Tuesday, July 21, 2009
Monday, June 29, 2009
Big Money In Commercial Fixer-Uppers!
I just got off the phone with a Minister in SW Houston who's going thru a divorce. He's selling an old run down commercial structure that was once used for as a health care facility. The amazing thing is that he just wants out. He's flexible with price and terms.
This started me to thinking about the vast opportunities available in off the road...off the beaten track commercial property investing. There's more opportunity than there is demand. I wanted to post a few thoughts on how to find these great values.
How do you find these gems?
Just look for yourself. As you're riding around town put 2 + 2 together. I kicked myself for one of the deals that I didn't take action on. I guess it was 3 or 4 years ago when Pastor Joel moved his mega church into the old Houston Summit also know as the Compaq center. I remember driving past there tons of times and noticing this run down commercial complex near to that location. I used to say to myself...."somebody is gonna get rich off that complex." Well guess what? Every commercial property owner in close proximity to Lakewood Church is raking in big buck! The area has changed so drastically that I can't even tell which structure is in the same location as that old run down building. So, look for opportunities where others don't.
Never assume that the distressed property isn't for sale. If you can contact the owner and negotiate a deal before it's listed, you can reap huge rewards.
Some of the places that you can look:
Online services, Realtors, Property Managers, Attorneys and Accountants, Lenders, and as mentioned above...driving around town.
That's all for now gotta go to work! Leave a comment if you want regular updates on this topic. I'm going to discuss some really good stuff.
This started me to thinking about the vast opportunities available in off the road...off the beaten track commercial property investing. There's more opportunity than there is demand. I wanted to post a few thoughts on how to find these great values.
How do you find these gems?
Just look for yourself. As you're riding around town put 2 + 2 together. I kicked myself for one of the deals that I didn't take action on. I guess it was 3 or 4 years ago when Pastor Joel moved his mega church into the old Houston Summit also know as the Compaq center. I remember driving past there tons of times and noticing this run down commercial complex near to that location. I used to say to myself...."somebody is gonna get rich off that complex." Well guess what? Every commercial property owner in close proximity to Lakewood Church is raking in big buck! The area has changed so drastically that I can't even tell which structure is in the same location as that old run down building. So, look for opportunities where others don't.
Never assume that the distressed property isn't for sale. If you can contact the owner and negotiate a deal before it's listed, you can reap huge rewards.
Some of the places that you can look:
Online services, Realtors, Property Managers, Attorneys and Accountants, Lenders, and as mentioned above...driving around town.
That's all for now gotta go to work! Leave a comment if you want regular updates on this topic. I'm going to discuss some really good stuff.
Saturday, June 27, 2009
Houston Real Estate
I'm watching this Houston real estate market like a hawk. There's unbelievable buying activity especially at the lower price points. The margins are incredible. Yesterday I turned in a cash offer and was informed by the selling agent that my offer was among 12 others. I asked him, "how many of those offers are cash?". He replied, " four (4) of the offers are cash".
Today I received a call from a past client who wants to invest in the Houston market while it's hot. He's using IRA fund and wanted to put $300,000 into rental property for Triad to manage. He was thinking of the low end luxury market. I explained to him that the luxury market in Houston is still quite strong. In the higher price points I've seen some great margins and buying opportunities. Take this one for example with over $500,000 in equity on the table.....it was snatched up right away. Anyway, I went on to explain that the low end market is where the strong activity is. I recommended that he purchase (3) $90,000 homes instead. The profit margins are higher and the risk is less. At any given time it's easy to go online and find incredible real estate opportunities in the Houston area. Here's a list that I ran just for this article. Even though each of these three properties look like great transaction, the one that literally jumps off the page is "Cherry Forest". Cherry Forest is priced at $94,900 (at the time of this post), and was once closed at $169,000 back in 2005.
If your thinking about investing in real estate....consider the Houston Market!
