% down on improved, residential-zoned lots for full-doc, A-paper borrowers, purchase and R/T refi only — no cash-out. Rates in the upper-5.00% range, 30-yr term with 3-year balloon, 1.25 – 3 points.

• Super Jumbo Financing:
  • 80% LTV to $2MM, 40-yr amortization + interest-only — 3/1, 5/1, 7/1, 10/1, 15+25 ARMs only
  • 90% LTV to $1.1MM with 10% seller-carry 2nd — same terms as above
  • STATED INCOME — 65% LTV, 12-24 mos PITI reserves, 700+ FICO, must create depository banking relationship with lender, self-employed or top-tier professionals only. Purchase preferred but will consider rate/term and cash-out. This is a really, really nichey product with lots of requirements.
  • 15 and 30-year fixed to $2MM. 75% max LTV to $900k, reduced LTV thereafter.

CA Only:

Loan Amounts $200-$400K

Loan types- Non-owner occupied residential, commercial properties, and rehabs.

LTV as high as 75-80%.

Interest rate ranges between 10.99-13%

It’s been a “feeding frenzy” in commercial real estate.  But even with an incredible loan to value, is it wise to pick up a bunch of deeply discounted commercial space right now? As retail goes online and offices go virtual to save costs, will there be a glut of commercial property on the market in the next 5 years?

Retail will never completely die, as people still need to go and try on wedding dresses and wander aimlessly around shopping malls. However, I do think that the big days of retail are officially over. As consumers become more savvy online, there will be more tire kickers.  And this trend will just grow and grow.

And, it’s easier than ever before for a company to take its office virtual. A friend of mine works for a small company with 50 employees. Several weeks ago, the company mandated that all employees work from home and meet twice a week for a whiteboard session.  With all of the technology and “freeware” in abundant supply and easy to use, this is certainly the future of office.

Granted, office space will remain a necessity for some businesses, but others will be forced by the recession to grow up faster and use low or no cost technology.  Perhaps multi-use, commercial real estate ventures like Noah’s will be the commercial real estate of the future.

The future of industrial commercial seems to be a little more bright. I imagine that it will enjoy fairly consistent growth after the recession blows over. Although small business is temporarily unable to access working capital, once credit returns, businesses that occupy industrial space will rebound.

Please share your insights into the future of commercial real estate. Do you agree or disagree with my assumptions? Please share!

Posted by Corey Curwick on September 27, 2009

The article that Elaine posted from the Washington Examiner is titled, “Second Wave of Real Estate Crisis to Hit Commercial Property Market.”

The author, William Flook, seems to have no idea about what’s happening in real estate. The article asserts that the ‘second wave’ of real estate crisis is ‘about to hit.’ This is like saying social media is ‘about to hit.’

The author of the article pins plummeting commercial values and the absence of financing options as the key catalysts for a “second real estate crisis.” Although the author is correct about the catalysts, I think it’s just been one big real estate crisis, and not a crisis number 1 and a crisis number 2. Would anyone else agree, disagree on this assertion?

One interesting thing to note from the article, was the premise behind it. The tax man is finally starting to feel the pain of declining commercial real estate values. This was pointed out by another LinkedIn member who commented on this article, Todd Phillips, Managing Director at Halcyon Equities.

Investors, private lenders, and hard money lenders have all been conservative about their investments in the commercial sector for quite some time. Demanding lower and lower loan to value ratios and highly favorable positions of leverage on some of the choicest properties; this has been the norm with most of my private and hard money lenders for the past year.

More and more commercial property owners, seeking to refinance their commercial loans, are having to seek out a hard money loan instead of a conventional loan.  Many of them have multiple commercial properties and an extremely high net worth.  With the ever-shrinking number of loan products and lenders, a hard money loan can be the only option for even the biggest commercial players right now.

Any further comments on the “second wave of real estate crisis,” the topic of this article?

Posted by Corey Curwick of Private Money Utah on July 29, 2009 – Leader of LinkedIn Group: Private Money Network

To access previous discussions: http://www.PrivateMoneyUtah.com

I did a post back in February called, “How to Fund a Hard Money Loan Quickly.” Shortly thereafter, I reopened the topic again with a subsequent post called, “How To Get Your Deals Funded Quickly.” A lot of the good tips in the last posting came from John Kutac of Western Capital Partners.

I think this is a great topic to post on because it solicits feedback and starts a dialogue.  For those who seek a private money or a hard money loan, or even for hard money loan brokers, the tips provided in these postings are standard protocol in the private money realm.  Don’t follow these basic rules of engagement, and you won’t get money very quickly, if at all.

