Private Commercial Mortgage Loans – Four Things Hedge Funds Will Ask for Before Approving a Loan

Hedge funds and other private lenders do make commercial mortgage loans. The key to securing a loan approval is knowing what these unique lenders are looking for. This interesting and informative article by the President of MasterPlan Capital LLC gives commercial real estate investors 4 keys to getting funded.

Private Commercial Mortgage Loans – 4 Things Hedge Funds Require Before Approving a Loan

Hedge funds, mortgage pools, private equity firms and even wealthy individual investors all make private commercial mortgage loans against income producing real estate. While these loans are not inexpensive, they can be a valuable resource to a property owner or commercial real estate investor who needs to close a deal fast or has credit or documentation issues.

Private lenders can close loans fast and with much less bureaucratic red tape and paperwork than institutions require. Securing a private loan can sometimes be the difference between making a huge profit and losing large amounts of money.

Almost all successful real estate investors have at least one reliable source of short-term private capital available to them so they can jump on opportunities when they pop-up or get them out of trouble when cash becomes tight. The key to getting a loan from a hedge fund or other private commercial mortgage lender, is knowing exactly what these savvy investors look for in a deal.

When evaluating a loan application for private funding there are several key factors that hedge fund managers, private equity executives and other lenders look for before they agree to fund a deal.

• Exit Strategy

Private commercial mortgage lenders are, first and foremost, opportunistic investors. Before they will even consider getting into a deal they will demand to know how they are going to be able to get out. A borrower’s exit strategy must be well thought out and must be realistic. Be prepared to demonstrate the viability of the exit. If you are planning on refinancing into a permanent, conventional loan it will help to have lenders already lined up. If you are planning to sell the deal, you will need to have a well researched marketing plan. To get a loan closed, it is imperative that you prove to the lender that they will get their money back, with interest and on time.

• Equity

Hedge funds do not exist to make you money; they exist to make themselves money. Loan-to-value (LTV) ratios in the private money industry are much lower than you will find in institutional lending. The best you can expect from a private lender is 65% LTV, and that is only for properties with sufficient cash-flow. <For loans on underperforming assets LTV ratios will be around 50%-60%. Protective equity must be present or private lenders will simply not be interested. Attempting to talk a private lender into relaxing their LTV requirements is a fool’s errand.

Further, it is important to note that private lenders base their valuations on their own assessment of what a building is worth. They are not required to accept or rely on any third party opinions or appraisals. The guy with the check book is the guy who gets to assign value, borrowers can take-it or leave it.

• Cash in the Deal

The days of 100% financing (or anything close to it) are long over. No responsible private lender will do business with a sponsor who does not have a substantial hard equity (cash) investment in the deal.

Most private mortgage originators today will look for borrowers and sponsors to have at least a 20% cash stake in any deal they fund and will never agree to be the sole financial contributor. They will sometimes allow a reasonable second mortgage but won’t allow borrowing to account for more than 80% of a deal’s capitalization.

Don’t ask a hedge fund for a loan when you are really looking for a well heeled partner.

• Experience

Hedge fund managers and executives at private lending firms are real estate finance professionals and will only work with other professionals. They are in business to make money not to give anyone a shot at the big-time. Investors, developers and deal sponsors will need to be able to demonstrate a track record of success in commercial real estate if they expect to get a loan approval.

Entrepreneurs with less than the requisite experience level, but with desire, ambition and a great deal, are advised to partner with a proven commercial real estate pro before submitting a loan proposal to a hedge fund.

Private lenders can be a very valuable capital resource for real estate investors, but their lending standards are fairly strict and they are not prone to deviate from their protocols.

The key to doing business with these unique lenders is to know in advance what they are looking for and to structure your deal to meet their criteria. Bring them deals they already want; don’t waste your time and effort trying to sell them a deal they are not inclined to accept.

