Avatar's Blog

The past weeks have been more than 'interesting' for the hard money commercial loan market. As the banks shut down lending opportunities almost entirely, we at Avatar Financial Group have been seeing requests for loans that would have been funded by banks in the past.

We take our role as a lender in these times seriously. We understand that people are counting on private lenders to help them weather the financial storm. Therefore, we are focusing all our efforts on commercial real estate loans, moving as quickly as possible to review properties and fund loans.

Until further notice, Avatar Financial Group will only fund commercial real estate loans starting at $1,000,000. We are not funding private residential properties of any kind in any state; we will continue to fund multi-family dwellings such as apartment buildings.

If you have a commercial loan request, use our online loan application to get the ball rolling. We'll contact you as quickly as possible to get you a firm quote.

Now that Sub-prime has basically disappeared, the hard money-money lenders are pretty much the only source of capital for many people. 

Once a thought of a last resort strapped borrowers, hard money loans which have different lending standards than traditional mortgages, are attracting a larger, more affluent group of consumers.

Unlike a traditional mortgage, which is largely defined by credit scores and the borrower's ability to repay, hard money loans are based almost entirely on the value of the underlying asset. That means a borrower's income and credit score aren't nearly as important as they otherwise might be.

Borrowers needing a short term loan or a 'bridge' loan are required to have substantial equity in their collateral - either their home, investment property or commercial property - of 30-40%.

Consumers who need quick access to financing to close on a property in as little as 2 weeks or less are good candidates for hard money.

Consumers who do not meet conventional bank financing but have substanital equity in their property are good candidates for hard money.

Be prepared to pay higher interest rates and fees and you will want to refinance as soon as you can into a traditional mortgage.  Once that is accomplished there should be no reason for another hard money loan.

A good broker never tires of finding a good tip to get attention and positive response from a lender. Surprisingly, I find very few good tip lists out there. If anyone knows of some, please share them with me (just shoot me an email). Here's a tip even veteran brokers might find beneficial:

Commercial Broker Tip: How to stand out from the crowd on the phone.
A lot of a broker's time is spent marketing, making connections, talking to prospective borrowers, and making connections with people who might refer business to them. A good broker is a bit of a chameleon: s/he understands how to speak to people in ways that make them comfortable. Often however, when it comes time to communicate with the lender, the broker is either 'all talked out' or ‘stressed out’. The same skills that bring in the clients are lost at that moment. My tip is: find them!

Recognizing your ability to make people comfortable and using that skill when communicating with everyone at the lender's office is going to set you apart from the usual crowd. Chances are, the lender you're calling has already fielded calls from twenty two fast-talking and three grumpy brokers by 11AM. Stand out from the crowd by saying hello, providing your full name and pausing for a moment if the lender wants to write it down along with your phone number and email address. Introductions and pleasantries should take 10 seconds or less; lenders are super-busy people, as you have probably experienced. Remember, you want them to warm to you, not wish you'd hush up and get off the phone.

Pace your presentation and begin with the bare facts. Here's an example that works:

“Avatar Financial Group, this is Allison.”

"Hi, Allison, this is Evan Jones from Mutual Brokers in Texas. Thanks for taking my call. I have a client with a retail strip mall in Dallas that he wants to refi. The property was valued by an appraiser last month for $2.1 million. He needs $1.6 million to pay off a first and get some cash out. Can Avatar fund that loan by the end of the month?"

Slam dunk! You're suddenly my favorite broker of the day! A pleasant tone in your voice, a brief acknowledgement that you are speaking to a human being, and a clear statement of the bare facts in 30 seconds or less means we can both get this ball rolling now.

The easy part? - the pleasant tone in your voice, a moment to repeat the lender’s name and say thanks for taking your call.

The more work-intensive part? - getting all the bare facts before you start calling. Get the following for those precious first 30 second communications:

• property type - be as specific as possible in 4 words or less
• location - city and state
• value, including how and when it was arrived at - critical additional data that sets you apart from the crowd
• loan amount - a ballpark is ok; be clear about the minimum the borrower can take and the amount the borrower would optimally like.

That last one - letting the lender know the minimum and optimal loan amount – can really set you apart in a lender's eyes. It lets them know you are pragmatic and will work with them to get the best deal possible without killing the loan. You and the lender have a common goal – to fund worthwhile loans and make a good living doing it. Here’s just one way to let the lender know you are on the same ‘team’ and ready to help make a deal work.

Even if you don't get to the finish line this time, chances are when your name comes up, you'll be described as an efficient broker who handles solid deals. In other words, someone the lender wants to hear from. Good luck out there!

Hard money commercial lenders tend to fund up to 65% of what is commonly termed, "the fair market value" of income producing commercial real estate property. Brokers would have an easy and profitable career indeed if lenders routinely funded 100% of the cost of purchase or even up to 80 - 90% of the value of properties for refinances. Since that's not the case, here are a few tips for creative loan packaging that will help to meet the needs of clients as well as the funding requirements of lenders.

Blanket Loans are loans utilizing more than one piece of real estate collateral. Here's an example of a commercial real estate blanket loan:

Assume a borrower wishes to purchase a retail strip mall at a cost of $2,000,000. As a hard money lender, Avatar will lend up to $1.3 million (65%) for the purchase. The borrower must come up with the balance. Note that hard money lenders will lend up to 65% of the lesser of the actual price paid for the property or the appraised value. If the borrower is getting a 'fire sale' price and the property is appraised at $5,000,000, the 'fair market value' of the property is still $2,000,000. It is the price for which the current owner is willing or is forced to part with the property on the market today. Therefore, we work with a price of $2 million and a first lien loan of $1.3. Read on...