Today I received a call from a past client who wants to invest in the Houston market while it's hot. He's using IRA fund and wanted to put $300,000 into rental property for Triad to manage. He was thinking of the low end luxury market. I explained to him that the luxury market in Houston is still quite strong. In the higher price points I've seen some great margins and buying opportunities. Take this one for example with over $500,000 in equity on the table.....it was snatched up right away. Anyway, I went on to explain that the low end market is where the strong activity is. I recommended that he purchase (3) $90,000 homes instead. The profit margins are higher and the risk is less. At any given time it's easy to go online and find incredible real estate opportunities in the Houston area. Here's a list that I ran just for this article. Even though each of these three properties look like great transaction, the one that literally jumps off the page is "Cherry Forest". Cherry Forest is priced at $94,900 (at the time of this post), and was once closed at $169,000 back in 2005.
If your thinking about investing in real estate....consider the Houston Market!
Friday, June 26, 2009
What's a Hard Money Loan?
From Wikipedia, the free encyclopedia:
A hard money loan is a specific type of asset-based loan financing in which a borrower receives funds based on the value of a parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution. Hard money is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers.
The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and not yet qualifying for traditional financing. Whereas hard money often refers to not only an asset-based loan with a high interest rate, but can signify a distressed financial situation such as arrears on the existing mortgage or bankruptcy and foreclosure proceedings are occurring.
Many hard money mortgages are made by private investors, often in their local area. Usually the credit score of the borrower is not important. The loan is purely against the collateral of the property. Typically the maximum loan to value is 65-70%. That is, if the property is worth $100,000 you can borrow $65,000-70,000 against it. This low LTV is to cover the lender if the borrower does not pay and they have to foreclose on the property
Loan structure
A hard money loan is a species of real estate loan collateralized against the quick-sale value of the property for which the loan is made. Most lenders fund in the first lien position, meaning that in the event of a default, they are the first creditor to receive remuneration. Occasionally, a lender will subordinate to another first lien position loan; this loan is known as a mezzanine loan or second lien. Hard money lenders structure loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers between 60-70% of the market value of the property. For the purpose of determining an LTV, the word "value" is defined as "today's purchase price." This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a one- to four-month timeframe.
This value differs from a market value appraisal, which assumes an arms-length transaction in which neither buyer nor seller is acting under duress. Below is an example of how a commercial real estate purchase might be structured by a hard money lender:65% Hard money (Conforming loan)20% Borrower equity (cash or additional collateralized real estate)15% Seller carry back loan or other subordinated (mezzanine) loan
Cross collateralizing a hard money loan
In some cases the low loan to values do not facilitate a loan sufficient to pay the existing mortgage lender off in order for the hard money lender to be in first lien position. Because securing the property is the basis of making a hard money loan, the first lien position of the lender is usually always required. As an alternative to a potential shortage of equity beneath the minimum lender Loan To Value guidelines, many hard money lender programs will allow a "Cross Lien" on another of the borrower’s properties. The cross collateralization of more than one property on a hard money loan transaction, is also referred to as a "blanket mortgage". Not all homeowners or commercial property owners have additional property to cross collateralize. Cross collateralizing or blanket loans are more frequently used with investors on Commercial Hard Money Loan programs.
Commercial hard money
Commercial hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non-owner occupied properties. Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.
Commercial hard money lender programs
Commercial hard money lender and bridge lender programs are similar to traditional hard money in terms of loan to value requirements and interest rates. A commercial hard money or bridge lender will usually be a strong financial institution that has large deposit reserves and the ability to make a discretionary decision on a non-conforming loan. These borrowers are usually not conforming to the standard Fannie Mae, Freddie Mac or other residential conforming credit guidelines. Since it is a commercial property, they usually do not conform to a standard commercial loan guideline either. The property and or borrowers may be in financial distress, or a commercial property may simply not be complete during construction, have its building permits in place, or simply be in good or marketable conditions for any number of reasons.
Some private investment groups or bridge capital groups will require joint venture or sale-lease back requirements to the riskiest transactions that have a high likelihood of default. Private Investment groups may temporarily offer bridge or hard money, allowing the property owner to buy back the property within only a certain time period. If the property is not bought back by purchase or sold within the time period the commercial hard money lender may keep the property at the agreed to price.
Traditional commercial hard money loan programs are very high risk and have a higher than average default rate. If the property owner defaults on the commercial hard money loan, they may lose the property to foreclosure. If they have exhausted bankruptcy previously, they may not be able to gain assistance through bankruptcy protection. The property owner may have to sell the property in order to satisfy the lien from the commercial hard money lender, and to protect the remaining equity on the property.