Documentation is now pretty much a rule for hard money lenders these days. Have all of the typical documentation required for a conventional bank loan on hand, when looking for quick funds. For an express hard money loan, documentation will make the underwriters job a breeze because then they only have to ‘verify’ the documentation. Years ago, documentation was not required, but with lenders now cherry-picking deals, you must have all of your documentation prepared to submit.

Another important tip for getting your deals funded quickly, has to do with networking.  Find out who is brokering money hard money loans consistently and quickly. Don’t waste time with someone who doesn’t have access to the money sources. Real lenders are hard to find. When I say ‘real lenders’ I mean those who have money to lend and are actively lending. Don’t spin your wheels with lenders who advertise on the internet if you want your deals to fund quickly.

Any other thoughts that anyone would like to share in order to continue the thread on this topic? Input or additional tips are encouraged.

Even with the credit crunch, the highest interest rates in hard money have typically loomed between 16 and 25 percent for the last year and a half.

But it seems that something good is happening in private money. The trend of interest rates in private money is heading downward. Even within the last few months, I’ve seen rates go down significantly.

For example, take a commercial building in Philadelphia.  Certainly not the hottest market for private money lenders.  And, when a building needs additional construction monies, its even harder to find competitive interest rates.

A few months ago, I queried this loan to all of my commercial hard money lenders. All but one decided to pass.  The lender that did issue a terms sheet, quoted the borrower at 18% interest and 20 points. Ouch!

The good ending to the Philadelphia property story is, I was recently able to get a terms sheet for 11% and 8 points. Even three months ago, these terms were nearly impossible to get for a loan request with these characteristics.

So, I’m optimistic about private money interest rates starting to trend downward. Any thoughts? Please leave your comments or thoughts below.

These requirements sound pretty
harsh but they are what they are I suppose. Does anyone else have a
source for construction financing they can share?

What is Crittenden? Crittenden National is a meet up of a bunch of different entities within the world of private money.  Hosted this year in Las Vegas by private money players Western Capital Partners, this was my first introduction to the 2009 Conference.  Because the Crittenden Event is so small, only 250 attendees, its easier to network as compared with a large trade show of say thousands of attendees.

The Conference is not just an opportunity for networking with industry profs.  The meat of it is actually comprised of 6 hours of educational sessions where industry executives are panelists that discuss relevant topics and trends in private and commercial lending.  In these sessions, attendees are able to ask questions to panelists and get insight and feedback.  These sessions are a good opportunity to see what challenges others are facing in the industry and creative ways they are overcoming such challenges.

Some of the attendees and panelists included: Western Capital Partners, NonBankLender, LBG Realty Advisors, North Hill Capital Management, Northwestern Mortgage, and of course Corey Curwick from Private Money Utah!

What a great time. I recommend this event for anyone who wants to know what’s happening in the world of private money.

Posted by Corey Curwick on May 12, 2009

I can’t tell you how many stories I’ve heard where a borrower tried to go before the lender (the judge & the jury) by him or herself and was denied the loan (found guilty). This being said, we have also funded many a loan (court case) by presenting it properly to our lender (the court).

Many times when borrowers are seeking private or hard money they are in a delicate situation. This is where a good broker plays a crucial role in getting a deal funded.  A good broker understands all of the details of the loan request, including the strengths and weaknesses, and is able to present this to the lender in the best way possible.

A story that happened recently is about a client that needed a construction loan for a halfway completed condominium project.  As his broker, we determined that private/hard money was his only alternative for completing the condo project.  We queried his loan request to all of our lenders and luckily we were able to find one lender that was willing to stick his neck out and help our borrower finish his project.

Our lender gave us the initial terms sheet and our client tentatively agreed to the terms set forth by signing off on them.  However, without consulting us first, the client decided to call the lender himself to see if he could negotiate the interest rate down. BIG MISTAKE.

In the course of the short phone call with our client, the lender began asking him questions about the project that were “delicate” questions, to say the least.  These were certainly questions that we as the broker should have answered for our client.  Back to the analogy of the court case, our lender heard some things that gave him a bad taste in his mouth. Several hours later, the lender called me back and said he was withdrawing the initial terms and had decided NOT to do the deal. GUILTY!

Because our client decided to go straight to the lender without our representation, he lost the terms that were on the table and as of today, his project is still sitting in limbo. This is a valuable lesson for all of us. Pick a good broker that’s been in the private/hard money lending game for a long time. This is your best chance for getting your deal funded (or winning your case!).

Posted by Corey Curwick on April 6, 2009
For more on this topic: http://www.PrivateMoneyUtah.com