Avatar's Blog

Well arranged, complete loan packages will enable you to get fast, reliable answers from the lenders you speak with. Among the most important initial elements of a hard money loan package are the photos of the property and surrounding areas. If you have poor quality photos showing only one angle of the outside of a building, your property better be so compelling in quality and value compared to your loan request that the lender is still inclined to look at the financials.

The order of review of any property is as follows:

1 - Look at the photos. Does this look like a property we want to add our lending portfolio?

2 - Review the loan request numbers against the photos - does the property look like it will support the value required to make this loan?

3 - Look at the photos once more to determine the coniditon of the buildng. Does it show pride in ownership? Do the neighborhood photos demonstrate that the property is in an advantageous area, likely to prosper?

4 - If the answers to questions 1 through 3 are satisfacory, begin the review of the financial data.

While the 'meat' of a loan package is in the historical and current financial numbers, good quality photos will open the door to get those documents reviewed in your favor. Ample light, multiple angles, photos of the inside, outside (all aruond) and the neighborhood will get you fast, reliable answers from a lender. If you submit numbers only and ask the lender to provide an LOI, you may get one - until she or he sees photos of the property and lets you know that this is not the kind of property they can fund afterall. Don't waste your time or the lenders's: submit photos.

MegaTrends is a book by John Naisbitt first written in1982 about the trends in the US - economic, social, and statistical, that would affect the world we live in the near future. It's a quick read and probably worth your while to pick it up, even today. Naisbitt wrote another MegaTrends in 1990. He pegged a lot of the events and trends based on a review of current conditions and graph models of the trends as they already existed. And he started a trend of his own - future-think.

Future think is a worthwhile endeavor. It is said that Gates still indulges in a week alone in a secluded cabin to do nothing but think about what has come about, where things are and where they should go in the future. As a professional in the real estate market, whether as a current owner, investor, or service provider to those communities of people, is to determine what the real estate needs of the future will be, where the growths and declines are going to take place, and when.

I've been traveling in the States lately. I've been hearing folks talk as they meet new people in airports. Probably because my ear is tuned to the industry, I hear conversation snippets about real estate more than other conversations as I stroll by. But I've heard an awful lot of people talk about their own home town as the fastest growing town in (fill in the blank). Everyone is noticing the growth and construction. They are talking about infrastructure improvements and increases. To sort the truth from the chatter, check the construction projects in areas where your property exists. Take a look at the trends in the age of the population, the traffic problems that can be solved and those that simply cannot be solved - these are bottlenecks to growth and development. More people are telecommuting and doing it more often. Will this change the square footage required by companies in growth phases? Will it change the layout of the office spaces? Look at trends in fuel pricing and consider how that will affect growth in temperate climates vs severe (cold or hot) climates. How will it affect transportation patterns. You get the idea. There is a lot more to determining where the good deals are in real estate than looking at the comp next door.

Hard money real estate lenders fall into two camps - institutionally funded and investor funded. Institutionally funded lenders get the money they lend from banks, retirement funds, and other investments sources who are looking to place a portion of their portfolio in real estate. Investor funded lenders may consist of a single wealthy individual who funds loans using real estate as collateral (someimtes called an Angel Investor) up to large REITS (real estate investment trusts) which may sell shares to investors on the stock exchange.

In all cases, the general lending process is the same: the lender uses real estate as collateral. The real estate is reviewed to determine whether it holds sufficient value for the lender to be willing to take the risk of making a loan based on this collateral. The borrower's financial state and future potential is reviewed to determine the risk factors there. And finally, an exit strategy is reviewed to determine whether the loan will be completed satisfactorily within a given time frame. Depending on the results of this due diligence process, the lender determines whether - and at what rates and terms - to fund the loan.

The economy continues to show signs of robust growth and health. Employment indicators show more of us getting back to work. Profit and production indicators continue to increase at a steady and manageable rate. Even the Boeing Company is making headlines that read: Boeing Shrugs Off Strike and Posts Increased Earnings.

Where is real estate investment heading? For the commercial sector, look at properties that wil support retail, industrial, and manufacturing facilities. New and expanding businesses will need to rent space to accomodate increased workforces.