About the Author: The author, Glenn Fydenkevez, is President of MasterPlan Capital LLC, a privately held commercial real estate investment banking firm. About MasterPlan Capital: MasterPlan offers private and institutionally funded commercial mortgage loans, credit tenant lease financing, equity financing and asset management services to property owners and investors in the lower 48 states. Borrowers can apply on-line using the firm’s simple, 1 page commercial mortgage application and will receive prompt, professional service.

Article Source: http://EzineArticles.com/?expert=Glenn_Fydenkevez
http://EzineArticles.com/?Private-Commercial-Mortgage-Loans—4-Things-Hedge-Funds-Require-Before-Approving-a-Loan&id=6056108

Commercial Mortgage Loans – 5 Things Every Lender Will Check

Lending has Changed in the Commercial Sector

In response to the liquidity crisis in the credit markets commercial mortgage lenders and brokers are taking a “back-to-the-basics” approach to underwriting loans. Lending standards have been tightened and all deals are being thoroughly checked out.

Commercial real estate investors, property owners and developers should understand what banks and private lending firms look at as they decide which loans to fund and which loans to decline. –Read the rest here–

Commercial Mortgage Loans – Credit Tenant Lease (CTL) Finance, Apply Online – Quick Response – MasterPlan Capital LLC

Private (Hard Money) Commercial Mortgage Loans

Private (Hard Money) Commercial Mortgage Loans

MasterPlan Capital is actively seeking to originate private, often called hard money, commercial mortgage loans against income producing commercial real estate.

CLICK HERE: Commercial Mortgage Loans ; MasterPlan Capital

This Commercial Mortgage Lender has Money to Lend!

This Commercial Mortgage Lender has Money to Lend!
We can make private (hard money) as-well-as institutional loans against income producing commercial real estate. We also have liquidity for credit tenant lease loans against NNN leased, single tenant retail and light industrial buildings. Click our logo and get in touch.

Click Our Logo To Visit Our Website

Yes You Can Get a Commercial Mortgage Loan From a Hedge Fund – Here’s How – A Wall Street Pro Explains

Most investors know that hedge funds make commercial mortgage loans, but few know how to approach a fund or exactly how secure an approval.

The first and most important thing to remember about hedge fund managers is that they have a Wall Street mentality; they are stock traders at heart. A trader wants to get into a trade at the right price, see results quickly and exit the trade at a profit. Hedge funds that commit capital to commercial real estate lending are no different. They want to lend at a low LTV (loan-to-value) and get out quickly. Profit takes the form of interest and points, but the general mindset of the decision maker on the loan committee is no different from a member of the stock selection committee.

It is imperative that you present your loan as an opportunity for them to make good money, quickly and safely, not as a way for you to reach your goals. Do not talk about your problems; money managers will be empathetic but will not be sympathetic. Emphasize the strong points of your deal, your past successes and your strengths as the deal’s sponsor. Keep the conversation optimistic. We all know it’s tough out-there; sophisticated hedge funds want to fund people who are capable of overcoming obstacles.

The large majority of private lenders, including hedge funds and private equity firms are equity lenders. Hard equity in the real estate is the lenders downside risk protection. This is extremely important to big money hedge funds because they generally do not recover their capital by selling their loans to the government or to the bond market. Hedge funds are usually “portfolio lenders”, meaning they use their own money to finance deals and hold the mortgage paper until it matures. Do not expect any loan offers from private funds to come in over 65% LTV (loan-to-value). If your deal does not meet this criterion, be prepared to inject more of your own cash or find a partner who can bring money to the closing table.

Your exit strategy is a paramount concern to hedge fund managers. Funds make “bridge” loans; short term, interim financing. They will need to know how you will pay them back and will need to be convinced that your exit will work. You must have a detailed, viable and credible exit strategy worked out before you approach a private funding source. It helps a-lot if you have an “in”. For good or for ill, Wall Street works like a private club. They have their own language, their own traditions and their own ceremony’s. If you are not member of the club getting their attention is much more difficult. For those on the outside of this specialized niche, it may be necessary to retain the services of a professional intermediary with Wall Street experience to get you in the door.

