Avatar's Blog

» Hard Money and Commercial Real Estate News and More

  • Foreclosures, Bankruptcies and More

    Posted on 11/19/2004
    When applying for a hard money loan, let the loan officer know about all the 'bumps in your road' before the lender issues a letter of intent and term sheet. If you wait until you have paid $5,000 for the costs of due diligence, that money will be spent uncovering those bumps. You won't get funded and you'll be out $5,000.
    Posted in Miscellaneous

  • How much can I get on land?

    Posted on 11/18/2004
    Hard money lenders have a range of lending criteria. In general, count on being able to get 50% LTV (value being the actual purchase price if this is a purchase) on land, and up to 65% (in rare instances 70%) if you have income producing properties.
    Posted in Miscellaneous

  • Income Producing Properties

    Posted on 11/17/2004
    If you are purchasing an income producing property that is not currently producing income, you will need to establish a reasonable measure for how much you can anticipate making in the future. Use comparable businesses in your area to make a benchmark. Expect to have to pay higher interest rates and points for a loan for such a property. Without a history of income, lenders will consider the property to carry more risk.
    Posted in Miscellaneous

  • Pro Forma Financials

    Posted on 11/16/2004
    If you are buying a property that is income producing, you may be asked for a pro forma financial statement. This statement is an indication of what kind of income you can expect to generate from the property you are about to buy.

    Request last year's and this year's (to date) income and expense sheet from the seller. Usse that to project your own earnings. Send both sheets to the lender.
    Posted in Miscellaneous

  • Close In Two Weeks

    Posted on 11/15/2004
    Many hard money lenders promise to close loans in two weeks. Know that the clock starts ticking on that two weeks once you have submitted a complete application, all your supporting financial documents concerning the subject property, photos, and a check for about $5,000 to cover the costs of due diligence (appraisal, inspections, site review, etc.) and all of the above has been accepted by the hard money lender.

    If you are making an initial inquiry, add the time it will take to gather all the documentation required by the lender and add that to the two weeks to get a realistic closing time.
    Posted in Miscellaneous

  • What is a Letter of Intent?

    Posted on 11/13/2004
    A letter of intent is a letter sent to a potential borrower client from a lender - in this case, a hard money lender. Avatar Financial Group sends letters of intent to clients whose real estate funding requests meet Avatar's lending criteria.

    The letter is an indication that Avatar intends to fund the project assuming that the financial information received to date and yet to come meet the criteria and show no reasons why the project should not be funded, and the property passes inspection by both Avatar representatives and any/all inspectors, appraisers, etc. that will be asked to provide professional services.

    If you have been forthright and complete in your documentation, and your property is as you represent it, there should be no further imepdiments to funding. A letter of intent is your assurance that it is now safe and appropriate to sign the document and send a check to cover third party costs of the required due diligence to complete the paperwork to get your project funded.
    Posted in Miscellaneous

  • As is Appraisals

    Posted on 11/12/2004
    Hard money loans are made based on the current value of real estate property. If you are buying -property, the current value is the price you will pay for the real estate.

    If you are refinancing property, the current value must be established by a written appraisal from a licensed real estate (not business) appraiser.

    Only if you are seeking a loan from a rehab lender or construction lender, will the value of the property be determined by an "after fix up" or "when construction is complete" price.
    Posted in Miscellaneous

  • Property Photos

    Posted on 11/11/2004
    The fastest way to get an initial expression of interest from hard money lenders is to submit your loan request with photos. Photos of the property, inside, outside, and the neighborhood, provide the lender with a good idea of what they are being asked to fund, the condition of the property, and whether its locaiton is conducive to the long term success of the person or business buying or refinancing it.
    Posted in Miscellaneous

  • Seller Carrybacks

    Posted on 11/10/2004
    A seller carryback loan is a loan made to you by the seller when you purchase his/her property. Generally, the seller will take a small carryback and be in the 2nd lien position, with a bank or hard money lender taking the lion's share of the risk and taking the 1st lien position.

    If you are seeking hard money commercial loans, count on having to put down a minimum of 20% of your own cash. The hard money lender will be able to fund up to 65% of the cost of the property and the balance can come from a seller carryback or other source.
    Posted in Miscellaneous

  • What <i>Is</i> A Hard Money Loan?

    Posted on 11/9/2004
    Hard money loans are bridge loans with real estate as collateral. Whether the real estate is comemrcial, industrial, office, retail, or residential, whether owner-occupied or investment property - even raw or improved land - all hard money loans are collateralized by some form of real estate.

    Generally used for short term solutions, hard money loans bridge the gap between purchase or refinance and long term financing options.
    Posted in Miscellaneous