Dennis Dahlberg - It Can't Get Better Than This!

Thursday, March 29, 2018

Commercial Lenders

Before you go in search of your first commercial lender, you need to determine just which sector of this lucrative investment strategy you are going to invest in. Let’s look at one of the most popular CRE investments—offices—and find out what’s hot for 2018 and where savvy investors are plunking down their chunk of change in order to increase their ROI.

And once you’ve developed a plan, stick to it. Many an investor has let their limbic system, the emotional overriding component of their brain, waylay them from their chosen investment strategy. So, let’s take a look at offices and see if this might just be the CRE investment strategy that you’ve been looking for.

The office building asset class accounts for about 20 percent of the total CRE market. This segment of the market can be volatile, so it’s important to know just what to look for in this arena. The overall economy is an important consideration as well as the projected job growth when choosing a particular market. Look for a declining vacancy rate and a rising absorption rate. Include the surrounding communities in your assessment as they will have a strong impact on your strategy and market. According to Statista, vacancy rates in office space are forecasted to decline from 12.9 percent in Q4 2017 to 12 percent in Q2 2019. In the first quarter of 2017, office space beat out every other segment in commercial construction starts including retail, warehouse, hotels, amusement and parking garages with a whopping 6.6 billion.

Office assets are usually assigned a quality rating, similar to multifamily units. Their standards can vary depending on the local market, but will be important to your commercial lender.

· Class A: These high-end properties are usually recently built or extensively remodeled. They usually have high visibility and are within easy access to major amenities. Core focused REIT and pension funds tend to veer towards this type of office investment.

· Class B: These are usually older buildings that may require some minor renovation. These are fairly popular among commercial lenders, particularly turn-around investors and private equity groups.

· Class C: These generally require some major capital investment for improvements. They are also not in very desirable locations and are typically used for redevelopment opportunities.

And just what cities have the highest rents? Hong Kong is king with a price of $255.50 per square foot. New York City comes in second with a price of $153, San Francisco in fifth with $105 and Los Angeles edging into 10^th place with a price of $73.

Co-Working Spaces is a growing consideration in this market.

While this type of office space was once considered the go-to for freelancers and small corps, times have changed. Big businesses are using this type of workspace in order to get their feet wet in a community before relocating. According to U.S. News, CBRE reported that co-working in America is experiencing an approximate five-year compound average annual growth rate of 21 percent.

Some investors are turning to REITs in order to get into this segment of CRE. Both Vornado Realty Trust and Boston Properties include co-working in their portfolio.

There are alternative commercial lenders who can help you get the funds you need for your project. At Level 4 Funding, providing capital for office projects is one of our specialties. We offer loans up to $50 million, 90 percent LTV, competitive loan rates and quick funding. Call us for a no-obligation quote.

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

Commercial Real Estate Lenders

Shopping malls are turning into mixed-use developments and online shopping has increased the demand for distribution centers. Investors in this segment are looking for commercial real estate lenders that are familiar with this segment of CRE.

We’ve all seen the boarded-up shopping malls with empty parking lots and decaying signs. And so have commercial real estate lenders. Sears, J.C. Penney, Macy’s, CVS and RadioShack have all reported bankruptcies and store closures, leaving lenders looking for a different venue, or at least a different take on an old classic. Shopping malls have become mixed-use developments that include housing, boutiques, outside concert venues and chef-driven restaurants. And maybe a golf course or two.

The truth is that several of the major delinquent loans are backed by shopping centers. According to REBusinessonline, “Major loans that have fallen past maturity in the past year include several that are backed by shopping centers formerly owned by the Westfield Corporation that were later sold to other REITs.”

This includes the $240 million Westfield Centro Portfolio, the $140 million Westfield Chesterfield and the $110 million Westfield Shoppingtown Independence. Rouse Properties purchased Independence Mall after a few years of foreclosure proceedings. Their goal is to create an “open-air retail destination” with a focus on upscale dining and a grocery market as an anchor. This shopping center giant has been in a restructuring mode since 2014 and just recently announced its sale to a French company. Unibail-Rodamco will reportedly pay $15.7 billion to take over Westfield Corp. It will operate as a REIT in France, the Netherlands, the United Kingdom, and the U.S. Its uncertain if Westfield’s previous plans to seek approval to flatten the Promenade Mall in Woodland Hills, CA and build residences, offices, boutiques, restaurants, hotels and a concert venue is still on target, though chances are the French global property leader will have a similar remodeling plan in mind.