Assume further that the borrower already owns two other pieces of property: an apartment complex with a recent (6 months or less) appraisal of $1,500,000 and a skating rink valued at $800,000. The skating rink has been in the family for years. It is free and clear. The apartment building has a mortgage on it for $420,000. Both properties operate with some profit. Here's the summary:

 

Property	Value/Price	Mortgage
Skating Rink	$ 1,500,000.00	$   800,000.00
Apartment Building	$ 1,200,000.00	$   420,000.00
Total	$ 3,700,000.00	$1,220,000.00
	$ 2,405,000.00	65% of the value of additional properties
	$(1,220,000.00)	Less amounts to be paid off to current first lien creditors
	$ 1,185,000.00	Potential net additional funds from a blanket loan
	$ 1,300,000.00	65% hard money loan on the new property purchase
	$ 2,485,000.00	Total potential funds available by collateralizing all three properties

The borrower can potentially take out a loan to cover the cost of the purchase and have some extra working capital to make some improvements or market the properties as well. Blanket loans are an excellent way to get additional capital when 65% of the cost is insufficient.

I bought a television a couple of months ago. It’s a nice big LCD deal that now hangs on the wall of our living room. When we were buying it, my husband and I considered buying the television outright or purchasing the set on credit through Circuit City and Chase Bank. My husband and I are both young and have no college debt, so we thought; “What the hey! Let’s build some credit and take out an eighteen month, no interest credit line with Chase.” We took the television home and waited for our first bill.

A month later, my husband and I moved apartments and called Chase, among other institutions, to have them change the address on our bill. This process took quite some time: it appears that you cannot change your address online, and my husband went through a number of cyclical telephone systems until he found a disgruntled operator who would change our address. After all, one would not want our television bill to go to the wrong house... what if we somehow missed a payment!

A few more weeks passed and we were expecting another bill. Days went by, and no bill arrived. Logging on to our online account, we figured out why: the operator at Chase had typed in a completely erroneous address. Names have been changed, but the principle remains: say our street name is Eastridge Way North., the address had been entered as Eridge Way. No “North” in sight. No wonder the bill had not arrived.

We paid our month’s bill online and got back on the telephone to correct the error. This time, however, getting hold of a human being was far more difficult than it had been previously. The toll-free number on previous billing statements took us through a cyclical nightmare where computer after computer assumed we wanted to make payments, buy products and complete a myriad of other tasks that had nothing to do with changing our address.

Our next tactic was to try and fool the computers. Every menu we got to, we hit zero in an attempt to reach an operator. The first few people we were routed to said that they couldn’t help us, but would forward our call to someone who could. Three out of four times, we were sent to either a  new useless system or the original automated system that chases its tail in order to have you give it money. No pun intended.

The fourth woman appeared to be in a non-English speaking country, although she said her name was Jessica. She couldn’t change our address and she definitely couldn’t let us speak with a supervisor. Apparently, she didn’t have one. Jessica being pretty much useless, we hung up and called the actual store from which we bought the television. My husband ended up shouting over the top of the sales rep who insisted that he put us through to Chase’s billing department (read: automated lemming). Polite reasoning turned to anger and finally to begging as we literally pled with two different sales people that we be put through to a phone number that didn’t start with 1800, 1877 or the like. We’ll pay for the call! Please let us speak to someone who can fix our address!

Exasperated, a Circuit City manager told us the only thing she could do was send us back to the automated system, but that “if you press three a bunch of times, the computer will think you’re a merchant and it’ll send you to a rep.” With those highly technical, customer-service oriented instructions, we waited for the computer’s friendly tones and began madly hitting “3” on our telephone’s keypad. The success of our venture now depended on dictating our address to another person whose English was limited and who misheard the address twice before getting it right. We made sure not to hurry through the address, and we even spelled it out. Time will tell whether the person actually managed to fix our problem. The amount of time spent on the phone attempting to sort out this seemingly simple problem? Three and a half hours. Three and a half hours of our lives that, television or no television, we'll never get back.

The question is, why is it so hard to change one’s address through Chase Bank? Also, why does the bank wait for five days after you pay a bill online before processing it? My opinion is that this bank makes it particularly hard to do everything in order to have people mess up. They can offer eighteen month interest-free credit lines on purchases as menial as TVs because confused customers can think they’re making payments on time when in fact their payments are being processed after the due date and late fees and interest can be added to their accounts. Making it impossible to change an address also means that bills may arrive late (ours eventually arrived a week late). Another cute trick is to bombard customers with offers when they call and making it seem as though customers have to listen to all the offers before they hang up, for fear of negating everything they accomplished during the call. 

We have made three payments on this television, but we’re thinking about paying the whole thing off next month and working on building credit elsewhere. It’s just too dangerous to deal with an organization whose primary goal is to have you trip up. Although we realize that banks have to make their money somehow, we are not going to be the victims of this type of scheme. The TV was worth every penny we were charged for it; the nightmare of trying to pay for it wouldn’t be worth all the TVs in the world.

In recent years, everybody from middle school children to their grandparents has learned at least something about who to trust, and who to avoid, on the internet. While a great number of people are still fooled by spammers and fraudsters, the general population is becoming increasingly informed - and thus skeptical - of internet advertising and content.
Many reputable organizations undoubtedly sabotage their own success by producing awful content online. When you're on the production end of an internet advertising campaign, you should remember what you consider to be "red flags" and avoid committing these offenses yourself. As obvious as this sounds, it is incredible how many people still employ tactics that scream of illegitimacy. Although everyone has different tastes and levels of tolerance, here are a few things that, when displayed on computer screens, say little more to a user than "Get out of this page now."

 

One:

WRITING IN ALL CAPS is a very good way of saying "I have nothing important to say, so I'm going to shout, in hopes of someone hearing me. Multiple words that are entirely capital letters also tend to sound toneless and monotonous to the person reading them: Think of a person bellowing at you without any intonation in their speech. Annoying, isn't it? If you want your writing to pack a punch and be remembered, write something worth remembering. It's best to avoid using all caps completely, and if you think a passage need emphsis, using italics is less intrusive.

 

Two:

Incorrectly spelled words. None of us are walking dictionaries, and I am an atrocious speller; however, would you really post a billboard on a street corner in a busy city without spell checking it first? Also, despite the fact that everyone misspells words, publishing these mistakes makes an author look unintelligent and careless.
Glaring grammatical and stylistic errors. Not many people in your audience will be scholars of linguistics and grammar, or will know the intricate rules of semi-colons, but most people can spot the more obvious errors, such as randomly placed apostrophes, excess use of "..." and the omission of full stops. Also, simply running your text through a spell checker is rarely good enough, as the computer will not notice that you've written "there" when "their" or "they're" should have been used. Think that no one in a marketing niche would make this error? I have seen it numerous times and it always eats away at a writer's credibility.

