Avatar's Blog

The second piece of a hard money commercial loan request package are the financials. Breaking them out into segments will help you gather all your docs without getting overwhelmed.

A Personal Financial Statement, often called a 1003, a personal financial statement is nothing more than a list of everything you own, from cash, stocks and bonds, to real estate, antiques, art, investment motor cars and more. On the other sde of the sheet is a list of everything you owe, from mortgages to credit card debts, leases, and loans. The difference between the two is your net worth.

Pretty straightforward stuff, once you know what is involved. Within reason, a Personal Financial Statement can be completed in well under and hour - sometimes in just a few minutes. You can get a copy of a Personal Financial Statement my emailing gillian@avatarfinancial.com

Photos are worth a thousand words. How many times have we heard that before? A thousand times? Believe it! The first thing that a hard money lender will look at in a loan package is the title and then the photos. Scanning through anywhere from a few to hundreds of pages of documents, the lender is searching for photos.

Choose a clear bright day if at all possible. Take a decent color camera (preferably a digital camera to make your life easier) and get panoramic, close up, interior, and neighborhood photos. Clean up the property first if you can. Rake the gravel, plant posies or put out pots, paint the front door, sweep, mow the lawn... whatever it takes to make the place look like there is "pride in ownership." "Pride in ownership" is what lenders want to see - it means a committed owner/borrower. And the only place to prove that you are one, is through the photos. Everything else, is just numbers. They are plenty important, but they are only reviewed if the property looks like a likely candidate for funding.

Make sure the photos are clear, bright, and show enough detail of the building to give a sense of what it is, where it is, and that it is well cared for.

5Over the past quarter, commercial property investments have increased in the US. Non-conforming loan requests have also increased as local and national banks continue to tighten reigns on commercial money lending criteria. The result is a boon for real estate backed lenders and investors in mortgage backed securities.

While hard money lending rates have increased since this month last year, a 'hold' promised by Mr. Greenspan in mid-June on the prime rate is a fair indicator that hard money loan rates will hold steady over the next few months. While hard money can be significantly more expensive than conventional loans, they keep the wheels of commerce turning when conventional financing is not an option.

• excellent maintenance of the facility
• improvements, new or replaced items that may not be visible
• energy-saving alterations to optimize lighting, fuel consumption, etc.
• other uses for the building(s)/property which will increase the resale value
• proximity to growth areas, road imrpovements or traffic alterations that will be advantageous to a business occupying the building, etc.

Avatar Financial Group looks to see that borrowers have a 1.2:1 ratio of income to expenses, including the Avatar loan before funding a hard money commercial loan. when presenting Profit and Loss statements for the subject property or business entity that will support the loan payments, look to see that this ratio exists.

It is prudent to run this financial exercise before submitting a loan to Avatar or to any other hard money lender. If your numbers don't pan out, this loan will probably not be good for your business in the end. If the business or subject property will not support the loan, you can add profits from another business venture or personal funds to make up the difference. In that event, as the subject property will running at a loss, it will be important to demonstrate why the loan is valuable to you under these unusual circumstances.

Hard money lending, like any other kind of lending, is a numbers affair. If the loan makes sense for the borrower and the lender, the loan can be completed. Focus on demonstrating this to the lender.

If youare refinancing a property with Avatar Financial Group, you will be asked to provide a payoff notice or payoff letter. This is an easy document to obtain and should take anywhere from a few minutes via fax to a week if it must be mailed by US post. Contact your current mortgage bank by phone and ask for the payoff amount. Ask the bank to provide an amount which will be applicable for the anticipated date of closing, which may be one to three weeks from the time you request the document.

The mortgage holder will generate a document giving a payoff amount applicable to the payment being received before the next payment date. Generally, people make monthly mortgage payments. Depending on the date of your payment and the date you request the payoff amount, you may want to ask the lender to provide a payoff amount for the month following the next payment.

If you are purchasing or refinancing a commercial, industrial, retail or office real estate property, you will be asked to provide a List of Equipment and Inventory for your closing document file. If you rent out space in a building, do not include property owned by your renters. This list is strictly for inventory and/or equipment you own and use in conjunction with the collateral building.

The List of Equipment and Inventory is generally applicable when a company occupies a factory, warehouse, or other commercial property and operates its business from that location. If you have questions about whether you need to fill out such a list and what to put on it, contact Avatar Financial Group for instructions and assistance.

If you are buying a property - regardless of whether it is investment residential, commerical, retail, industrial or other, you will need a survey for closing. Avatar needs a copy of the survey for your property, signed by you for your closing document folder. If you purchased your property some time ago and can no longer locate the survey, you may need to order a new one. Ask your loan broker or contact Avatar for assistance if you need help understanding how to order a survey, what to expect to pay for it, and how to choose a survery company for your needs.

A current clear title is a critical part of your loan document package. Title can take anywhere from a few days to more than two weeks to obtain. Once you have submitted your loan package and received a Letter of Intent, your first task should be to locate and retain a nationally recognized title company in your area to provide title for your property. If you are purchasing property, contact the seller to be sure she or he has ordered the title documents in a timely manner. More fundings are held up due to delays in obtaining clear title documents than any other obstacle.

An Opinion Letter written by borrower's attorney is a critical component of you closing documents package. Once you have received closing documents form Avatar Financial Group, forward it to your attorney. Ask him to write a letter which addresses the validity and enforceability of the documents, as well as the authority of the entity and signers to complete the transaction. Forward the signed Opinion Letter to Avatar or have your attorney send a signed Opinion Letter to Avatar and a copy of that Letter to you for your records.