Get the low-cost loan you deserve! Look to Bay Portal Companies, Inc. and find out why America's entrepreneurs come to us for helpful loan officers, offering aggressive rates and low fees!
We specialize in Commercial Real Estate Loans! We offer Commercial AND Residential Loans in all 50 states! As mortgage bankers, there are NO BROKER FEES, NO JUNK FEES AND NO DELAYS! We offer Full-Doc, Stated, Hard Money and Wall Street Money.
Founder, President and CEO of Bay Portal Companies, Inc.
*Also Choose From Our Full-Doc
And FAST Hard Money Loans!!!
AS COMMERCIAL MORTGAGE BANKERS, LICENSED RESIDENTIAL LOAN OFFICERS
WE OFFER WALL STREET MONEY, BANK LOANS AND HARD MONEY LOANS NATIONWIDE!
Welcome to our online application site! My name is Bruce Cobbeldick, President of Bay Portal Companies, Inc. We have linked hi-tech with high touch and seen to it that our team of professionals truly listen and serve our customers. Our approach and our work ethic is different. We're confident we will earn your business with our service, rates and fees! We seek to exceed your expectations by offering great rates, fast fundings and old fashion work ethics that provide genuine care, helpful resources and access to our people and processes Monday thru Sunday 9:00 a.m. - 9:00 p.m. If you have questions about your application, or would like to apply CLICK HERE!
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Preferred Partner!
Our Service Level Agreement (SLA) stipulates these expectations:
At Bay Portal Companies, Inc., we are serious about being easily accessible throughout the week. We answer your call - be it a weekday or the weekend! At Bay Portal Companies, we realize that most real estate transactions take place after working hours and on Saturday or Sunday! So, while some loan officers are content with letting their Purchase Leads or Refi Applications sit in their Voice-Mail for two or three days, we realize your need for speed! We understand TIME TO VALUE and the cost of missed opportunity, so we have a policy of returning all phone calls within 30 minutes or less, 12 hours a day, 7 days a week. Period.
My name is Bruce Cobbeldick. I founded Bay Portal Companies. Call me if you have any problems or concerns! Our team has been selected and trained to offer top-shelf service!
Bay Portal Companies Inc. specializes in Residential Mortgage lending and Commercial-Business Loans. As a direct lender, we can ensure rapid approval decisions combined with the industry's lowest rates. This ensures we issue Pre-Approvals quickly (we know real estate agents HAVE THE NEED FOR SPEED!) and that our customers can take advantage of the lowest possible mortgage payments available - - - we focus on fast fundings and saving clients the kind of money that pays us the highest compliments possible - referrals! CALL 440-668-0887 TODAY! Ask for Bruce Cobbedick, Ken Tonegato, Monica Cobbeldick, or Steve Fry!
WE ARE AN INTERBAY PREFERRED PARTNER AS A LENDER WE OFFER OUR OWN WAREHOUSE LINE PLUS WE HAVE WHOLESALE BROKER MATRIX PRICING WITH $30 MILLION IN OUR PIPELINE, OUR RATES ARE LOW!
We are committed to seeing to it that our loan officers are trained professionals, accessible and committed to quality service. Contact me if you have any concerns or delays. My direct phone line is 440.668.8110. We do Residential Loans in all 50 states and we specialize in Commercial/Business/SBA/Hard Money loans. Our team approach means that each loan officer has a staff of caring associates, who help us deliver speedy Pre-Approval Letters and F-A-S-T Fundings. Get a lender who listens and gets it right the first time! As mortgage bankers, who can also broker loans, we offer both Residential and Commercial financing to customers nationwide! Our FREE Fax-Back Loan Program lets borrowers send us their Good Faith Estimate from our competition via fax, and within four (4) hours or less, we send our proposal, circling the line items where our rates, fees and/or closing costs are lower than the competition.
At Bay Portal Companies, we offer everything from 30 year Fixed Programs and Interest Only products to Hard Money and Flex-Pay loans. Be it residential, business, commercial, vacation, second home or investment property, we are revolutionizing the real estate finance world! Ask us about our Talking Loan Officer Signs, FSBO Sales Kits and Flat Fee Closing Costs. We believe that Thought Leadership, genuine helpfulness and hi-tech access to our people and processes sets us apart. We take the mystery out of mortgages! Get the low-cost loan you deserve. Contact Bruce Cobbeldick's team of mortgage bankers today, and sidestep the middle man. We feature: NO BROKERS FEES. NO DELAYS. NO JUNK FEES, AND NO HASSLES!