Legal and regulatory issues
From inception, the hard money field has always been formally unregulated by state or federal laws, although some restrictions on interest rates (usury laws) by state governments restrict the rates of hard money such that operations in several states, including Tennessee and Arkansas are virtually untenable for lending firms.
Commercial lending industry
Thanks to freedom from regulation, the commercial lending industry operates with particular speed and responsiveness, making it an attractive option for those seeking quick funding. However, this has also created a highly predatory lending environment where many companies refer loans to one another, increasing the price and loan points with each referral. There is also great concern about the practices of some lending companies in the industry who require upfront payments to investigate loans and refuse to lend on virtually all properties while keeping this fee. Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding in order to reduce this risk. If you feel you have been the victim of unfair practices, contact your state's attorney general office or the office of the state in which the lender operates.
Hard money rate
Hard Money Mortgage loans are generally more expensive than traditional sub-prime mortgages. However, all mortgage loans are not necessarily considered to be a high cost mortgage. Generally a hard money loan carries additional risk that a borrower is aware of. Rather than selling the property a borrower will opt to keep the loan and if a lender is willing to assume some of the risk by offering a hard money loan.
Interest rate on hard money
The rate is not dependent on the Bank Rate. It is instead more dependent on the real estate market and availability of hard money credit. As of 2007, and for the past decade, hard money has ranged from the mid 11%-17% range. When a borrower defaults they may be charged a higher "Default Rate".
Hard money points
Points on a hard money loan are traditionally 1-3 more than a traditional loan, which would amount to 3-6 points on the average hard money loan. It is very common for a commercial hard money loan to be upwards of four points and as high as 10 points. The reason a borrower would pay that rate is to avoid imminent foreclosure or a "quick sale" of the property. That could amount to as much as a 30% or more discount as is common on short sales. By taking a short term bridge or hard money loan, the borrower often saves equity and extends his time to get his affairs in order to better manage the property. Hard money is expensive, but cheaper than a partner!All hard money borrowers are advised to use a professional real estate attorney to assure the property is not given away by way of a late payment or other default without benefit of traditional procedures which would require a court judgment.
I Know Where to Find Hard Money
Call Now!
Dick Green #479053
Triad Realty and Mortgage
936-441-8539
A hard money loan is a specific type of asset-based loan financing in which a borrower receives funds based on the value of a parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution. Hard money is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers.
The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and not yet qualifying for traditional financing. Whereas hard money often refers to not only an asset-based loan with a high interest rate, but can signify a distressed financial situation such as arrears on the existing mortgage or bankruptcy and foreclosure proceedings are occurring.
Many hard money mortgages are made by private investors, often in their local area. Usually the credit score of the borrower is not important. The loan is purely against the collateral of the property. Typically the maximum loan to value is 65-70%. That is, if the property is worth $100,000 you can borrow $65,000-70,000 against it. This low LTV is to cover the lender if the borrower does not pay and they have to foreclose on the property
Loan structure
A hard money loan is a species of real estate loan collateralized against the quick-sale value of the property for which the loan is made. Most lenders fund in the first lien position, meaning that in the event of a default, they are the first creditor to receive remuneration. Occasionally, a lender will subordinate to another first lien position loan; this loan is known as a mezzanine loan or second lien. Hard money lenders structure loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers between 60-70% of the market value of the property. For the purpose of determining an LTV, the word "value" is defined as "today's purchase price." This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a one- to four-month timeframe.
This value differs from a market value appraisal, which assumes an arms-length transaction in which neither buyer nor seller is acting under duress. Below is an example of how a commercial real estate purchase might be structured by a hard money lender:65% Hard money (Conforming loan)20% Borrower equity (cash or additional collateralized real estate)15% Seller carry back loan or other subordinated (mezzanine) loan
Cross collateralizing a hard money loan
In some cases the low loan to values do not facilitate a loan sufficient to pay the existing mortgage lender off in order for the hard money lender to be in first lien position. Because securing the property is the basis of making a hard money loan, the first lien position of the lender is usually always required. As an alternative to a potential shortage of equity beneath the minimum lender Loan To Value guidelines, many hard money lender programs will allow a "Cross Lien" on another of the borrower’s properties. The cross collateralization of more than one property on a hard money loan transaction, is also referred to as a "blanket mortgage". Not all homeowners or commercial property owners have additional property to cross collateralize. Cross collateralizing or blanket loans are more frequently used with investors on Commercial Hard Money Loan programs.
