Avatar's Blog

The past weeks have been more than 'interesting' for the hard money commercial loan market. As the banks shut down lending opportunities almost entirely, we at Avatar Financial Group have been seeing requests for loans that would have been funded by banks in the past.

We take our role as a lender in these times seriously. We understand that people are counting on private lenders to help them weather the financial storm. Therefore, we are focusing all our efforts on commercial real estate loans, moving as quickly as possible to review properties and fund loans.

Until further notice, Avatar Financial Group will only fund commercial real estate loans starting at $1,000,000. We are not funding private residential properties of any kind in any state; we will continue to fund multi-family dwellings such as apartment buildings.

If you have a commercial loan request, use our online loan application to get the ball rolling. We'll contact you as quickly as possible to get you a firm quote.

A good broker never tires of finding a good tip to get attention and positive response from a lender. Surprisingly, I find very few good tip lists out there. If anyone knows of some, please share them with me (just shoot me an email). Here's a tip even veteran brokers might find beneficial:

Commercial Broker Tip: How to stand out from the crowd on the phone.
A lot of a broker's time is spent marketing, making connections, talking to prospective borrowers, and making connections with people who might refer business to them. A good broker is a bit of a chameleon: s/he understands how to speak to people in ways that make them comfortable. Often however, when it comes time to communicate with the lender, the broker is either 'all talked out' or ‘stressed out’. The same skills that bring in the clients are lost at that moment. My tip is: find them!

Recognizing your ability to make people comfortable and using that skill when communicating with everyone at the lender's office is going to set you apart from the usual crowd. Chances are, the lender you're calling has already fielded calls from twenty two fast-talking and three grumpy brokers by 11AM. Stand out from the crowd by saying hello, providing your full name and pausing for a moment if the lender wants to write it down along with your phone number and email address. Introductions and pleasantries should take 10 seconds or less; lenders are super-busy people, as you have probably experienced. Remember, you want them to warm to you, not wish you'd hush up and get off the phone.

Pace your presentation and begin with the bare facts. Here's an example that works:

“Avatar Financial Group, this is Allison.”

"Hi, Allison, this is Evan Jones from Mutual Brokers in Texas. Thanks for taking my call. I have a client with a retail strip mall in Dallas that he wants to refi. The property was valued by an appraiser last month for $2.1 million. He needs $1.6 million to pay off a first and get some cash out. Can Avatar fund that loan by the end of the month?"

Slam dunk! You're suddenly my favorite broker of the day! A pleasant tone in your voice, a brief acknowledgement that you are speaking to a human being, and a clear statement of the bare facts in 30 seconds or less means we can both get this ball rolling now.

The easy part? - the pleasant tone in your voice, a moment to repeat the lender’s name and say thanks for taking your call.

The more work-intensive part? - getting all the bare facts before you start calling. Get the following for those precious first 30 second communications:

• property type - be as specific as possible in 4 words or less
• location - city and state
• value, including how and when it was arrived at - critical additional data that sets you apart from the crowd
• loan amount - a ballpark is ok; be clear about the minimum the borrower can take and the amount the borrower would optimally like.

That last one - letting the lender know the minimum and optimal loan amount – can really set you apart in a lender's eyes. It lets them know you are pragmatic and will work with them to get the best deal possible without killing the loan. You and the lender have a common goal – to fund worthwhile loans and make a good living doing it. Here’s just one way to let the lender know you are on the same ‘team’ and ready to help make a deal work.

Even if you don't get to the finish line this time, chances are when your name comes up, you'll be described as an efficient broker who handles solid deals. In other words, someone the lender wants to hear from. Good luck out there!

Keep posted to this blog for news on additional lending services from Avatar Financial Group. As you read this, new opportunities for conventional commercial loans are being formulated and, as a reader of this blog, you're the first to know what's on its way.

Since its inception, Avatar Financial Group has provided commercial bridges for industrial, commercial, retail, hospitality, and investment residential properties. In WA and CA, Avatar also lends on owner occupied properties. The new programs expand on the commercial business loan concept and will provide a wider range of options for qualified borrowers.

Check back for more info as it becomes available.

I am often asked by brokers and borrowers alike, "Do you do residential loans?" The answer is yes... and no. What stumps most folks is the difference between an owner occupied residential mortgage and an investment residential loan. Here are some tips about what Avatar can fund and what Avatar will not fund:

Owner occupied residential properties. If the property is in the states of Washington or California, and the value of the property in its current condition today is at least $770,000, Avatar can fund up to 65% of that value, or $500,000. Naturally, if the property is worth more, 65% LTV will potentially generate a larger loan. If the owner occupied residential property is located other states (Avatar only funds in the US), then the property must qualify as a commercial property - in other words it must be held in a Trust, LLC, or similar corporate entity and the cash out funds from a refinance must be used for business purposes. Commercial lenders do not fund owner occupied residential properties if they are held in the owner's name alone.