 

Three:

Hideous social networking pages. I came across one commercial loan company's MySpace entry that played the song "Take The Money And Run" when a user opened the page. Another loan company had a poppy Top 40 song to play to visitors. Although the first page was probably trying to be funny and the second was trying to be hip, using music on any webpage, including MySpace, is a bad idea. Additionally, taking advantage of some social networking sites' HTML allowances in order to splash pretty pictures all over a page is a bad idea. It looks tacky and unprofessional.

 

Four:

Too much large/bold/underlined font. There is a saying in the newspaper industry about having information "above the fold." This refers to the content that people can see on the front page when the paper is folded in half. The same term now applies to web pages. Although different computers and different browsers show varying amounts of a page, what can be seen without scrolling is known as being above the fold. Having a dozen large, bold and underlined headings above the fold is as good as having no text at all. Users do not read the text, they just try and find something to look at that doesn't resemble spam. If this spammy text is all that's avaiable, the "Back" button will be looking like most clickable option.

 

Five:

Excessive color. Even though your color options appear to be infinite, you should not attempt to incorporate every color from fuchsia to lime green into your site. It is also amazing how many people know that green, gray and yellow don't look good together, but who still slap them next to each other on a webpage.

 

Six 

Big and/or numerous advertisements. If you need to run ads in order to sustain a business, try to avoid having the ads take over your page. Also, too many Google-provided ads will make your site look like a dime-a-dozen directory.

 

Often, financial companies and cut-price law firms are the major offenders in the realm of bad websites, so if you're in either field and can produce a nice page, you're already ahead.

Of course, everyone can add more to this list, such as annoying flash introduction sequences, but do make sure to stay away from the heavy-weight mistakes listed here. Your online reputation depends on it!

So, I was in Victoria, BC where I learned that the human eye has four receptors, not three. Until the year 2000, we knew about only three. That we should find a receptor in the human body we knew nothing about for all of recorded history is newsworthy enough, but take a look at what this receptor does!

The three light receptors we already knew existed, receive light and are used to 'see'. This fourth receptor isn't used for 'seeing'; it receives information from the kinds of light it is exposed to and send messages to the parts of our body that release melatonin. Assuming a natural exposure to the light of day (sun), we are exposed to a bluish light in the morning, something else midday and warmer yellow light toward the end of the day. We already know that our melatonin release schedule is tied to our ability to rise, shine, and sleep at night. Now we know a little more about how the release schedule is triggered.

Until the past century, almost everyone was exposed to the right kind of light at the right times of day. With the invention and spread of electricity and the development of large office and factory buildings with rooms that have no exposure to the outside light, things changed. With the small amount of information available to date, researchers already know that exposure to the wrong light or even the right light at the wrong time of day increases all manner of ailments, including for example, breast cancer. It is possible that over a million women a year can be spared this disease simply by exposing their eyes to the natural light of the sun. So far, we don't know how much light (lumens), exactly when and how long the exposure needs to be for optimal effects. What we do know is that this discovery is going to have serious impacts on lighting in commercial structures – and soon!

Commercial buildings with this new kind of lighting installed will be providing a significantly healthier working environment for the people who spend most of their waking hours on the premises.

Avatar's CEO, Jerry Zevenbergen had some very good personal news to share this week. J. William Zevenbergen was born on November 18th, the first grandson to a very happy Grandfather. At 8lbs, 14 oz and 21 inches long, mother and son are both doing very well. 

The Zevenbergens are adjusting to shorter hours of sleep and the demands of a hungry baby boy.  And Jerry is looking forward to expanding his role as grandfather.

It’s almost enough to make you cry. It’s definitely enough to make you take a hard look at your own financial plans. The story of Casey Serin, the twenty-four year old from Sacramento, California who has spent the last five years sinking further and further into debt after reading some real estate books and going to some real estate seminars, is a sad tale indeed.

Featured in Sunday’s USA Today, Serin also keeps a blog, iamfacingforeclosure.com, where he chronicles his journeys into $140,000 of debt. The list of what this young man did wrong in the property market is astonishing. He made his first foray into the real estate market at nineteen, purchasing a condominium while he was earning a $35,000 salary. Apparently, everything went smoothly until Serin decided do leave his salaried job and start his own company. A risky decision in and of itself, it did not take long for Serin’s mortgage payments to exceed what his income could have him afford. Selling the condo, he made $30,000 off the deal and proceeded to blow the profit on an array of things, including dates.

Serin’s tagline on his blog is includes the phrase “what NOT to do in Real Estate,” and this is definitely an accurate description of USA Today’s list of his mistakes. Using every shady and silly trick in the book, such as using “liar loans”, quitting a second job, buying sight-unseen and purchasing eight homes with no exit strategy, Serin is now considering bankruptcy.

If nothing else, this story is a neon lit, fifty-foot high billboard advertisement against educating oneself through self-help books and seminars. When the business you are attempting to get into could involve this type of serious financial disaster, you must seek better advice than “How To” authors. A young man such as Serin has (had?) decades to make money in the real estate industry, but he may well never live down the mistakes he’s made over the last five years. Nobody, buyers or lenders, wants to see this type of thing happen.

It rains in Seattle. Not, perhaps, as much as non-Seattleites may believe, but sometimes you can tell how this town earns its name as the Emerald City. Our trees are hardly ever in need of water.

However, the following is not just a Seattle story, because it rains everywhere. Last Saturday night, Seattle experienced one of its first torrential downpours of the fall, and residents at an apartment complex in the city found out first hand what kind of damage a leaking roof can do to their belongings. They also found out what happens when water is left to drip down drywall, soak into carpet and warp wooden doors for twenty-four, forty-eight and finally seventy-two hours. They then discovered what mildew smells like, and were spurred to wonder how much moisture inhalation is necessary before one develops pneumonia.

