Avatar's Blog

I spent the weekend in Depot Bay, Oregon, at a timeshare resort. I was trying to get some work done, requiring internet connectivity. I was prepared - I had my Verizon Wireless card, laptop, charger, travel sized mouse and support materials with me. Confidently, I set up shop in the condo. No luck. Spotty connectivity for me; nothing for my daughter. We packed up our gear and headed off into the night, looking for connectivity on the Oregon coast.

Naturaly, the next day, the sales staff wanted me to spend some quality time with them. This time, I was with my daughter, so I took her to a sales presentation so she could learn how they work. Eagerly, the salesman launched into his spiel. Cutting him off gently, my daughter inquired as to whether internet connectivity was imminent. Otherwise, she pointed out, she wouldn't be a customer. Without connectivity, she can't work and without being able to work on the road, she'd be needing to find another place for lodging. The salesman was surprisingly nonplussed. He couldn't understand why she or I would want to work on a holiday. After going round and round on this for awhile, I finally laid it out as plainly as I could.

1950: One person in the family needs to work. The whole family stays home.

2006: One person in the family needs to work. The family packs up laptop, Frisbees, and swim suits - heads for the beach. Worker accomplishes necessary tasks in an hour or two. Spends the balance of the day in 'quality time' with the family.

The promise of the Internet is the mobility of the work environment. It frees us to move data around the glob without hauling files cabinets and removing secure data from the vault. It's time the hospitality industry caught up with the program. If you're in the hospitality development, renovation or operations business, take heed. Without wireless Internet access, your property will suffer decreasing revenues as the competition with wireless access eats your lunch.

The difference between securing a loan from a bank and from a private hard money lender such as Avatar Financial is very interesting. If you've ever applied for a loan at a bank (and who hasn’t), you will recall the hours of debate over whether your personal and financial situations fit neatly into a bank’s criteria. You may have a wonderful job, be enjoying a steady income, and be saving a steady amount of money every month; however, if a bank cannot pigeon-hole you as the perfect applicant with a long and perfect history, your chances of securing a good loan are minimal.

In the field of hard money loans, Avatar will not attempt to box you in with unrealistic ideals. A loan must be sensible from the perspective of both borrower and lender. The equity and value of a property, along with the borrower/guarantor’s ability to afford the loan payments now are what we base our loans on, and we take a lot of variables into account, many of which benefit potential borrowers, and many of which banks do not consider.

In additional Avatar news, we are currently working on becoming more regular with our blog posts and article updates. We’re also considering how we can make certain parts of our website more accessible and aesthetically pleasing, so watch out for some subtle changes over the next few weeks. We’re especially excited about revamping our Nationwide Lending page, and expanding our financial terms glossary. So keep stopping by, because with the weather (at least in Seattle) going bad, what else is there to do but stay indoors and roam the web?

Recent increases in residential foreclosures have changed the face of the hard money lending industry lately. Back in March, I wrote about the onslaught being on the way. Well. that time has arrived.

Here at Avatar, we've been seeing ever increasing numbers of owner occupied residential requests. Of course, the sad news is, Avatar does not fund owner occupied residential properties with few exceptions. We fund owner occupieds in Washington and California, so long as the loan and property value meets our minimums.  And, we fund residential second homes, investment properties, etc. in other states. Again, those properties and loans have to meet our minimums.

Naturally, we get our fair share of rehab loan requests as well... and again, Avatar doesn't fund based on ARV, so we are not a good match for those borrowers either. 

But it is the owner occupied residential property loans that are most troublesome... and coincidentally for the serious real estate investor, the most interesting. Consider this:

Once all the people are forced from their homes through foreclosure, where will they live? Answer: Not in condos or other private residences. They will be looking for apartments. 

As I noted in the spring, the last standing rental apartment complex left standing in cities such as Miami, Tampa, Atlanta, Chicago, et al, will be one profitable puppy! 

With the rush over the last few years to convert apartment to condos and resell, there is a glut of such properties on the residential market. Those folks are also being foreclosed on. And they are looking to rent apartments along with all the SFD foreclosure victims.