The banks, insurance companies and brokers are not lending like they used to. For many good quality commercial mortgage loans, private money is the only-game-in-town. Hedge funds are flush with cash and are hungry to make deals. If a real estate investor can develop a relationship with these unique lenders they will enjoy a seemingly endless source of funds.
————————————————————————

MasterPlan Capital LLC – Commercial Mortgage Lender, Private and Institutionally Funded Commercial Mortgages- Equity Financing – Asset Management – EZ Online Commercial Mortgage Application – Quick Answers – Close in 10 Days – The author, Glenn Fydenkevez, is President of MasterPlan Capital, he has more than 20 years experience in the financial industry and has been a officer at one of the world’s largest investment banks.

Commercial Mortgage Loans – Institutional Funding vs. Private Funding (Banks vs. Hard Money)

It is more difficult to get a commercial mortgage loan today than it was two years ago. The credit crisis has prompted many commercial real estate investors to look into alternative sources of capital. Private lenders, often called hard money lenders, have gained popularity recently as banks and Wall Street brokers have refused to make loans. It is true that privately funded commercial mortgage lenders can be more flexible and can close loans in just days, but that does not mean they are easy to get. Before a property owner applies to a hard money lender they should understand the differences between institutional funding and private funding.

Regulation

Traditional lenders like banks, insurance companies and Wall Street investment houses are all highly regulated. Banks carry FDIC or other government insurance, insurance companies are watched over by each State Insurance Commission and Wall Street is governed by the Securities & Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FIRA). There is a tremendous amount of bureaucracy, red-tape and rules involved in originating conventional, institutional loans. All this regulation means that bank loans are slow, banks are not flexible and there are loads of paperwork and documentation involved.

Private lenders are, by definition, private entities. They might be organized as LLCs or Limited Partnerships (LPs) or they might be a single, wealthy individual who makes money by making loans, but they do not fall under the prevue of banking regulation. They must, of course, adhere to all anti-fraud laws as-well-as all laws against un-fair and deceptive business practices, but they don’t have to report their specific lending activity to Government Agencies and are not subject to Government licensing or chartering. Hard money lenders can be highly flexible in their underwriting criteria; they can change their own lending policies as they wish for their own reasons. They don’t have to require large amounts of documents if they don’t want to and they can move very quickly if they like a deal.

Speed

Bank and other institutional loans typically take 90-180 days to close. Private loans can close in a matter of just days if they have to (a virtual impossibility when dealing with a bank) but generally take about 21 days. Rates Conventional loans are usually based on an established benchmark rate such-as the 10 year US Treasury Bond. The bank takes the base rate adds an index and comes up with a loan rate. Treasury and other rate indexes are historically low right now (Fall ’09) and commercial mortgage loans (for those who qualify) rates are being priced at between 5.5%-7.5%

Private lenders generally hold the loans they issue in their own portfolios as-opposed to institutions who generally sell their loans to Government Enterprises or the secondary market. Hard Money lenders make their profit on rate and points so they charge significantly more. Most private loans today are being quoted at between 10%-16%

Points

It is rare to see a bank charge more than 2 origination points on any loan.

Private lenders will typically charge at least 3 points and as many as 5.

Terms

Traditional lenders usually offer 3, 5, 7 or 10 year fixed terms on loans amortized over 10-25 years. A balloon payment or a refinance is usually necessary at the end of the term, although more and more banks are offering adjustable rate products that don’t require refinance.

Private loans are almost always short term, bridge type loans. Most charge interest only payments rather than amortize. The average private loan term is about 18 months and hard money lenders rarely write a loan for more than 36 months. The loan must be paid off in full at the end of the term.

Underwriting

Regulated institutions are now universally full documentation, full underwriting lenders. Every “I” must be dotted and every “T” must be crossed. They will fully underwrite the property first then the borrower. Both must pass muster or the loan will be denied.

Private lenders are equity lenders. They lend primarily based on the amount of equity in the target property. Investors will find hard money loans require much less paperwork and documentation. Private lenders will be careful and won’t lend to just anyone, but the underwriting is much more straight forward.