A leaking roof is a big problem in itself, but a leak that is not dealt with immediately is a serious health hazard. Appalled residents in the apartment building watched water dripping from light switches and smoke detectors, all the while waiting for the building’s management company to send in the cavalry. By Tuesday afternoon, a lone workman had placed fans in the four badly affected units, but the roof remained untouched. Wednesday rolled around, and residents were vacating their apartments, some preferring to stay ten miles away in Bellevue rather than sleep in a soggy, smelly building.

On Wednesday night, the roof was patched. By this time, however, the damage was done. It was too late. 

There are a number of things the building’s management could have done, both prior to and during this debacle that would have saved them much headache and a lot of money. It seems so silly to point out that roofs should be maintained to the highest possible standards, but in a likely attempt to save money, this particular building’s roof had not been properly cared for. It can be frustrating to fork over money, especially when a building appears to be in good shape, but maintaining the structural integrity of something like a roof requires work. In this case, properly repairing said damage will cost far more than what would have been required to keep the roof in good order.

Just take a quick glance through Washington State’s Landlord / Tenant Law: This company violated a slew of clauses. The law states that the landlord must, among other things, “maintain the dwelling so it does not... endanger the tenant’s health and safety”, “maintain structural components, such as roofs... in reasonably good repair”, “maintain the dwelling in reasonably weather-tight condition” and make repairs to “a condition which is immediately hazardous to life” within twenty-four hours of being given written notice. I don’t know a great deal about electricity, but I do know that having standing water underneath light switches that are also dripping is pretty dangerous. I also know that pneumonia isn’t nice. Because of these clauses, tenants are entitled to move out of they so wish, and they are entitled to a prorated refund on their rent as well as the normal return of deposits.

It is so sad that all this could have been avoided by a little proactive behavior by the landlord. Residents pay rent in part so that their landlords can afford to maintain their buildings: They do not expect to hand over exorbitant Seattle rates for the privilege of acquiring an indoor water feature. I implore you all to respect those who live or work in your buildings by respecting the buildings themselves. It is the stuff of nightmares to be flooded out of your home, so please keep your properties in a condition in which you would be comfortable living. The money you spend on maintenance today will save you lost rent, major repair costs and legal fees tomorrow.

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.

It's all over but the shouting in Seattle, WA. Avatar Financial Group takes their hats off to the Steelers and wishes them well. But even with the first sunny skies we have seen in more than a fortnight, sad sack faces are to be seen all over town. Tough game.

Sometimes, life just doesn't seem fair. You get hit with more things than you can handle and things don't go your way. Fortunately, there are alternatives to the conventional lenders in real estate. If you run into a "bump in the road", Avatar may be able to collateralize your real estate property to generate the working capital you need to get back in the game.

There's a buzz in the air in Seattle these days. Our football team is going to play 'with the Big Boys' at the Super Bowl. We aren't very cocky about this opportunity. Mind you, Seahawk fans know it's been 30 years too long in the coming. But we are finally on our way to the big game.

Parties are planned and brokers and borrowers around the nation have called to wish us well. Thanks to all of you who cheer us on. But really, folks - Avatar will lend even on properties in the Pittsburgh area - we are a nationwide lender and we look forward to serving all of you in '06!

A recent bonehead award went to George Melendez in Lowell, MA. Melendez came up with cool method to rob a bank. He filled a bag with books and wires, went up to a teller, and claimed he was carrying a bomb.

Then he collected the money, dropped the sack and ran out with the loot. Police, of course, had to be cautious, call the bomb squad, etc. and all this gave him plenty of time to get away. Brilliant move. So why the bonehead award? At the last bank robbery, Melendez was apparently running out of books from his bookshelves at home. This time he tossed in his own phone book, complete with his name and address on the label. Should have made a trip to the library! ...courtesty of my friend at Boeing.

While robbing banks may be the fastest way to get cash from a bank these days, private lenders like Avatar do pretty well all on their own - and can keep you on the right side of the law! Avatar funds in two weeks (or less in some cases!) for almost any kind of income producing property in the US. Call us at 888-886-0097 or email gillian@avatarfinancial.com and give us a try. We work nationwide, protect brokers, and pay on the day of closing.

 

 

 

For the first time in eighteen years, the Fed will have a new leader. Al Greenspan will step down as Chairman and Benjamin Bernanke will take the helm. Perhaps no other person in government is as important to the US investor as the Chairman of the Fed. He sets the rates by which real estate mortgages are set nationwide. Avatar Financial Group sets loan rates against the Prime Rate. Most Avatar loans fund at Prime + 6%; as they float with the prime rate, we (and, no doubt, our borrowers) keep a pretty firm eye on the Fed Chairman’s whims concerning the prime rate.

Ben Benanke becomes Chairman on Tuesday, January 31, 2006. Stay tuned as we learn more about ‘the boss’.

 

Every year it’s the same old story: we are hardly past the winter holidays when the Tax Man comes calling. For most real estate investors, the idea of filling out the forms is more egregious even than having to pay those taxes. So, most palm off the task to the professionals.

Even if the closest you come to tax preparation is an annual visit to your accountant, there are times when a little understanding of the tax implications of a business move might come in handy. Fortunately, our friendly IRS now offers 1040 Central, an online resource that might prove invaluable – all without waiting on the phone, or paying top dollar for some simple answers. Of course, for the more complex stuff, you’d best stick with the tried and true experts.

Access 1040 Central at http://www.irs.gov for a quick overview of changes for 2005 filings, current new releases, FAQs, filing options for most basic filers, and more. You can even check on your refund. Of special interest to investors: check out the credits and deductions section – you may find some real nuggets of information about your current and future holdings here.

Recently I got a direct mail piece from a local real estate agent offering to provide me with a market analysis. She promised to let me know what my home is worth. Basically, she is hoping that I will ask her to prepare this analysis, a free service and then be so star-struck with the numbers that I will ask her to sell the home for me... and perhaps ask her to find me another home to buy. Good marketing for the real estate broker.