In the long term, if people begin using the computer and web-based technologies now available to track inventory and sales and project production requirements, requirements for long term storage facilities should be less and requirements for JIT delivery systems should increase. It used to take Sears Robuck and Company about 3-6 months to tell a manufacturer of a specific tool or color of paint how much sold and in which months, etc. Now, manufacturers can log in to see the daily sales of their products made by Sears - down to the color and day of the week that the product sold. Projecting short and long term needs is becoming much more precise. Consider the real estate ramifications when choosing your next investment property.

Avatar Financial Group annouces a NEW LENDING PROGRAM for the purchase or refinance of commercial properties. For buyers who are bank-qualified, but the bank can't move fast enough, Avatar offers COMMERCIAL BRIDGE LOANS at 9.99% and 3 pts.

Borrowers seek hard money loans for many reasons. Until now, those who need hard money for the 'best of reasons' - because there is an excellent deal that won't wait for a bank or conventional lender to get around to funding - have had to pay standard hard money rates for the term of their loan.

Today, Avatar Financial Group launched a new program to cater to the -need-it-now, bank-qualified market. At 9.99% and 3 pts, Avatar has significantly lowered the cost of commecial bridge loans for these buyers. Credit scores of 600 or better are required. The maximum LTV is 65% of the purchase price of the building. If used for a refi, "value" is defined as the price one could reasonably expect to get if the property had to be sold in three months or less. Debt service requirements are 1.2 for trailing 12 months. For more information call 888-886-0097 Pacific business hours.

Avatar Financial Group is a commercial hard money bridge lender. In general, we fund commercial, industrial, and investment residential properties. In some circumstances, we can also fund owner occupied residential properties. Here's how and when:

If the property is located in the states of Washington (WA) or California (CA), Avatar can assist owners with their residential mortgage needs. All loans are subject to our 65% LTV and $500,000 minimum loan amount. Therefore, properties must be selling in current condition today for at least $770,000. This is known as the ‘street value’ or ‘quick-sale value’ of the property. MAI appraised values may be somewhat higher. Avatar lends on today’s purchase price.

If the residence is held in an LLC, Trust, or other corporate entity and the funds are to be used for business purposes, it is possible to refi your property with a hard money commercial bridge loan. TIP: Don’t call the hard money lender and ask how to put your property into the corporate entity so you can get a loan. As with many financial restrictions in US law, the intent of actions is an important element of determining whether a property can be financed with a commercial or residential mortgage. In the case of owner occupied residential properties, the government will look at why you put your property into a corporate entity. If the sole purpose is to get a commercial loan (translate that to mean: avoid being restricted by residential lending rules) then it does not qualify as a commercial property and cannot be funded by a commercial lender.

Assuming that you have a property already in a corporate entity – to protect assets, to separate assets, or for any other reason – you can then contact a hard money commercial bridge lender, such as Avatar to get a loan. You can expect to receive up to 65% of the quick-sale value (see above). If you have a mortgage on the property, you will need to pay that off at closing with the proceeds of the loan. Avatar must fund in the first lien position.

To clarify whether your property qualifies for a hard money commercial bridge loan, contact Avatar at 888-886-0097.

Signs of slowing are popping up everywhere. Recently,  inflation has been rising near the high end of the Fed's tolerance level. Inflation is bad for economic growth; consumers have to pay higher prices for goods and services and therefore consume less.

The Fed's chief weapon against inflation is interest rates. By raising the Prime Rate, the Fed makes borrowing money more expensive. The result is that businesses can't fund expansion as easily as when interest rates are lower, so they grow more slowly or don't grow at all. That means fewer new jobs. Consumers pay more on credit card debt and variable rate mortgages. Prices remain stable, but the economy slows, corporate earnings shrink, and stocks drop in value. The natural course of things is that real estate prices also settle down.

This does not necessarily mean that your real estate investment is going to lose value, but it might mean that the rates of return you have come to expect may be less. When requesting a hard money loan, be conservative about the value and potential value of your real estate collateral. We may not like this reality, but it's best to deal with it realistically. Conservative calculations on your part now will bring happy results in the future.

Apologies and thanks for your patience to all of you who called in to Gillian's line over the past days. While the hardware was changed out at her office, calls, voicemails, and messages were in a jumble. We understand that when you have a deal that needs funding, you need answers now. Avatar works hard to respond to all requests within 24 hours. Most get answers within 1 to 8 hours.

The phones are all up and running again - thanks for your patience. If you have a hard money commercial loan , you have choices:

• use our online form: http://www.avatarfinancial.com/loan-application.php
• call during Pacific Coast hours: 888-886-0097
• Or send an email to gillian@avatarfinancial.com

We'll get you answers, not run-around!