Loan-to-Value (LTV)

Banks used to lend up to 80% of a buildings value and allow a 10% second position loan, allowing sponsors to borrow as-much-as 90% of a deals value. Those days are gone. Now even the largest, strongest banks won’t lend more than 75% LTV and they discourage second loans. 65% is typical unless a borrower has a very strong balance sheet and a large liquidity position.

Private lender will not exceed 65% LTV even for properties that have excellent cash flow. Underperforming or vacant buildings will receive offers in the range of 50%-60% and land loans will come in at well under 50% LTV.

In a perfect credit environment bank loans or loans from other large money centers are the most desirable. They offer the best terms, lowest rate and fewest points. Any one who can qualify should seek funding from these powerful institutions. However, we are not in a perfect credit environment. We are in a mess.

Banks have tightened their standards, property values are dropping and the secondary mortgage bond market has completely collapsed. These circumstances have made it difficult or impossible for people to secure a conventional loan. Private lenders are more expensive and offer only short term financing, but they are filling a vital need and should be considered by borrowers if the bank has turned them away.

——————————————————————————————–

Private and Institutionally Funded Commercial Mortgage Loans – Borrowers and Investors can Apply Online – Simple 1 Page Commercial Mortgage Loan Application – Answers in 1 Business Day – MasterPlan Capital LLC; Commercial Real Estate Investment Banking

When Do Hard Money Commercial Mortgage Loans Make Sense?

Privately funded, often called “hard money” commercial mortgage loans typically carry annual interest rates of more than 10% and charge origination points of 2%-4%. These kinds of rates and terms may seem restrictive, but when the situation calls for it, taking advantage of private lending is a smart business move.

When Time is of the Essence

In the commercial real estate game time truly is money. Experienced property owners, investors and developers will tell you that often speed of execution can trump interest rates and points. When facing a looming purchase option expatriation date, a pending balloon payment that’s coming due fast, an unexpected cost overrun or, worse, a foreclosure scenario business people don’t have time to wait the 60-90 days it can take to close a conventional bank loan. Unfortunately, there are times when your property or you project are on the line and nothing short of quick cash can solve your problem. Hard money lenders can make on-the-spot decisions and can close fast. One week funding is very possible and any legitimate private lender can close almost any deal in less than 3 weeks. Hard money is relatively expensive but it’s a heck-of-a-lot less expensive than losing your deal.

When You Have Credit or Documentation Issues

Conventional lenders will insist on large amounts of documentation and that the borrower(s) have decent credit. To start with, real estate investors must produce 3 years tax records, profit and loss statements, copies of leases, bank statements, building maintenance records and much more. Details will be verified and a deal can be killed because of an “I” that was not dotted or a “T” that was not crossed. Private loans, on-the-other-hand, are usually equity based and not driven by the strength of the borrower. Your credit may not matter at all. Hard money lenders do not have the bureaucracy and the regulations that banks, Wall Street and the insurance companies do. They routinely do deals with minimal documentation, sometimes without even a property appraisal. If your record keeping is in disarray, if you are missing required documents, if you have poor credit or you simply don’t wish to share so much personal financial information, then hard money may be your best (and only) option.

When You Need a Bridge

Private lenders are among the most efficient and professional bridge lenders in the financial services industry. When a commercial property owner or developer finds themselves in need of a bridge loan (short term, interim financing) they are well served turning to private funding sources. Very often bridge loans are used to “bridge” the time gap that can exist between their permanent financing coming on line and their immediate need for cash, such as when they have a closing in days but their bank can’t close their loan for weeks. Bridge loans are also an important method of dealing with construction cost overruns, when a few million dollars can get the project finished and ready for sell-out quickly. There are many situations that call for bridge financing and many private lenders exist for the sole purpose of providing it quickly.

When You Need To Make an Attractive Offer

Cash is still king and having a reliable hard money lender on your team is like money in the bank. If you tell a seller you can close on a prize piece of property in 10 days with all cash, you will get that sellers attention. Your competition is likely asking for a 30 day due diligence period and as-much-as 60 days to close. If you can establish credibility with a dependable private lender and you know what their loan criterion is, you can bid with confidence and the cash to back it up.