Even better for you if you own commercial or investment residential real estate as well. There are thousands of real estate brokers out there hoping you will ask them to prepare a market analysis for your property. If you are seeking to refi the property, your first call should not be to an appraiser. Appraisers will provide you with an "MAI Appraisal" - aka "Retail value" of the property. But lenders will lend based on the "Street Value" - what your property will really sell for today.

Contact a real estate broker and tell them that you want to know what you can hope to get for your property if you have to sell it within the next four months. Tell them you know you'll take a hit. Ask them what the number would be. Agents want your business, so they will probably put on rose colored glasses and give you a number. Take the rose colored glasses off, reduce the sum by about 10% - give or take, as you feel the situation warrants - and that's your quick sale value. If you count on this number when you apply for the loan, you will probably be satisfied with the value the lender comes up with as well. Coming to a meeting of the minds with your lender is one of the most critical factors in a successful application.

Calling all apartment building owners! I am gathering info from owners around the country. Tell me the average overhead cost of your apartments in your area. Here's what I want you to do:

• Calculate your gross income per annum
• Add up all the expenses of the operation per annum
• Divide the expenses by the gross
• Divide that by the number of apartments

What you'll have the is operating expense expressed in a percentage per apartment per year. So - investors (with inquiring minds) around the nation want to know: how does my property stack up? Am I spending MORE than the average percentage per apartment, less, or about the same?

Email gillian@avatarfinancial.com Thanks!

Avatar Financial Group's CEO, Mr. Jerry Zevenbergen was blessed with the arrival of a granddaughter, Grace Lee yesterday. Proud parents, aunts, uncles, and grandparents greeted her arrival and shared photos. See her on our home page - lower right.

For those of us who spend our days focused on property values and finances, it's a pleasure to step back and take note of the miracle of the progression of life and family.

Meanwhile, business goes on as usual at Avatar - call or email us with improved commercial property deals anytime.

When was the last time you heard of an investor who purchased a commercial piece of property for MAI appraised value? Could you name a handful in the past three to five years? Probably not. Good real estate investors look for properties selling for less than the appraised value and snap them up.

The purchase price of properties is called the 'street value' or 'quick sale value'. It is the sum that a property will change for between willing parties today. MAI appraised values assume that the seller has one, two, or even more years to wait for the right buyer to come along and buy the property at top dollar. Life isn't like that.

When you are purchasing a piece of real estate, if you are seeking a non-bank (private lender) loan, count on getting a 65% LTV first lien position loan. Be sure you have 20% to put down on the property yourself  - you can gather a group of investors to help you out here, but don't borrow that money. The 15% balance can be a seller carryback.

More about this equation tomorrow....

Avatar is a Seattle based lender and we share the excitement in our town as our football team, the Seattle Seahawks, head for the Super Bowl. Many readers probably already know that the Seahawks have never been to a Super Bowl, so this is a big event for the local fans. We’re happy, but not cocky.

As the game winds down this evening, Avatar sends best wishes to Pittsburgh who will meet the Seattle team in Detroit. And our hearty congratulations to the city of Detroit as they host the game. Realtors and mortgage brokers take note – lots of people are coming to town. Make sure they know who to contact if they are interested in investing in your town.

PS – The game is over and I am thrilled to see the players of both teams, hugging each other on the field, the coaches approaching each other with deliberation and dignity – and hugging each other, sharing personal words together, and not just shaking hands. Win, lose, or draw, a good game of sport is a fine way for a country to spend a Sunday afternoon. …and now, I am headed off to pick up two dear friends who flew all the way from Charlotte, NC to see the game. Sandy and Cary, we’re sorry you lost, but we’re happier the game brought you to town to visit with us.

Brokers around the country are reporting that during this busy time of year, they are seeing continued interest in condo conversion complexes, but less so than last year. I hear the the southeast is still largely designated as 'undervalued' in both residential and commercial properties. Residents of Charlotte, Atlanta, Jackonsville, Nashville, etc. note that the income levels in those 'undervalued' cities are not commensurate with those of the more expensive cities. But that doesn't seem to stop the price of housing and commercial properties from continuing to rise anyway.

 

Refinancing your commercial property to generate some working capital? Here are some tips for getting started:

• Contact local realtors. Ask them what you could expect to the sell for if you had to sell it in the next four to five months. Ask at least two.
• Consider that realtors want your business and may wear rose colored glasses when quoting you a number. A more realistic number may be something than what they promise you.
• This is the quick sale value of your property and will differ from the MAI appraised value.

To determine how much you can pull from the property, take the quick sale value of the property and multiply it by 65%. Reduce the product by any outstanding liens on the property, including mortgages, tax liens, etc. If some liens can be subordinated, you may be able to keep those in place, so long as the total loans to value does not exceed 80%. The reason? The owner/borrower must always have some equity in the property. Avatar lends up to 65% LTV and permits another 15% in subordinated loans.

P&Ls are not tax returns. They are profit and loss statements. They can be made to demonstrate different phenomena of your business and can be focused toward different readers. If you are making a P&L for a loan package, your P&L should show:

• gross income
• operating expenses including rents, cost of goods, labor, debt service, etc.
• net cash flow into business

Then you can add another section showing capital improvements, major acquisitions, etc. If you simply run it all together, you can make a cash cow look like a money losing proposition. Make sure your P&L shows your business in an honest, but favorable light. Show the cash flow and then show what you spent the income on that will improve the business in the short and/or long term.

Avatar is not a bank lender - we don't fund basd on FICO scores, etc. We don't care what your mother's uncle dog died of and we won't ask why it was your fault. That's what banks do. We lend on loans that make sense for the borrower as well as the lender.

So why do we ask for tax returns and FICO reports? When determining the relative risk factors in any loan, it is prudent to see how low that risk can be proven. If you have solid tax returns over the past few years, that will bolster your request. If not, we won't decline the loan. If your FICO shows low FICO scores, but your P&Ls show strong income, then we know why you are coming to hard money. Banks don't like low FICO scores, but low FICO is not an insurmountable obstacle to our funding of your loan.

We use these elements in our due diligence to see that you are who you say you are and that your numbers 'make sense' all around. Before we do our due diligence, take a moment to do some due diligence of your own. Take a look at your own numbers to see whether the loan you are requesting makes sense for you and your business. If so, you'll be able to make a reasonable argument to Avatar as well.