Commercial hard money
Commercial hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non-owner occupied properties. Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.
Commercial hard money lender programs
Commercial hard money lender and bridge lender programs are similar to traditional hard money in terms of loan to value requirements and interest rates. A commercial hard money or bridge lender will usually be a strong financial institution that has large deposit reserves and the ability to make a discretionary decision on a non-conforming loan. These borrowers are usually not conforming to the standard Fannie Mae, Freddie Mac or other residential conforming credit guidelines. Since it is a commercial property, they usually do not conform to a standard commercial loan guideline either. The property and or borrowers may be in financial distress, or a commercial property may simply not be complete during construction, have its building permits in place, or simply be in good or marketable conditions for any number of reasons.
Some private investment groups or bridge capital groups will require joint venture or sale-lease back requirements to the riskiest transactions that have a high likelihood of default. Private Investment groups may temporarily offer bridge or hard money, allowing the property owner to buy back the property within only a certain time period. If the property is not bought back by purchase or sold within the time period the commercial hard money lender may keep the property at the agreed to price.
Traditional commercial hard money loan programs are very high risk and have a higher than average default rate. If the property owner defaults on the commercial hard money loan, they may lose the property to foreclosure. If they have exhausted bankruptcy previously, they may not be able to gain assistance through bankruptcy protection. The property owner may have to sell the property in order to satisfy the lien from the commercial hard money lender, and to protect the remaining equity on the property.
Legal and regulatory issues
From inception, the hard money field has always been formally unregulated by state or federal laws, although some restrictions on interest rates (usury laws) by state governments restrict the rates of hard money such that operations in several states, including Tennessee and Arkansas are virtually untenable for lending firms.
Commercial lending industry
Thanks to freedom from regulation, the commercial lending industry operates with particular speed and responsiveness, making it an attractive option for those seeking quick funding. However, this has also created a highly predatory lending environment where many companies refer loans to one another, increasing the price and loan points with each referral. There is also great concern about the practices of some lending companies in the industry who require upfront payments to investigate loans and refuse to lend on virtually all properties while keeping this fee. Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding in order to reduce this risk. If you feel you have been the victim of unfair practices, contact your state's attorney general office or the office of the state in which the lender operates.
Hard money rate
Hard Money Mortgage loans are generally more expensive than traditional sub-prime mortgages. However, all mortgage loans are not necessarily considered to be a high cost mortgage. Generally a hard money loan carries additional risk that a borrower is aware of. Rather than selling the property a borrower will opt to keep the loan and if a lender is willing to assume some of the risk by offering a hard money loan.
Interest rate on hard money
The rate is not dependent on the Bank Rate. It is instead more dependent on the real estate market and availability of hard money credit. As of 2007, and for the past decade, hard money has ranged from the mid 11%-17% range. When a borrower defaults they may be charged a higher "Default Rate".
Hard money points
Points on a hard money loan are traditionally 1-3 more than a traditional loan, which would amount to 3-6 points on the average hard money loan. It is very common for a commercial hard money loan to be upwards of four points and as high as 10 points. The reason a borrower would pay that rate is to avoid imminent foreclosure or a "quick sale" of the property. That could amount to as much as a 30% or more discount as is common on short sales. By taking a short term bridge or hard money loan, the borrower often saves equity and extends his time to get his affairs in order to better manage the property. Hard money is expensive, but cheaper than a partner!All hard money borrowers are advised to use a professional real estate attorney to assure the property is not given away by way of a late payment or other default without benefit of traditional procedures which would require a court judgment.
I Know Where to Find Hard Money
Call Now!
Dick Green #479053
Triad Realty and Mortgage
936-441-8539
Thursday, June 25, 2009
Top Five Credit Management Tips of All Time
Hoping to help keep even more Americans from getting sucked into the black hole of consumer credit debt, the Treasury Department and the Federal Reserve Board have announced the top five fundamental practices that consumers should follow to manage their personal credit.