There is no denying that private loans are more expensive than conventional loans but consider that they are usually short term and can often make the difference between a deal closing and a deal falling through. A successful commercial development project or a profitable income producing building can make an investor millions over its life cycle. When all factors are considered, and your deal is on the line, hard money can be down-right cheap.
——————————————-
Commercial Mortgage Lender; MasterPlan Capital LLC

Commercial Mortgage Loans – What Rates Do Hedge Funds Charge For Commercial Mortgages?

The ongoing credit crisis has made it much more difficult for investors to qualify for an institutionally funded (bank, broker, insurance company) commercial mortgage loan. Underwriting standards have become significantly tougher and loan parameters have tightened. Very few deals are being accepted by the banks, and even fewer are actually closing. Many good loans that should receive financing are being rejected out-of-hand. We call this situation the “funding gap.” Recently many hedge funds and private equity companies have recognized that opportunity exists for firms that can help fill the funding gap by offering private commercial mortgages to quality borrowers who have been shut out by their banks. Over the last 18 months money managers have committed hundreds of millions of dollars to the commercial real estate finance sector. They are buying distressed mortgage paper directly from troubled lenders and they are very willing to write new loans against commercial buildings and development projects. But before commercial real estate investors seek a loan from a hedge fund or other private lender there are some important things they should know. Private commercial mortgage lenders are opportunistic investors; a hedge fund is in business to earn high returns for its investors in a timely and efficient manner. The loans they offer will be short term in nature (rarely more than 36 months) and will carry significantly higher interest rates and origination points than a bank or Wall Street broker would. Further, hedge funds will be very aggressive in foreclosure situations; they will take your property if you fail to perform. Funds and private lenders that we work with are currently charging 10%-15% annual interest with 3-4 points. This means that borrowers can expect to pay a 13%-19% APR. On top of that, borrowers are responsible for the cost of any third party reports that may be required such as appraisals, environmental assessments and feasibility reports. On the positive side, there is capital available for these private commercial mortgage loans and deals can be closed very quickly. Most funds prefer income producing, investor owned commercial buildings like apartment complexes, office buildings or self storage facilities. They will generally lend up-to 65% of a properties value and underwriting is equity based not credit driven. They will lend for both purchase and refinance, but private loans are “bridge” loans and a viable, realistic exit strategy needs to be in-place. In-other-words they will need to know exactly how they are going to be paid back. This credit squeeze has been devastating to the commercial real estate industry and the problems are not going away. As we all wait for the situation to improve private lenders, including Wall Street hedge funds and private equity firms, have cash and are willing to lend it.

MasterPlan Capital LLC – Commercial Mortgage Loans – Privately Funded – Equity Financing – Asset Management – Simple, 1 Page Commercial Mortgage Application Online – Quick Answers – Quick Close- The author, Vincent Remealto, is a commercial real estate valuation and underwriting analyst for MasterPlan Capital.

Article Source: http://EzineArticles.com/?expert=Vincent_Remealto
http://EzineArticles.com/?Commercial-Mortgage-Loans—What-Rates-Do-Hedge-Funds-Charge-For-Commercial-Mortgages?&id=2489357

———————————————————————————

CLICK HERE TO APPLY FOR A COMMERCIAL MORTGAGE LOAN – MasterPlan Capital LLC

MasterPlan Capital is Funding Commercial Mortgage Loans With Private Money

MasterPlan Capital LLC – Still Funding Commercial Mortgage Loans – Click Our Logo to Apply Online

CLICK HERE TO APPLY FOR A COMMERCIAL MORTGAGE LOAN

 

Commercial Mortgage Bridge Lending – All About Bridge Loans (What They Are, What it Takes to Get One)

In simple terms, a bridge loan is a short-term, interim commercial mortgage loan that is sometimes necessary to “bridge” a funding gap that can exist while arranging and closing more permanent financing or other financial transactions. For example if an investor is closing on an apartment building in 3 weeks and her bank can’t close her purchase loan for 3 months, she needs a 90 day bridge loan to get her deal done. Or an investor might be selling a building to raise cash that is needed right away, but it’s going to take at least 6 months to market and sell the building. A bridge loan is the answer.

