Avatar's Blog

» Hard Money and Commercial Real Estate News and More

  • Financing bridge loans for multiple properties

    Posted on 1/19/2005
    As a hard money commercial bridge lender, Avatar Financial Group can 'blanket; or 'wrap' several pieces of property into a single loan. There are some significant advantages for doing so, including some cost savings. However, some costs are still incurred on each property, which can on occasion make the process too expensive to be cost effective.

    In general, the costs of underwriting are not significantly reduced. These costs include appraisals, inspections, financial documentation review, document preparation and escrow, site vists, etc. If the properties are close together, there is a cost savings on the site visit by an Avatar representative.

    If the properties are each valued in excess of $500,000 blanketing a loan may be advantageous while still being cost effective. If the properties are valued at $1,000,000 or more each, you might even consider blanketing up to three properties into a single loan to generate sufficient capital to meet your needs.
    Posted in Miscellaneous

  • Understanding the Value of Property

    Posted on 1/18/2005
    LTV means 'loan to value'. When seeking hard money or commercial bridge loans, you will consistently read that the loan will be based on a percentage of loan-to-value.

    How do you determine the value of the property you wish to collateralize? The first thing to note is that hard money lenders require that they send their own appraisers to assess the value of the property. Do not waste your money on an appraisal; you will pay for it twice.

    To estimate the value of property, use the selling price (the actual price you will pay for the property) if you are requesting a loan for a purchase. Very few people buy commecial or investment property at the appraised value - everyone is looking for a 'good deal.' Therefore, for the purpose of a hard money loan, the actual value of real estate is the 'street price', the price the property will sell for today. If you are refinancing a property, get a realtor to provide you with an estimate using 'comps' or comparative properties in your area with the prices they sold for recently. If no recent sales are available, you can still get a rough idea from a realtor as to what to expect your property would sell for on the open market today. Do NOT include the value of the business, the furnishings or other properties other than the buildings and improvements to the real estate.
    Posted in Miscellaneous

  • Understanding the Escrow Process

    Posted on 1/17/2005
    Once a hard money loan is ready to fund, the monies for the purchase or re-finance from the borrower's side of the deal must be placed into an escrow account for the sole purpose of helping to finance the deal. Avatar and other hard money lenders cannot issue the bridge loan without this critical piece.

    If you're funding a deal, remember to have a reliable escrow company in place. If you're not aware of one, Avatar can recommend many excellent, low-rate escrow companies in the US.
    Posted in Miscellaneous

  • Unique types of Private Money

    Posted on 1/16/2005
    Technically, private money refers to any non-bank funded backing that a loan deal can receive. For Avatar Financial, the backing for our hard money loans comes from institutional financing - financial organizations that have backed Avatar's loans with capital outlays.

    Another common source is individual funding - from friends, family, or business contacts. This can also be done less personally through lenders that are investor backed - personal loans are collected and bundled together to lower the individual risk on a project, and funding is made with a percentage of each investors money.
    Posted in Miscellaneous

  • Choosing Investor Funded REITs or Institutionally

    Posted on 1/15/2005
    When searching for a hard money lender, you generally have two choices. You can choose an investor funded REIT or and institutionally funded REIT. Each type of REIT (stands for: Real Estate Investment Trust) is funded in different ways. But each will make loans based on the equity in real estate.

    Investor funded REITS are funded by wealthy individuals who are presented with a prospectus on each loan they are asked to participate in funding. An institutionally funded REIT is funded by one or more institutions such as banks, retirements funds, etc.

    The advanatge of an institutionally funded REIT is that the rates tend to be somewhat lower than investor funded REITS and they are able to fund extremely quickly, since the money is already waiting 'in the bank', so to say. The advantage of an investor funded REIT is that there are always investors willing to take on almost any risk for the right price. You may pay more to get your loan funded and you may have to wait while a prospectus about you and your loan request is developed and floated among investors until it finds people willing to fund it. But, for a price, you will probably find someone, somewhere, willing to take on the risk factors involved in your project. The 64 thousand dollar question is always, is this a price you will be willing or able to afford?
    Posted in Miscellaneous

  • Commercial Bridge Loan Tip

    Posted on 1/13/2005
    If your construction project is 90%+/- complete and you need a commercial bridge loan to pay off lien holders so you can complete the project, contact Avatar Financial Group. Using the collateral in the exisitng real estate, Avatar successfully funds bridge loans under such circumstances, enabling builders to achieve profitability.
    Posted in Miscellaneous

  • Hard money for bridge loans

    Posted on 1/12/2005
    Bridge loans - loans needed NOW for a short period of time. Hard money is an excellent choice for a bridge loan. Using the equity in real estate you already own, you can get a loan in two weeks or less and keep it for a short period of time. Hard money costs more than bank money, but loans can close in 2 weeks or less, whereas banks take a lot longer. And you can always refi at lower rates at conventional bank snail's pace without losing an opportunity.
    Posted in Miscellaneous

  • Land loan, construction loan, or both?

    Posted on 1/11/2005
    Hard money lenders can offer you a 50% LTV loan for a purchase of land. If you are going to build on the property, it is a good idea to ask about getting a single loan to purchase the land, get the permitting stage completed and then build out the property. You may save significant sums in closing costs, points, etc. by combining the loans.
    Posted in Miscellaneous

  • Clear Title in Foreclosure

    Posted on 1/10/2005
    If the property you are buying is in foreclosure, it may not have clear title. Be sure to determine from the seller, the seller's bank, and the lender, exactly what is in order to get clear title upon completion of your purchase. Always buy title insurance when buying real estate property to protect your interest.
    Posted in Miscellaneous

  • Hard money bridge construction loans

    Posted on 1/9/2005
    Hard money bridge loans are especially helpful at the end of the construction phase. When it is time to pay off the construciton loan, but the project is not quite complete and there is a gap between construction completion and profitability or sale, hard money can bridge the gap and make the project a success.
    Posted in Miscellaneous