From Retail to Warehouses

Some have blamed the demise in retail and shopping centers on the online giants such as Amazon. But this expanding trail that leads from brick and mortar to mouse and keyboard has left an interesting opportunity for commercial real estate lenders and investors—industrial warehouse and distribution centers. According to American Banker, e-commerce sales are expected to reach $700 billion by 2022. And all those online purchases need a home. While most distribution centers are built on demand, there is a growing number of commercial lenders shelling out the bucks for speculative centers—centers that are selling just as fast as they can be built. In fact, with increasing demand, building in this sector is booming, vacancies are at an almost record low, and rents are rising. Mini-distribution hubs are on the rise as well. Atlanta, Dallas-Fort Worth and Chicago all made the top five in the amount of construction space geared for new warehouse and distribution centers.

Those in the business are looking for commercial real estate lenders who understand the business.

Level 4 Funding has been in the industrial/warehouse segment for over 20 years. We work with over 200 private investors and understand the sectors that they specialize in. With this type of rolodex, we can get you the loan you need at the best possible rate. Closing can occur in as little as a few days, giving you the money you need to purchase that next warehouse, build a distribution center, or develop a mixed-use supercenter in record time. Call us for a no-obligation quote.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Wednesday, March 28, 2018

Why small town businesses are finding it hard to get commercial loans

Lenders are withdrawing from less populated areas, and small businesses in rural areas are facing difficulty finding sources of commercial loans.

Local banks have been consistently closing in rural areas. The in-person service, which was once so crucial for small business financing, is quickly becoming a thing of the past. Banks are relocating to more populated areas, and larger banks continue to consolidate smaller community banks. These larger banks use algorithms, rather than personal relationships to evaluate a borrowers creditworthiness.

This trend is making it harder for many rural borrowers to qualify for business loans.The value of small business lending in rural areas is now half of its 2004 peak. Much of this decline is a result of the recession, but the amount of small business lending in urban areas only declined by a quarter over this same period. The numbers demonstrate that business owners in more populated areas are not facing the same difficulties as their rural counterparts.

The decline is having a drastic impact on business activity in less populated areas. Research by Colorado State University economist Stephan Weiler demonstrates a link between the reduction in small business loans and new business formation in rural areas two to three years later. His research did not reveal a similar pattern in urban areas.

Community banks have been leaving rural areas for decades, making commercial loans harder to find

There has been a measurable decline over the past 20 years in the number of smaller community banks in rural areas. These community banks were once the sole source of credit for many small businesses in these areas. 625 of Americas 1,980 rural counties have no locally owned community bank. 35 rural counties in America have no bank at all, and 115 have only one branch.

Lenders cite specific difficulties in rural areas."It's very hard to find highly competent commercial loan officers who want to live in these small towns and can produce an adequate amount of production," said Jerry Rexroad CEO of Carolina Financial Corp.

Rural businesses also lack the detailed information which is used by many larger banks to assess the creditworthiness of borrowers. However, economic difficulties in rural areas make it harder for banks to do business.

Economic difficulties are making commercial loans harder to find in many areas

Rural areas face unique economic challenges. Employment growth suffers due to weak school systems. Local businesses suffer due to competition with big-box stores and few small business owners have seen their credit situation improve since the recession. Business lending in rural areas has not picked up since the recovery began. Although new small dollar loans have been on the rise, rural areas have only seen a modest increase.. Only 10 percent of new small business loans, roughly 22 billion, have been issued in rural areas since the recovery began.

It remains unclear whether the banks themselves or the economy in these areas are to blame these hardships. Nonetheless small town businesses will face difficulty securing financing for the foreseeable future.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Make Money Using Hard Money Loans

Hard money loans are not suitable for every borrowers needs but they are perfect to meet some specific needs. Using this loan correctly can be a great way to grow your wealth.

Nothing in this world is perfect and likewise, there is no single type of loan that is perfect for every scenario. But there are several situations which are tailor made for hard money loans. Understanding the correct time to select a non-traditional loan is the first step to using this financial tool to generate financial security for yourself and your family.