 

Bridge financing is time sensitive lending that, almost always, needs to be arranged and closed quickly. Commercial real estate property owners, investors and developers must pay-up for the speed and efficiency that bridge lenders can provide. Rates on bridge capital start at around 10% and, depending on the perceived risk in the loan, can top out at 15% or a little more. If lenders and brokers add origination points a bridge loan can be very pricey indeed. Yet, commercial real estate bridge lending is a huge business with volumes counted in the hundreds of billions of dollars. Investors understand that, although costly in absolute terms, a bridge loan is much less expensive than taking on a partner who will demand 50% of the project forever, and a-heck-of-a-lot less expensive than losing their deal altogether.

 

Banks, Wall Street and other large institutional lenders are not effective in the bridge lending space. They tend to be highly regulated and highly bureaucratic. By the time a conventional lender could arrange a bridge loan any opportunity would be long gone. In-point-of-fact the slowness of institutions is the reason bridge loans are in such demand. Effective bridge lending is usually accomplished by private, unregulated financial firms such as hedge funds, private equity groups, mortgage pools and other private lenders.

 

These unique funding sources answer to no one but themselves, they can make decisions on-the-spot and close multi-million dollar deals in just days.

 

Bridge loans are short term loans typically between 9 & 18 months long and rarely more than 36 months. They are generally structured as simple interest only loans with the principle due in-full at maturity. They are underwritten based on the equity that exists in the collateral property and are not credit or balance-sheet driven.

 

The first and most important factor in obtaining a bridge loan is knowing where to go to get one. If you need bridge capital you won’t have time to shop around and research lenders. The clock will be ticking and you’ll likely have only one shot at saving your deal. The best strategy is to develop relationships with lenders and professional commercial mortgage brokers before you need one, so they’ll be there when you do.

 

After a lender has been identified you’ll need 4 things to get the loan; credibility, equity, a payment strategy and an exit strategy.

 

Bridge lenders are highly sophisticated financial pros who like to work with other seasoned professionals. Short term loans arranged on-the-fly are risky endeavors, they are a privilege granted to credible investors with proven track records of success.

 

Bridge loans are essentially equity loans. It is imperative that the collateral property be worth more than the loan balance. Each lender will have their own parameters but none will write 100% LTV interim financing in today’s credit environment.

 

A legitimate, verifiable debt service plan is nearly as important as equity. It is not enough that investors say they can and will make payments, they must prove it. If the property being financed or the borrower can not document sufficient income to make the mortgage payments, then an interest reserve can be arranged if the lender and borrower agree and there is enough equity in the property to support a larger loan. In an interest reserve scenario, the bridge lender either loans the investor more money to make interest payments, or takes the interest out of the original loan proceeds. The proceeds are held in an account and payments are deducted from the account when due. Interest reserve accounts are managed by third parties such-as trustees or attorneys. If the loan is paid off early any balance in the interest reserve is released to the borrower.

 

An exit strategy is of paramount importance when seeking a bridge loan commitment. Bridge loans are short-term, opportunistic loans. The financiers who originate and fund them want to know exactly how they will be paid back and when. The two most popular and viable exits are to secure replacement financing or to sell the collateral.

 

Bridge loans make the commercial real estate world go ’round. They are used for construction or other budget short-falls, to buy out departing partners, to rescue projects from foreclosure, to pay estate taxes and even to settle nasty divorce cases. There are as many reasons for bridge loans as there are commercial buildings in a city.

 

MasterPlan Capital LLC – Commercial Mortgage Loans – Equity Financing – Asset Management – Simple, 1 Page Commercial Mortgage Application; Online – Contact Us – Fast, Professional Service