This is one of the best 'tests' for real estate bubble identification I have found. It was sent to me by Paul Farrell, author of The Millionaire Code, Lazy Person's Guide to Investing, The Winning Portfolio and others.

He writes:

Look at each mini-bubble separately, think about the clues.

Give each a 1 to 5 point grade.

Total your score and send it to Paul .(paulbfarrell@charter.net) who is compiling a large scale look at potential real estate bubbles on our horizon:

1. Real estate bubble (5 pts)
   Clues: Speculators driving prices. Lenders offer cheap money, short-term loans. Home equity loans fund short-term spending. Fed chairman sees minimal froth.

2. Energy and oil bubble (5 pts)
   Clues: Crude hits another record. Political turmoil in oil-producing nations. Consumers buy gas-guzzlers at record pace. GM, Ford in trouble.

3. Foreign trade deficit (5 pts)
   Clues: Monthly deficits top $50 billion. This year’s deficit will beat 2004’s $617 billion. Foreigners now own $2.5 trillion of America.

4. Federal budget deficit (5 pts)
   Clues: Federal debt now $7.8 trillion; add another $400 federal deficit this year.

5. Corporate pensions under-funded (5 pts)
   Clues: Airlines, auto, other manufacturers heavily burdened, default to taxpayers.

6. Local government pensions deficits (5 pts)
   Clues: A near $400 billion mess draining local taxpayer resources.

7. Weak US dollar (5 pts)
   Clues: Fear China and other foreign powers will replace dollar reserves. Warren Buffett now betting $20 billion on foreign currency hedging.

8. Social Security deficit (5 pts)
   Clues: No choice, cut benefits or raise taxes; politicians hate both, so it’ll get worse.

9. Health care insurance costs (5 pts)
   Clues: Burden shifting to employees. Costs above inflation. 43 million uninsured.

10. Medicare deficit (5 pts)
    Clues: Going broke faster than Social Security. Prescription drug benefit added an unfunded $8.1 trillion. Long-term estimates over $36.6 trillion.

11. Personal savings shortfall (5 pts)
    Clues: We consume not save. National savings rate is zero, down from 8% two decades ago. Average household net worth less than $15,000, excluding home equity.

12. Consumer debt bubble (5 pts)
    Clues: We’re living beyond our means. Consumer debt at $2 trillion. At 13%, household interest as percent of income at all-time high. Personal bankruptcies rising.

13. War and military defense deficit (5 pts)
    Clues: Iraq and Afghanistan was costs over $200 billion a year, $2 trillion a decade.

14. Homeland insecurity (5 pts)
    Clues: Minimal legislation to protect ports and chemical plants. Federal budget even cut border patrol 90%. Vigilantes patrolling. We are vulnerable.

15. Class gap widening (5 pts)
    Clues: Superrich and CEOs getting increasing share of wealth, ownership and tax cuts.

16. Congressional pork-barrel (5 pts)
    Clues: Both parties act like teenage addicts on a spending spree with stolen credit cards. By not using the veto, the administration acts like a parent who needs Nanny 911.

17. International credibility (5 pts)
    Clues: Image problems: Post-9/11 imperialism, WMDs, Abu Ghraib, Gitmo and more.

18. Junk mailings (5 pts)
    Clues: Mail solicitations increasing for credit cards and hot stock newsletters.

19. New “Mad Money” cable show (5 pts)
    Clues: Frantic, manic entertainment; 1990s irrational exuberance again.

20. Numerous key mini-bubbles (5 pts)
    Environmental, resources, technology, educational, outsourcing, jobs, you pick!

 

Total your scores on these individual mini-bubbles.

If your total is 50 points or more, you're seeing a “MegaBubble” dead ahead. Prepare accordingly.

If you’re close to 100 points, consider a very conservative strategy. Most investors don't see bubbles when they’re in them. And if they do see, they act too late.

Send your scores to Paul to help create an aggregate of the collective mindset.

 

Over the past months interest rates for hard money loans has risen between and 2-5% across the industry. Some lender tie their rates to LIBOR; others like Avatar Financial Group tie rates to the Prime Rate. As the prime rate has risen from a low of 4% to just under 7% today, Avatar has worked hard to lower rates, keeping hard money as affordable as possible for borrowers. Current rates at Avatar are as low as prime +6%.