If you have an apartment complex, let me know how your occupancy rates are looking these days. How are rents holding up compared to a year ago? Are you seeing what I am seeing - the fallout from the foreclosures should be filling your apartments now.

I've written about this continuing trend in residential real estate investments and it bears another mention today. MBA Newslink noted that fewer American families are able to afford their own homes... again. I've been reading similar headlines again and again in the last few weeks. This continuing trend means more and more families are going to be renting SFDs and apartments.

So - looking for a good real estate investment property? Look to apartment complexes in harder hit areas of the country. Families moving out of their homes are going to have to live somewhere... and in an area where all the apartment complexes have been converted to condos, the last remaining apartment complex is going to be a profitable little venture.

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.

Hey brokers and lenders! Heads up! Take a look at what our new Fed Chairman had to say yesterday:

"The rapid growth in commercial real estate exposures relative to capital and assets raises the possibility that risk-management practices in community banks may not have kept pace," Bernanke said.

Can you believe it? This is the stuff hard money dreams are made of. This means the banks are going to tighten their regulations and lending criteria again. Which, of course, means more business for, wait for it.... private lenders!

Unbelievable, isn't it? Just when you thought you could not possibly be busier, the requests are about to pour in the door. Are you ready? For a copy of Avatar's lending criteria, email gillian@avatarfinancial.com I'll let you know what we fund, the funding time (2 weeks - really!) and anything you'll need to know to be ready for the businesses and investors who are going to need private money to get their deals done in the coming months.

Rand Fishkin of SEOmoz (www.seomoz.org) gave Avatar some good press today when he addressed the SES Conference in New York City. Rand's company works diligently to make sure our website provides the most up to date, applicable information to help brokers and borrowers make a fast, reliable determination as to whether Avatar is the right match for their clients' needs.

We work hard to update this blog, as well articles, recent deals and more on the website. If there is some information you'd like to see, contact gillian@avatarfinancial.com anytime.

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.

The news is in from my Band of Intrepid Brokers -the BIB (To join this elect group, email gillian@avatarfinancial.com and send your thoughts about the State of Investment Real Estate in the US today). Here are the places that brokers and lenders are becoming concerned about:

• Tampa, FL
• New Mexico (the whole state)
• Southern CA (the whole darned place!)
• Hosuton, TX
• and most of all...... Las Vegas, NV

Why are they concerned? Real estate prices have been soaring as elsewhere in the states, but the BIB is seeing signs of softening, overbuilding, excesive vacancy, slower sales, and other signs of a slowing real estate market.

What's still hot?

• Seattle - fancy that!
• NYC - still has space to grow
• Charlotte, NC - but this one's getting close to overbuilt, so keep a sharp out

Have your own ideas about what's hot and what's not in US investment residential and commercial real estate? Share your crystal ball results with Gillian. Together, we'll keep an eye on the future and optimize everyone's efforts in the hard side of lending.

I went to Benaroya Hall to hear Nikolaj Znaider play his Stradivarius in Beethoven's Violin Concerto in D Major. Magnificent - don't miss this Danish maestro if he comes to your town. I was chatting with my friend, Sandy, during the intermission. Sandy noted that as she is batting around in a large house all by herself these days, she's been checking out homes in her area to see if it might be a good time to move.

Home builders, she notes are still keeping their heads in the sand about the grayiing of America. They continue to build multi-story homes, many of them smaller and marketed to empty nesters. But Sandy has special experience with what Americans are really going to need - single level homes or master suites on the main floor at the very least. Sandy spent a number of years caring for her husband who succumbed to multiple schlerosis last year. She explained to me that a master suite on the first floor requires a larger footprint for the house, making it more expensive to build - land is getting scarcer by the minute.

So Sandy's thinking of staying in her current place for awhile. She figures she'll have one of the homes that folks will be looking for - and there won't be many of them out there. Thinking of investing in residential real estate? Think ahead - America is getting older and they are going to need one level homes.