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| Rancho Cucamonga, California - Friday, July 25, 2008 | ||
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| WHERE DO I FIND THE MONEY?Money can be the most elusive item when one really needs it. Potential borrowers are sometimes shocked when I quote an interest rate for a particular type of loan.For example, a 6 unit apartment project will demand a much higher interest rate than a 4 unit located in the same area and of the same quality. Why? Up to four units, the loan can be sold to Fannie May or Freddie Mac. This releases the money back to the lender with profits being generated by the yield differential between what the lender originated it for and what the Washington lender will pay for the loan. Once you pass four units, you are into a lending area that not many institutions favor. These loans are not as easily sold on the open market, thereby mostly attracting lenders who will "portfolio" or keep the loan. Those who do these over four unit projects generally want a dollar amount of sufficient size to warrant their making the loan. One lender I deal with has a rule: anything under $500,000 will require a $2,600 processing fee and the interest rate is usually at least one percent higher than a four unit loan. In addition, the 30 year fixed rate normally associated with four units or less is non existent in the larger multi-family loans.. typical terms will vary with 3,5, and sometimes 10 yr fixed rates being offered. (the ten yr. is usually quite a bit higher in rate) The amortization period will vary from a high of 30 years to a low of 15. Points can vary from 1 to 3 depending on the lender. Mixed Use properties, special types, gas stations, restaurants, etc. all typically attract a completely different class of lender who is seeking a higher yield on their investment and in return looks at commercial properties that most lenders will decline. Loans I have funded which fall into this class include trucking terminals, retail strip centers with the second floor all apartments, Horse Facilities, Citrus Packing houses and Churches not belonging to some national group. So in closing, when you are looking for a loan, first identify what type of property you have to offer as security. Then go to a individual who has experience in these types of loans. Don’t be afraid to ask for references as most single family loan representatives have not a clue where to go. they can only see the dollar signs. Results are usually disastrous with your property being improperly presented to this small lending market. Once a property has been shown to a lender and declined, the odds of them taking a "second look" are very slim. Recently I did a loan that involved a a camp for children interested in Biking and related sports activities. The borrower had been trying to get an SBA loan for over 2 years and had been turned down by everyone. A careful study of the loan package showed up some glaring deficiencies.. Once these were corrected and the proper presentation made to an SBA Lender (with a little begging to take a second look), the loan was approved. The key to making making loans such as I have described is having the lender database, the contacts and most important the experience is how to put together a loan package. Our firm has been doing this type of loan for over 40 years. We offer both loan placement and valuation services. For more information go to our website, www.landloan.com. Last Update: 2/8/2002 Ed Soehnel has been active in the real estate industry for over 40 years. He is a long standing appraiser and for the past 15 years he has concentrated on real estate loans and their related interests. You can reach Ed at http://www.landloan.com or ed@landloan.com | ||||