In general, hard money loans have a higher interest rate and therefore the money is costing the borrower more than a traditional loan. But for every negative there is also a positive. And in the case of these private loans, the positive comes in several forms. The first of which is that the loan approval is based on the value of the collateral unlike a traditional loan which requires good credit scores and a strong credit history to secure a loan. Not only does this fact reduce the amount of documentation that a borrower needs to provide but it also streamlines the lenders approval time. All the lender needs to do is establish the current market value of the collateral to determine if the loan will be funded or rejected. This time savings can be critical when you are trying to purchase a property before another buyer makes a better offer.

Private lending options offer borrowers a faster turnaround time, less paperwork and do not rely on personal credit or financial stability. All of these facets of private lending make this a very viable solution when considering deals such as fix and flips, land loans or construction loans. In all three of these cases it can be very difficult to secure traditional finding. And without funding, it is impossible to make these deals and reap the rewards once the project is completed. But using a private lender will allow you to complete the funding and the deal to realize the profit in the end.

How and Why It Works

As you might have noticed, all of these potential money makers are short term investments which are time sensitive. It can be very difficult to secure a loan fast enough to purchase a great fixer upper to flip or to purchase unimproved land for a new construction project. Banks are not willing to lend money for these more risky ventures nor are they willing to expedite your request. But a private lender is willing to work with you to provide more flexible terms and a faster approval and funding to allow you to meet the shorter time line. Then, with the property secured, you can invest some time in finding less costly financing and refinance or you can make the necessary improvements and flip the property quickly for a large profit.

Making Private Loans Work for You

Hard money loans are not the solution for every deal or opportunity. But they do offer certain features which can make them the perfect financial tool to use to make money and increase your financial security. When used properly by a borrower who understands the process, the risks and the rewards, this type of loan offers a great return on investment.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

OCC Study reveals risks from Commercial loans

The OCC warns in its semi-annual risk report that relaxed underwriting standards may be putting some commercial loans at risk of default. Should you be worried?

The report warns that specific influences on the credit market may be causing some banks to lower borrower standards. "The credit market continues to be influenced by strong competition, particularly from non - bank lenders, and heightened asset valuations," the report claims. In effect, strong competition for new loans may be pressuring some banks to lower standards on borrowers.

The report also warns that the recent economic boom may be making some lenders complacent and that lenders may need to take greater caution in case of an economic downturn. "In addition, the long economic recovery and expansion may collectively increase lender complacency. In this environment, lenders need to focus on maintaining sound credit standards within risk tolerances and understanding the potential credit risks that may be exposed under less benign economic conditions."

The report claims banks need to be cautious and may need to diversify their lending activities. The authors of the report, the National Risk Coalition, cite commercial mortgage growth as a specific area of concern. The NRC claims,"increasing concentrations of commercial real estate (CCRE)loans highlight the need for sound risk management processes and the effectiveness in managing concentration risk for some banks."

In spite of the dangers key commercial loan metrics remain are strong

The report claims that key metrics of commercial credit quality such as delinquencies, nonperforming loans, and net charge-offs remain positive. These key measures improved over the second half of last year and remain elevated above historical averages. Commercial credit quality is stronger than any time since the 1980s according to the statistics. New business loans have moderated from the 25% growth levels seen in recent years but remain above GDP according to the report. Non-depository groups such as investment firms and finance companies receive the majority of these new loans.

Smaller banks may be relaxing underwriting standards to fuel commercial loan growth, which could be a dangerous trend should an economic slowdown occur

Assessments by OCC evaluators reveal a gradual easing of borrower standards at many banks. Since the first quarter of 2016, the majority of banks have relaxed lending standards, rather than tightening them. The trend reflects a gradual easing of underwriting standards which began in 2013, as the economy started to recover from the recession. Even though banks are relaxing their standards, the report concludes that the majority of banks are still lending within their risk tolerances and are maintaining relatively safe underwriting practices.

However, there remains a concern that the growth in commercial mortgages may be putting some lenders at risk. Specifically smaller banks with less than a 1 billion dollars or less in assets. While business lending declined overall last year, the majority of new business loans originated from these smaller banks. Data indicates that these groups are supplementing a declining volume of residential mortgages with commercial mortgages. This narrow and specific focus on commercial mortgages may put these smaller financial institutions at risk if economic conditions change and more borrowers default.