During a May 22, 2003 credit management panel discussion hosted by Treasury and the Federal Reserve and attended by representatives of financial services organizations and community and consumer groups, consensus was reached on the following five fundamental practices:
1. Build savings to avoid high-cost debt and improve payment options.
2. Pay bills on time.
3. Pay more than the minimum payment.
4. Comparison shop for credit and obtain only the credit you need.
5. Understand your credit history and how it affects you.
"These fundamentals are an important first step toward educating.....Read Entire Article
During a May 22, 2003 credit management panel discussion hosted by Treasury and the Federal Reserve and attended by representatives of financial services organizations and community and consumer groups, consensus was reached on the following five fundamental practices:
1. Build savings to avoid high-cost debt and improve payment options.
2. Pay bills on time.
3. Pay more than the minimum payment.
4. Comparison shop for credit and obtain only the credit you need.
5. Understand your credit history and how it affects you.
"These fundamentals are an important first step toward educating.....Read Entire Article
Wednesday, June 17, 2009
Secret Searching Method
So, I'm working with a couple of cash buyers. One would think that the old adage, "Cash Is King", would still be a valid way of doing business. I'm beginning to wonder. I've noticed a trend with this current market where lenders/lien holders are willing to go for the two in a bush rather than 1 in the hand.
My cash clients have lost on several cash offers to slightly higher offers containing third party financing considerations. Go Figure! I've always stayed ahead of the curve and have been able to locate the good deals before the rest of the pack. If you hunt harder than the next guy you'll always eat. In this market alot of agents have gone on to other fields. Those that have decided to remain in the industry are either too new to understand the stakes or are experienced hunters.
So now it's Game Time! It's time for me to revert to back to covert marketing campaigns. And guess what? I've discovered something real interesting that I'm rather excited about. It works like a gem! I'll share a brief overview with you. For more detailed information....contact me and just ask me. It's so simple it's scary. What I've been doing is structuring a custom search based on expired listings. The end result is to locate individuals who were at one time offering their properties for sale at discounted pricing due to pending foreclosure, depreciated values or some other circumstance requiring a quick sale. These same individuals have been disappointed with unsuccessful marketing results. Resulting in the Listing becoming expired. This type of client can many times be a very easy individual to over exceed their expectations. In this market things have changed. There's real money to be made with Expired Listings. To keep ahead of the curve, we as agents must change and think of outside the box marketing techniques. He who hunts the hardest and the longest will always eat! I suggest that you experiment with Expired Listings.
Good Luck!
My cash clients have lost on several cash offers to slightly higher offers containing third party financing considerations. Go Figure! I've always stayed ahead of the curve and have been able to locate the good deals before the rest of the pack. If you hunt harder than the next guy you'll always eat. In this market alot of agents have gone on to other fields. Those that have decided to remain in the industry are either too new to understand the stakes or are experienced hunters.
So now it's Game Time! It's time for me to revert to back to covert marketing campaigns. And guess what? I've discovered something real interesting that I'm rather excited about. It works like a gem! I'll share a brief overview with you. For more detailed information....contact me and just ask me. It's so simple it's scary. What I've been doing is structuring a custom search based on expired listings. The end result is to locate individuals who were at one time offering their properties for sale at discounted pricing due to pending foreclosure, depreciated values or some other circumstance requiring a quick sale. These same individuals have been disappointed with unsuccessful marketing results. Resulting in the Listing becoming expired. This type of client can many times be a very easy individual to over exceed their expectations. In this market things have changed. There's real money to be made with Expired Listings. To keep ahead of the curve, we as agents must change and think of outside the box marketing techniques. He who hunts the hardest and the longest will always eat! I suggest that you experiment with Expired Listings.
Good Luck!
Tuesday, June 16, 2009
Great Time For Investors!
"It's also boom time for the companies that can supply those investors with financing when they need it.
"This is an absolutely wonderful market environment to be in," says Frank Sharp, who heads Watershed Renovation Capital, in Alexandria, Virginia. "
Read Entire Article....
"This is an absolutely wonderful market environment to be in," says Frank Sharp, who heads Watershed Renovation Capital, in Alexandria, Virginia. "
Read Entire Article....
Subscribe to:
Posts (Atom)