Calling all brokers! I need your input. I've been writing tips and thoughts about the industry in this column for some time now. A few of you mention that you read it regularly. More of you mention that you read something in particular and take issue with the sentiment or agree.

Now I need your help in a big way. If you read this column, I need to know what's happening in your town. What laons do you specialize in? What's getting funded? What isn't? What are the trends you are seeing? Share your wisdom and I will share it (minus the proprietary stuff, of course!) with your colleagues.

Help me make this a banner year for all of us in the non-conforming lending business. I'm waiting for your emails at: gillian@avatarfinancial.com.

Not sure why, but I am having trouble lately getting decent color photos of subject properties with the loan requests. Brokers and borrowers alike are desperate to close in 14 days or less, but they can't seem to come up with a few clear photos of what they are asking Avatar to lend on.

Here's the tip, folks - loan requests that come in with good quality color photos of the exteriors (and a few of the interior) of the subject property get funded at a rate of better than two to one. This is because photos really are worth a thousand words. When I give a loan package to Avatar's CEO or president, the first question is, "What am I wrapping my arms around here? Show me the photos." If the photos pass muster, they'll look at the numbers and the story. Without photos, there's no loan to consider.

Send photos, folks! It is the fastest route to getting your loan package in front of the president or CEO and getting your loan funded.

Avatar strives to provide an initial response to every loan request – more than 2000 per month by the end of 2005, within 24 hours. Starting on January 2^, of the new year, loan requests began flooding into the office. I am more than three day’s behind in answering loan requests here at Avatar. (Not to worry, by Monday I will caught up again). But – brokers and investors take note…. I have to tell you most of the requests are the fallout of the draconian law signed into effect in April 2005. This sickening piece of legislation has ripped the bankruptcy safety net out from under responsible working families to the benefit of irresponsible credit card companies who foisted loans, credit cards, and other lending instruments on people who could ill afford to pay the usurious and ever increasing interest rates of these ravenous monsters.

 

The hardest calls I field are those from people who are losing their homes due to foreclosure. I hear the same stories again and again. Most say they “know” that “most people” who declare bankruptcy probably spent too wildly and deserved it, but their situation is different – they have a child, a parent, a spouse or other family member is dire medical straights. They have lost jobs, been hit by natural disasters, and more. The hear trenching stories go on. I’ll tell you what: this tall tale that people who go bankrupt and are foreclosed in America are in that boat because they deserve to be there is the biggest, most ugly lie corporate America and our own bloated-with-personal-wealth-they-want-to-protect-and-increase government officials we have ever seen. The founding fathers are rolling in their graves now. What’s next – debtor’s prison?

 

And what does that mean to brokers and real estate investors around the country? Apartment rentals are going to be hot – people who lose their homes need to rent a place to live. Condo converters beware. Some of those buyers will lose their homes with the adjustable rate mortgages now beating them into penury. They will be renting apartments next year and their condos will be selling for a song – which will directly compete with your ‘retail’ priced condos now being converted.

 

I’m looking for what this will mean to retail strip malls, office buildings, industrial centers, golf courses, ski resorts, mobile home parks, and more. The country continues to lose the middle class. Look to the extremes to serve the markets that are growing.

So many folks - both borrowers and brokers are surprised when they do business with Avatar. Our slogan is "a refreshing change from business as usual" and we try hard to live up to it. But it occurs to me (must be the spirit of the season not quite wearing off) that hard money doesn't have to be such a rough place to make a living.

I hear from literally hundreds of brokers and borrowers with loan requests every week. I do my best to return every call within the day or at the latest the next day. I do my best to respond to every loan request in an equally timely manner. Do I succeed? Not every time. But Avatar's reputation for being respectful, accountable, and reliable is based on the fact that we strive for that kind of response time and succeeed almost 100% of the time.

Moreover, I note that more often than not, borrowers and brokers alike begin their conversations with a bit of a brusqueness in their voice. By the time we hang up only a few minutes later, their voices are more pleasant and they have generally shared something personal or at least friendly in tone before saying goodbye. As we look to the New Year and consider ways to increase busines, I'd urge every professional broker 'out there' to consider beginning their conversations with clients and potential clients, as well as with colleagues and lenders with a kinder tone and an expectation of civiility. It's got to start somewhere - why not with you? You'd be amazed at how your cadre of Raving Fans grows and how quickly your referrals increase. Old news? Sure it is. But I can tell you from personal experience as well as from the Sales masters, simple civility and inherent kindness will increase business in the short and long term more than almost any other trait in the business.

Brokers around the country are reporting a banner start to 2006. With banks and conventional real estate lenders tightening the reigns on business, investment and real estate lending,  non conforming loan brokers are finding their phones heating up.

Commercial purchases are up in the southeast and south central states. The northern midwest, usually quieter in the winter months is seeing a brisk upswing in real estate loan requests.

By far the most noticeable increases are still in the owner occupied residential lending arena across the country. Hardest hit appear to be the midwest and southeastern seaboard with more requests for foreclosure bailouts than other parts of the country. Condo-conversion afficionados take note - if condo and home owners are being foreclosed on, they will need new residences in a hurry. And the first stop will be apartment buildings. Check the litmus papers to see if it's really time to convert those apartments to condos. Consider whether you might to be the only apartment complex left in a town with empty condos and increasing numbers of folks looking to rent instead of purchase.

The first stage of approval of a hard money loan results in the issuing of a Letter of Intent. In order to get one, Avatar's president or CEO takes a look at photos of the subject property, a personal financial statement on the guarantor of the loan, and P&Ls from the entity that will support the monthly loan payments.

When submitting a loan to Avatar, start by filling out the 2-minute loan scenario form accessed from the home page. The form will ask for some basic information, including when you purchased the property - or when you plan to buy it. You will be asked what you paid (or will pay) for the property and what the current value is. If you have an appraisal, enter the value and the date of the appraisal.