Surf Our Commercial Loan Division's Information:
"Where America's Entrepreneurs go for a low-cost loan!"
Phone: 440.668.0887 Fax: 440-250-8889
We can do loans in all 50 states and are open Mon - Sun 9-9. We answer your call !!!
Here is what you need to submit your scenario if you are a co-broker or a borrower...
Form 1003 - FNMA loan application
Tri-Merge Credit Report - ALL THREE BUREAUS
Certification and Authorization Form
Bio/Resume reflecting investor experience / industry experience
Environmental disclosure
Copy of current rent roll - copy of leases
Copy of most recent title insurance policy
Copy of purchase agreement (where applicable)
Copy of hazzard insurance policy
Copy of survey
.JPEG images of property/land/buildings (compilation of exterior and interior)
Copy of most recent real estate tax bill
Executive Summary stating what does this scenario make good strategic sense to pursue
Personal and Business Financial Statements
Check for $350 for Underwriting and Admin Fees (once RATE/TERMS/FEES accepted by borrower)
OUR MISSION
As mortgage bankers who can also broker out loans and do Hard Money, SBA and secure Wall Street investors funding, we maintain and strengthen interaction with the Nation's top conduits and lending sources, leveraging Private Money, regional and local Banking entities on a daily basis. Our current list of lending resources, including over 450 Lenders nationwide, allowing us to identify which lender and programs BEST satisfy our CLIENT'S NEEDS.
We are not tied to any lender's specific program, but are instead committed to matching the client's specific, unique requirement with the BEST financing program we can identify. By knowing what deal types our resource lenders prefer, we help create a favorable outcome for both the lender and borrower in just about any loan transaction.
OUR STRATEGY
While Bay Portal Companies' team of mortgage bankers and processors is not tied to any Lender's "charter" or programs or quotas, we make every effort to understand what loan types different Underwriters and Investors like, and what part of their programs best benefit our clients strategy. We strive to answer our clients calls and avoid lengthy delays. We make every effort to answer our phones and do not hide behind voice mail or offer excuses when it comes to our Commercial Division. We understand that every loan is somebody's dream, someone's livelihood and so we take great pride in being accessible 7 days a week, 12 hours a day, every single day of the year except Thanksgiving, Christmas, Easter and New Year's Day.
Our mortgage bankers, processors and marketing team goes thru extensive training and keeps their saws sharp, aware of the latest trends, legislation and products. Our objective is to quickly, and competently satisfy the borrower's financing question "Given my requirements - Based on the merits of the Commercial Property and its Debt Service Ratio - How much debt will my project support - and can you do that deal - Within my stated time frame?" No other team gives out their home phone numbers, cell phone numbers or personal e-mail accounts like we do. We make a point of being available to our real estate agents, borrowers and investors, and we have business processes and technologies in place that reflect our vision and commitment to speedy service!
The vast array of loan products available in the marketplace, both fixed and variable, are the result of different institutional objectives on behalf of the players - the Lenders/Investors. Lenders will look more favorably on project structures consistent with their 'hold' charter; i.e., for example, if they like short term hold loans, we match them with borrowers that need that type of financing structure to maximizes their project's return. Long term holders might be better served with a Lender that satisfies that model with a different product. We try to match the borrower & lender to the benefit of both.
With the link (above) and our Starter Kit, you can get your loan pre-approved in 24-72 hours!
Our information gathering process on the front end, from both the borrower and the marketplace, lets us perform a desk-top underwriting to determine both the potential loan structure and those current, available sources that might service those requirements. As a part of our packaging the loan for lender review, we engage the process with the borrower for submitting a package we know is in a form acceptable to a particular lender's underwriting requirements. This helps reduce the time necessary to get to funding.
Finally, we coordinate the due-diligence efforts of Lender with the borrower and their advisors to close the loan as quickly as possible. We have created far more than a website. We offer professionals, vendors, customers and agents in the real estate and financial services arena the chance to improve their income and offer the kind of networking and business development support that helps our associates to tap their potential. Ask about our Sales And Leadership Training, Talking Loan Officer Signs or FSBO Sales And Marketing Kits. No one helps landlords, investors or first-time borrowers like we do! Whether you are a seasoned investor or just launching your real estate investment endeavors, look to us for Thought Leadership and resources that will save you time and money! Call 440-668-0887 today.