However, the report also claims underwriting standards remain reasonable, credit quality is high, and that the economy is strong. Whether banks will heed the conclusions of the report remains to be seen.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How You Can Solve Your Commercial Loan Woes with the Help of Hard Money Lenders

If you can get a loan, you can catapult your business into the next echelon, so why not shoot for the stars? When you are having trouble getting your commercial loan approved, it might be time to seek the assistance of hard money lenders to get you the cash you need.

Whether you are a first time investor looking at purchasing a property or a new business owner that needs cash fast to get your business off the ground, commercial loans can be a godsend. However, sometimes as a first time borrower, traditional lenders might be a little skeptical of loaning funds. That’s when hard money lenders come in handy. Just when you think you might not be able to get a loan at all, you’ll see that they can help you make your business and investment dreams come true.

Just as with any loan situation, there will be challenges that arise along the road. You will need to be prepared to handle any situation by working closely with your hard money lenders to find a win-win solution. Sometimes it's a matter of finding the right lender for the type of investment or business you have. Sometimes it’s a document or statement you’ll need to provide. Be flexible and patient, while the process can at times be frustrating, it’s important to have a lender you can trust to guide you through it all.

For investors and new business owners looking to purchase property, there are many types that these lenders specialize in like foreclosure properties, “fix and flips”, short sales, construction loans and land loans. These loans are also beneficial for business relocation that needs to happen fast as well as for borrowers that do not have the best credit score or history.

These lenders are very different than conventional bank lenders.

It’s important to know that dealing with conventional lenders are a totally different story – their application process is very detailed and often quite lengthy. There is a lot of bureaucracy and “red tape” that can be avoided with hard money lenders. If you’ve applied for this type of loan in the past, you know the road can be long and arduous. Luckily, that’s not the case with non-traditional lenders and alternative lenders offer many benefits – including an easier application process and quicker turn around time.

It starts with the right lender.

The lender is just as important as the loan itself. It becomes something of a partnership, so finding a lender you can rely on is very important. You will want to ensure they can guide you through the process but also won’t take advantage of you either. Ask around to see if business associates or friends can refer a great lender they’ve worked with in the past. Look for a local lender and don’t be shy about meeting with them and asking questions prior to agreeing to move forward. Once you find the right lender, the road to getting your loan will be much smoother!

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tuesday, March 27, 2018

Triple Your Chances for Getting Hard Money Loans

Using a few tips can greatly improve your chances for securing hard money loans. You might also find that these same tips will increase your profit as well.

Applying for any type of loan can be stressful, and one of the best ways to avoid that unnecessary stress is to be well prepared. Knowing what to expect and how to best present your request can not only reduce your stress level but can increase your chances of getting hard money loans.

The first item that you need to understand is that a lender is only going to consider the loan request if the amount is within the industry standard 65-75% loan to value range. This means that the loan cannot exceed 75% of the value of the property. With that in mind, you need to be prepared to pay any additional cost above that 75% in cash. Understanding the LTV concept allows you to ask for a reasonable loan amount and also prepares you for the down payment which will be required. You will appear very well prepared and professional when the lender mentions the down payment amount and you tell the lender that you already have those funds available.

Another important question that you need to be ready to answer is about your exit strategy. Every lender wants to know what your plan is for the property and how you plan to achieve your goal. This could be completing a renovation and then renting the property or it could mean selling it after a renovation. But this is basically you explanation about how you plan to be able to repay the loan.

Compare Your Offers

The final strategy is to seek several hard money loans in an effort to have multiple offers to choose from. This is the same method that you would use to select any service provider and it allows you to shop for the best terms and overall cost of the loan. Be sure to calculate any loan origination fee, funding fee or early payment penalty that might be included in the terms of each offer to determine the true cost of each option.

Improve Your Chance for Success

There is a lot of information that you need to understand before securing hard money loans. But if you are willing to invest the time, then you can secure multiple offers. This allows you to select the best loan offer to meet your needs. In addition, preparing to answer the questions of the lender about your exit strategy and down payment funds is a good opportunity to fine tune your business plan for the project. Planning for the down payment and your exit are both smart business decisions that will help you to land a loan as well as increasing your potential profit at the end of the deal. It can be tempting to rush into a purchase when you find a great property with a lot of potential. But investing a little time in the planning phase will provide a great foundation for the project and better potential for your return on investment.

Technorati Tags: commercial loans,commercial lending,commercial mortgage