Provide a short executive summary in the notes section of the form - tell us what you are planning to do, why you are seeking hard money rather than a conventional loan, how the monthly loan payments will be made, how long you plan to keep the loan and what your exit strategy will be. An exit strategy is the manner in which you will pay back the loan at the end of the term of the loan. This might include sell the property, refinance it, or obtaint he money in some other way.

I've been hearing variations on a theme from the brokers I chat with each day.... the recent hikes in interest rates coupled with the noticeable tightening of the reigns on lending criteria among commercial banks is changing the investment residential landscape in the US.

Across the country, I am hearing brokers talk about record numbers of inquiries at the close of 2005 and early 2006. Brace yourself - if these brokers are correct, next week is going see an increase in that onslaught. The largest increase in hard money loan inquiries is among homeowners. They are the canaries in the coal mines*. When homeowners who financed with short term ARMs during the low interest rate window a few years back find themselves unable to meet the continually increasing monthly mortgage payments, they begin to default. We are seeing this phenomenon in single family dwellings and condos/coops, alike. When condo owners can't keep up, prices start dropping - good deals will be out there, courtesy of desperate sellers or the banks that foreclose on them. With an increasing number of such properties (I hesitate to call it a glut, but there will be some and they will increase through the winter/spring), the condo conversion craze will cool.

We saw plenty of investors grabbing up apartment complexes around the country and converting them to condos, reselling the individual apartments for many times more than the amount they paid for the total property. What was a good game plan last year, may not work so well this year. With more people losing condos and SFDs to foreclosure and incresasing interest rates, there will be more folks looking to rent their homes rather than buy one.

I'll be watching to see how the story unfolds this winter. But today, put me down as being 'bearish' on condo conversions and 'bullish' on apartment complex ownership and construction - especiallly in the Southeast.

* Miners used to take canaries into the mines with them. Keeping them close at hand, it wassomeone's job to keep an eye on the birds to be sure they were breathing and well. Canaries are extremely sensitive to carbon monoxide and will die well before adults humans suffer the same fate. If the birds died, the miners had a short window of oppotunity to get out of the mine before suffering carbon monoxide poisoning. Watch the homeowners - they are investors' canaries.

When issuing a Letter of Intent, Avatar generally wants to see P&Ls for the business entity that will support the loan payments, photos of the subject property, and a Personal Financial Statement on the borrower(s)/guarantor(s) of the loan.

Avatar takes a look at loans from a number of different angles to make a decision about loans based on all . The purpose of the Personal Financial Statement (aka 1003) is to see the sibstance of the person or business entity behind the real estate guarantee. The financial situation of the guarantors of a loan can serve to support the argument for financing.

 When creating a Personal Financial Statement list assets, liabilities and indicate the net value of the personal estate. Real estate, investments, bank accounts, and personal possessions such as art, antiques, and household goods may also be applicable.

Avatar Financial Group funds loans that make sense for both the borrower and the lender. To determine whether a loan makes sense for a borrower, A Avatar Financial Group takes a look at P&Ls (profit and loss statements) for about two years' history for the business entity that is going to support the monthly interest-only payments for the life of the loan. When preparing your financials, take a look to see whether you are bringing in at least 1.2 times the sum you have to spend on all your expenses, including the Avatar loan in any given month. This will provide you with a reasonable cushion of cash flow. In the event that you run into a bump in the road during the loan, you will be able to get over that bump rather than run into serious trouble or disaster.

Create a list of your expenses. Remove any existing loan payments that will be paid off with the Avatar loan. Insert the Avatar loan expense instead and take a look at the numbers. You'll know whether this hard money loan is going to make sense for you.

After a Letter of Intent is issued by a hard money lender, the next step is the due diligence process. Due diligence at Avatar FInancial Group consists of the following:

• Review of any existing appraisals and a review of the property by Avatar's appointed appraiser. The appraiser determines the reasonable quick-sale value of the property on which to base the loan. Quick-sale value is the sum one can reasonably expect to receive for a property in the event that it is sold in four to five months' time.
• Review of the property by Avatar's CEO or president. A senior staff member will fly out to the property and walk the premises. The borrower does not need to be present by access is, of course, required.
• Review of P&Ls from the entity that will support the monthly interest-only loan payments. Avatar will look for signs that the loan makes sense for the borrower as well as the lender. The borrower should be able to show that there is sufficient income to pay all the monthly bills including the Avatar loan and still have a few dollars left over to put into a pocket. In other words, if the borrower runs into a 'bump in the road', there will be sufficient cash on hand to get over that bump. Avatar makes loans that make sense for the borrower as well as the lender.
• Legal review - by legal counsel for both the borrower and lender
• Gathering of documents such as tax returns, title, survey, insurance information, etc.

The first stage of a private money loan approvals is the issuing of a Letter of Intent. When you submit a loan to Avatar, your loan is reviewed to be sure we are a good match for your needs. If the LTV, loan size, property type and location, and borrower equity ratio is sufficient, then a Letter of Intent is issued to you.

The LOI is generally emailed to the broker of record who then forwards it to the client. To get a Letter of Intent, be prepared to provide the following:

• Photos of the Subject Property
• Personal Financial Statement on the Borrower(s) / Guarantor(s) of the loan
• P&Ls from the entity (last year and YTD this year) that will support the interest only monthly loan payments.
• Executive summary

The executive summary is an important element of the loan package. It should contain information about the borrower, the object/purpose/use of funds of the loan, length of time the funds will be needed, why the borrower is seeking hard money rather than a conventional mortgage, exit strategy and any pertinent info that will help Avatar to determine whether this is a loan Avatar is prepared to fund.

Keeping information about 'skeletons in the closet' or 'bumps in the road' hidden at this time is a costly mistake for borrowers and brokers alike. Once the LOI is issued, the borrower will be asked to sign and return the Letter and wire (or pay via online form) a down payment toward the third party costs of due diligence. If the full lending scenario is not disclosed before the LOI is issued, that information will come out during the due diligence process. It does not serve the borrower well to have the down payment funds spent in pursuit of a loan that does not meet lending criteria when a quick yes or no is possible without any expenditure of funds.