We have the knowledge and expertise to properly underwrite and package a loan proposal which generally provides a more cost-effective solution than a Borrower can obtain on their own.
We provide access to Loans, Capital (both Equity and Venture), as well as Hard Moneyfrom over 1000 lenders to help you get the best financing for your situation.
We provide Internet value by using an easy way to apply for and track loan progress.
We know and understand your local market and know when its best to use a neighborhood lender or national one.
We are a professional organization that is accountable to you to get the job done.
Browsing around for that perfect commercial real estate loan? Look no further! We focus on commercial real estate loans. We can help you find the loan program you need to suit your specific situation. If you would like to find out more about what Bay Portal Companies can do for you and your business, please click here Have a great day!
Commercial Real Estate loans in Ohio Bay Portal Companies will help get you a Commercial Real Estate Loan in Ohio - find your county ...
Bay Portal can help get you a Commercial Real Estate Loan in Ohio - find your city ...
Akron, Alliance, Amelia, Amherst, Archbold, Ashland, Ashtabula, Athens, Aurora, Avon, Avon Lake, Barberton, Barnesville, Batavia, Beachwood, Bedford, Bellaire, Bellbrook, Bellefontaine, Bellevue, Belpre, Berea, Bowling Green, Brecksville, Broadview Heights, Brookville, Brunswick, Bryan, Bucyrus, Burton, Cadiz, Cambridge, Canal Fulton, Canal Winchester, Canfield, Canton, Carrollton, Celina, Chagrin Falls, Chardon, Chesterland, Chillicothe, Cincinnati, Circleville, Cleveland, Cleves, Clyde, Columbia Station, Columbiana, Columbus, Conneaut, Cortland, Coshocton, Cuyahoga Falls, Dayton, Defiance, Delaware, Delphos, Dover, Dublin, East Liverpool, Eaton, Elyria, Englewood, Fairborn, Fairfield, Findlay, Fostoria, Franklin, Fremont, Galion, Gallipolis, Galloway, Geneva, Georgetown, Germantown, Girard, Goshen, Grafton, Granville, Greenfield, Greenville, Grove City, Groveport, Hamilton, Harrison, Hartville, Heath, Hebron, Hilliard, Hillsboro, Holland, Hubbard, Hudson, Huron, Independence, Ironton, Jackson, Jefferson, Johnstown, Kent, Kenton, Lancaster, Lebanon, Lewis Center, Lima, Lisbon, Lockbourne, Logan, London, Lorain, Louisville, Loveland, Madison, Mansfield, Maple Heights, Marietta, Marion, Martins Ferry, Marysville, Mason, Massillon, Maumee, Medina, Mentor, Miamisburg, Middlefield, Middletown, Milford, Millersburg, Minerva, Mogadore, Monroe, Mount Gilead, Mount Vernon, Napoleon, New Albany, New Carlisle, New Lexington, New Philadelphia, Newark, Newton Falls, Niles, North Lima, North Olmsted, North Royalton, Northfield, Norwalk, Novelty, Oak Harbor, Oberlin, Olmsted Falls, Oregon, Orrville, Ottawa, Oxford, Painesville, Pataskala, Paulding, Perrysburg, Pickerington, Piqua, Plain City, Pomeroy, Port Clinton, Portsmouth, Powell, Ravenna, Reynoldsburg, Richfield, Saint Clairsville, Saint Marys, Salem, Sandusky, Shelby, Sidney, Solon, Springboro, Springfield, Steubenville, Stow, Streetsboro, Strongsville, Sunbury, Swanton, Sylvania, Tallmadge, Tiffin, Tipp City, Toledo, Toronto, Troy, Twinsburg, Uhrichsville, Uniontown, Upper Sandusky, Urbana, Van Wert, Vandalia, Vermilion, Wadsworth, Wapakoneta, Warren, Washington Court House, Wauseon, Waverly, Waynesville, Wellington, West Chester, West Union, Westerville, Westlake, Wheelersburg, Wickliffe, Willard, Willoughby, Wilmington, Wooster, Xenia, Yellow Springs, Youngstown, Zanesville,
These are some of the common business types can we do Commercial Real Estate Loans for ...