If the loan is for a purchase of owner occupied residential property and the property will be purchased in a Trust, LLC, etc. then it may qualify for a loan from Avatar. The purchase price (not the appraised value) must be a minimum of $770,000 to generate the minimum loan of $500,000.

If the residential property is to be used for business purposes - ie: it is an investment property for resale, rental, business occupation, etc. then the property may also qualify for a commercial loan, even if it is held in the owner's name, not a corporate entity.

To clarify whether your residential property meets the criteria to be funded with a commercial loan, contact Avatar at 888-886-0097.

There's a buzz in the air in Seattle these days. Our football team is going to play 'with the Big Boys' at the Super Bowl. We aren't very cocky about this opportunity. Mind you, Seahawk fans know it's been 30 years too long in the coming. But we are finally on our way to the big game.

Parties are planned and brokers and borrowers around the nation have called to wish us well. Thanks to all of you who cheer us on. But really, folks - Avatar will lend even on properties in the Pittsburgh area - we are a nationwide lender and we look forward to serving all of you in '06!

Recently I got a direct mail piece from a local real estate agent offering to provide me with a market analysis. She promised to let me know what my home is worth. Basically, she is hoping that I will ask her to prepare this analysis, a free service and then be so star-struck with the numbers that I will ask her to sell the home for me... and perhaps ask her to find me another home to buy. Good marketing for the real estate broker.

Even better for you if you own commercial or investment residential real estate as well. There are thousands of real estate brokers out there hoping you will ask them to prepare a market analysis for your property. If you are seeking to refi the property, your first call should not be to an appraiser. Appraisers will provide you with an "MAI Appraisal" - aka "Retail value" of the property. But lenders will lend based on the "Street Value" - what your property will really sell for today.

Contact a real estate broker and tell them that you want to know what you can hope to get for your property if you have to sell it within the next four months. Tell them you know you'll take a hit. Ask them what the number would be. Agents want your business, so they will probably put on rose colored glasses and give you a number. Take the rose colored glasses off, reduce the sum by about 10% - give or take, as you feel the situation warrants - and that's your quick sale value. If you count on this number when you apply for the loan, you will probably be satisfied with the value the lender comes up with as well. Coming to a meeting of the minds with your lender is one of the most critical factors in a successful application.

Avatar Financial Group's CEO, Mr. Jerry Zevenbergen was blessed with the arrival of a granddaughter, Grace Lee yesterday. Proud parents, aunts, uncles, and grandparents greeted her arrival and shared photos. See her on our home page - lower right.

For those of us who spend our days focused on property values and finances, it's a pleasure to step back and take note of the miracle of the progression of life and family.

Meanwhile, business goes on as usual at Avatar - call or email us with improved commercial property deals anytime.

When was the last time you heard of an investor who purchased a commercial piece of property for MAI appraised value? Could you name a handful in the past three to five years? Probably not. Good real estate investors look for properties selling for less than the appraised value and snap them up.

The purchase price of properties is called the 'street value' or 'quick sale value'. It is the sum that a property will change for between willing parties today. MAI appraised values assume that the seller has one, two, or even more years to wait for the right buyer to come along and buy the property at top dollar. Life isn't like that.

When you are purchasing a piece of real estate, if you are seeking a non-bank (private lender) loan, count on getting a 65% LTV first lien position loan. Be sure you have 20% to put down on the property yourself  - you can gather a group of investors to help you out here, but don't borrow that money. The 15% balance can be a seller carryback.

More about this equation tomorrow....

Refinancing your commercial property to generate some working capital? Here are some tips for getting started:

• Contact local realtors. Ask them what you could expect to the sell for if you had to sell it in the next four to five months. Ask at least two.
• Consider that realtors want your business and may wear rose colored glasses when quoting you a number. A more realistic number may be something than what they promise you.
• This is the quick sale value of your property and will differ from the MAI appraised value.

To determine how much you can pull from the property, take the quick sale value of the property and multiply it by 65%. Reduce the product by any outstanding liens on the property, including mortgages, tax liens, etc. If some liens can be subordinated, you may be able to keep those in place, so long as the total loans to value does not exceed 80%. The reason? The owner/borrower must always have some equity in the property. Avatar lends up to 65% LTV and permits another 15% in subordinated loans.

P&Ls are not tax returns. They are profit and loss statements. They can be made to demonstrate different phenomena of your business and can be focused toward different readers. If you are making a P&L for a loan package, your P&L should show:

• gross income
• operating expenses including rents, cost of goods, labor, debt service, etc.
• net cash flow into business

Then you can add another section showing capital improvements, major acquisitions, etc. If you simply run it all together, you can make a cash cow look like a money losing proposition. Make sure your P&L shows your business in an honest, but favorable light. Show the cash flow and then show what you spent the income on that will improve the business in the short and/or long term.