Brokers and borrowers are encouraged to provide complete information about the loan situation and borrower when submitting the initial loan scenario. Within a few hours, you will have a reliable answer from the CEO and/or president of the company - a response you can count on. For more info or assistance with submitting loan requests, email gillian@avatarfinancial.com.

When you submit a hard money commercial loan request at Avatar Financial Group the request proceeds through a series of reviews in order to proceed to funding. Here is what to expect:

1. Initial review - your request is reviewed to determine if it meets Avatar's lending criteria for size of loan, loan-to-value ratio, property type, etc.
2. Initial review by the president or CEO of Avatar - at Avatar, qualified loans go directly to the top. Photos of the property, financial statement, and P&Ls on the entity that will support the loan payments are reviewed. If the loan 'makes sense', a Letter of Intent is issued.
3. The borrower reviews the terms, rates, etc. of the Letter of Intent. If s/he wishes to proceed, the Letter is signed and a downpayment toward the third party costs of due diligence is made.
4. Avatar proceeds with the due diligence process including an inspection of the property by a senior Avatar staff member, an appraisal review by Avatar's appointed appraiser, financial document reviews, etc.
5. Once the due diligence process is completed, the funding documents are prepared. Legal counsel for both the borrower and lender review the documents and 'sign off' on it.
6. The loan is funded.

For many months I have written the blog for Avatar Financial Group. In the beginning, I wrote the column as a TIPS log, helping new and seasoned brokers alike to understand what a good loan submission package contains and how to increase 'Yes' answers for their loan requests.

After awhile, I turned to news, closings, and other info about the hard money commercial loan business. After a few months, I noticed more and more emails coming in asking me to return to my original focus - helping brokers be better brokers.

So that's what 2006 brings to the Avatar blog - a return to our mission of providing excellent service in every we can to borrowers, brokers and professionals in the hard money commercial lending profession.

Here's to the New Year - may you all increase your client base, may your loan packages improve daily, and may more of your loans close as you become increasingly more capable at submitting 'winning' loan packages.

Tip 1 - PHOTOS. I predict that I will come back to this concept numerous times int the coming year. But let me start off by saying that loan scenarios that come in with excellent quality photos - good lighting, exterior and interior images showing clean, well maintained properties, are funded at a rate of better than two to one.

This has nothing to do with the financial business. It has everything to do with human nature. Put yourself in the shoes of the lender. She or he has more than a hundred potential deals to review in a week. Which ones take precedence? Easy - the ones where the lender can quickly see exactly what it is that they are being asked to put their arms around and lend money on.

Speak with your clients about the importance of good photos. Photos should be submitted in email format - low resolution jpegs. Trust me on this - if you have monster files that clog the lender's email server, you will not be their favorite broker this week. Learn to reduce images, improve highlighting, increase light or clarity, etc. for the images you submit. The time you spend learning this and tending to the images will pay off in more closed loans - definitely worth your while!

Good luck - I'm looking forward to working with you in 2006.

Over the years, Avatar Financial Group has developed a well earned reputation in the industry for living up to our byline - "a refreshing change from business as usual" in hard money lending. We focus a good deal of our attention on the quality of the service we provide, from initial contact through completion of the loan. We try to be sure that brokers and their clients are respectfully treated with straightforward, timely information and action.

We also choose to work with providers who help make our information dissemination and marketing serve our clients best. SEOmoz, LLC of Seattle, WA manages our website, including design, content, and search engine optimization (hence the name, SEO. For those who are interested, "moz" doesn't stand for anything, but stemming from the site Dmoz.org, an Open Directory Project, it has come to mean free or openly shared technologies.) This week, Newsweek wrote an article about the work of SEOmoz.

If you have ideas for information you'd like us to provide you, or want to sign up for our newsletter, which provides news about recent closings and tips for developing better loan packages, new clients, etc.please contact me at gillian@avatarfinancial.com.

Jean-Maxime would like to point out that there's a case to be made for OIL at $100 a barrel. He says, "I knew three years ago we were going to see higher oil prices. $75 a barrel is a given. Higher oil prices are going the be the norm for a while. The prices of the past years were artificial. Heavy demands are constant now, particularly from India & China. They are now competing for raw materials / commodities across the board, driven prices up."

So what's that got to with real estate? Everything. The cost of operating properties is going to continue to rise. You can pass these costs to your tenants, but you will see the reflection of increases in your bottom line as well. The market will only bear so much. Calculate what oil at $100 will do to your bottom line before investing and when considering what to sell.

Also consider what will replace oil. Natural gas, solar, hydro, and other options begin to be very competitive when oil hits $65 a barrel. We're there, people. Time to see what retrofitting will be needed in your properties to take advantage of cheaper energy options.

CB Richard Ellis announced that they arranged for the sale of the Wingate Commons in Fort Lauderdale to Weston Wingate for $3.75 million. Houston based real estate trust, Hines Real Estate Investment Trust is offering $200 million in common shares and is planning a $2.2 billion IPO. The commercial news of sales, increases in prices and soaring times for Invesment Trusts continue.

At the same time, residential real estate news i showing signs of cooling all over the country. And every one of the articles contains caveats that although homes are taking longer to sell and prices are not soaring as quickly as they have been, the housing market is still as hot as ever.

Well, yes. And no. It is not possible for things to be slowing and things to be the same. Simple physics. That said, it is true that the housing market is still hotter than it has been in many decades. It just isn't as hot as it was only a year ago. So buyer beware. I am getting more and more requests for residential bridge loans from folks who are having trouble selling their homes before they buy the new home. They still feel they have to get in on the home they want now before they are bid out or lose the opportunity. However, they are not getting the same response from others when trying to sell their own homes.

Location? Hardly. The requests are coming in from the San Francisco area of CA - from up and down the coast of CA for that matter. Denver, Houston, Wichita, Boston, Atlanta. It seems to me that the problem is more the with the particular sellers than with a specific area. Houses are selling a little slower - that's all there is to it. Some folks aren't quite catching on and they are desperate to get into that ne home before they have a firm sale on their own.

My advise? Settle down, folks. Your house might take a few months to sell, instead of a few days or weeks like your neighbor's home did last year. No big deal. But things are beginning to slow.