Avatar's Blog

» Hard Money and Commercial Real Estate News and More

  • Loans for Non-resident Aliens

    Posted on 10/19/2004
    Few lenders are able to fund loans for non-resident aliens. If you are an alien in the US without permanent residency status and want to purchase property, look to Avatar Financial Group to help you out. If Avatar is not able to fund the loan, consider making an arrangement with a US citizen to be at least a minority partner in your venture.
    Posted in Miscellaneous

  • Hard Money is a Bridge Loan

    Posted on 10/18/2004
    The purpose of a hard money loan is to give the borrower enough time to arrange for long term financing. If the loan is for a purchase, the borrower uses a hard money loan to close quickly and gains up to 36 months of 'breathing space', during which time, long term conventional financing can be arranged.

    If hard money is used to refinance a property, a hard money loan can be closed quickly, once again giving the borrower quick access to working capital and time to arrange for longer term financing if necessary.
    Posted in Miscellaneous

  • Prepayment Penalties

    Posted on 10/17/2004
    The term of a loan is its length. When seeking hard money loans - or any commercial bridge loan - be sure to ask about prepayment penalties. If you need a loan for 6 months and the term of your loan is 12 months, be sure you can pay it back it without owing a lot more in prepaymnet penalties.
    Posted in Miscellaneous

  • 1st Lien, 2nd Lien

    Posted on 10/16/2004
    Avatar's rates are among the lowest in hard money comemrcial bridge lending. In exchange for excellent rates, Avatar must be in the first position when providing a hard money loan and will provide up to 65% LTV on an incoming producing property. As the borrower, you are required to have 20% in your own property to obtain that loan. If you need more cash, take an additional 15% from a hard money lender who is willing to take a second lien position at a higher rate, rather than trying to find a single lender to give you the entire 80% LTV in one loan. It will probably cost less to split the loan.
    Posted in Miscellaneous

  • Hard Money Risk Factors

    Posted on 10/15/2004
    If you are seeking a hard money loan, the risks in lending you money are greater than a bank is willing to take. Expect to pay more than you would for a traditional bank commercial real estate loan.

    Risk factors that determine the rate and points you will pay on a hard money loan include among other things:

    * your personal financial status * the financial health of your business * the length of the loan * the clarity and certainty of your exit strategy

    Many other factors play a part in determining the cost of your hard money loan. Identify the strengths in your loan package and be sure to be clear about income sources and exit strategies to ensure that your hard money loan is offered at the best rate possible for your situation.
    Posted in Miscellaneous

  • Business vs Real Estate Appraisal

    Posted on 10/14/2004
    Hard money loans are based on the value of real estate, not the value of a business. When obtaining an appraisal, be sure to use a licensed real estate appraiser. You may need a business appraisal as well if you are purchasing a business, but submit the real estate appraisal to your hard money lender to make your loan request go through more quickly.
    Posted in Miscellaneous

  • Working with Brokers

    Posted on 10/13/2004
    Honest, hardworking brokers can bring substantial value to your business funding activities. A borker's knowledge and expertise can help you get funded quickly and efficiently. An experienced broker will have connections with direct lenders around the nation.

    Where you might spend months trying to locate a lender to fund your loan, a knowledgable broker will be able to identify the right lender for you and help you prepare your loan information package so you are most likely to get a "yes" quickly.

    When hiring a broker, ask for references and ask about fees. Be ready to pay 1-3 pts for the service.
    Posted in Miscellaneous

  • Hard Money for Your Private Residence

    Posted on 10/12/2004
    Generally, hard money is collateralized by commercial property and the proceeds are used for commercial purposes. However, in some states, it is possible to collateralize your residence for a hard money loan if the proceeds are used for commercial purposes.

    Be ready to demmonstrate that the funds will be used to start, support or grow a business, invest in real estate or some similar commercial purpose.
    Posted in Miscellaneous

  • Brokers: Get Straight Answers from Clients

    Posted on 10/11/2004
    Brokers! When working with clients to obtain hard money loans, it is important that you root out straight answers right from the start.

    Purchase? Find out the actual price your client will pay for the property - unless you are working with a rehab lender, the loan will be based on the actual purchase price. Refi? Have your client get a licensed real estate appraiser to make an appraisal, so you have concrete numbers to work with.

    Having honest, correct info from the start can save you hours of barking up wrong trees.
    Posted in Miscellaneous

  • When to Pay Due Diligence Expenses

    Posted on 10/10/2004
    If a lender expresses interest in funding your loan, you should receive a term sheet via fax or mail, stating the terms (time frame of the loan) and the costs (rate, points, due diligence costs, fees, etc.) of the loan.

    A term sheet provides you reasonable expectation that the lending company is ready to fund your loan, assuming that no "bumps or warts" show up during inspection of the property, appraisal reports, financial info, etc.

    At this point, you will be asked to pay about $5,000 toward the costs of due diligence expenses, which can include travel, property inspection, reports, appraisals and more. This amount should be credited toward those costs at closing.

    Due diligence expenses are not "upfront" fees. They are a purchase or services. Whether or not your loan is funded, this money is well spent to obtain critical info about your property and project.
    Posted in Miscellaneous