Auto Rental Yards, Auto Service, Bed and Breakfast, Building and Construction Loans, Car Wash, Church Buildings, Combination of Commercial and Residential, Day Care, Funeral Homes, Hotel and Motel, Light Industrial, Mobile Home Park, Multi-Family 5+ Units, Non allowed building types, Office, Restaurant, Retail Sales, Self Storage, Warehouse,
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Some of the common loan types associated with Commercial Real Estate Loans Acquire or Expand a Business, Acquisition and Development Project, Adult Care, Apartment Complexes, Apartments 5+ Units, Asset Financing, Asset Leasing, Automotive Repair Shop, Bars, Bed and Breakfast Inn, Boutique Hotel, Boutique Motel, Bridge and Private Money, Cocktail Lounge, Equipment Financing, Equipment Leasing, Gas Station, Hard Money Financing Programs, Large Balance Commercial, Mezzanine Financing Programs, Mobile Home Park, Motel, Multi Family Units, Nursing Home, Office Complex Funding, Office Financing Programs, Purchase, Restaurant, Self Storage Unit, Small Balance Commercial, Special Use Hotel, Stated Assets., Stated Income Financing
Lending in the Name of Corporations, Trusts or LLC
Seller Seconds to 90% CLTV
Gifts of Equity
No Employment Seasoning
No IRS 4506 Requirements
Unlimited Cash Out Refinance
Inherited Properties with Cash Out
Blanket Mortgages
FULL DOC CHECKLIST:
Three years income tax and financial statements
Year-To-Date Profit & Loss and Balance Statement
Personal Finance Statements
Projected Cash Flow Statements for next 12 Months
Pro Forma for next 12 Months/Length of Loan
Federal and State Taxes informationrmation
Collateral Sheet
Well Written Business Plan
Commercial Underwriting Guidelines
Commercial Financing is underwritten on a case by case basis. Every loan application is unique and evaluated on its own merits, but there are a few common criteria lenders look for in commercial loan packages.
Financial Analysis A key component in making an underwriting evaluation is the debt coverage ratio. The DCR is defined as the monthly debt compared to the net monthly income of the investment property in question. Using a DCR of 1:1.10 a lender is saying that they are looking for a $1.10 in net income for each $1.00 mortgage payment. Typically they will determine the DCR ratio based on monthly figures, the monthly mortgage payment compared to the monthly net income. The higher the DCR ratio the more conservative the lender. Most lenders will never go below a 1:1 ratio ( a dollar of debt payment per dollar of income generated). Anything less then a 1:1 ratio will result in a negative cash flow situation raising the risk of the loan for the lender. DCR's are set by property type and what a lender perceives the risk to be. Today, apartment properties are considered to be the least risky category of investment lending. As such, lenders are more inclined to use smaller DCR's when evaluating a loan request. Make sure that you are familiar with a lender's DCR policy prior to spending money on an application. Ask them to give you a preliminary review of the investment property that you want to purchase. Information is free, mistakes are not.
Loan to Value Unlike residential lending, commercial investment properties are viewed more conservatively. Most lenders will require a minimum of 20% of the purchase price to be paid by the buyer. The remaining 80% can be in the form of a mortgage provided by either bank or mortgage company. Some commercial mortgage lenders will require more than 20% contribution towards the purchase from the buyer. What a bank/lender will do is subject to their appetite and the quality of the buyer and the property. Loan to value is the percentage calculation of the loan amount divided by purchase price. If you know what a lender's LTV requirements are, you can also calculate the loan amount by multiplying the purchase price by the LTV percentage. Keep in mind that the purchase price must also be supported by an appraisal. In the event that the appraisal shows a value less then the purchase price, the lender will use the lower of the two numbers to determine the loan that will be made.
Credit Worthiness For businesses less than three years old, personal credit of principals will be evaluated. This may hold true for longer periods of time for tightly held companies. For corporations, business performance and credit ratings will be evaluated with a proven track record.
Property Analysis Fair Market Value and Fair Market Rent will be analyzed. Special use property may require additional underwriting. Age, appearance, local market, location, and accessibility are some other factors considered.
Commercial LTV Ratio
The loan-to-value (LTV) ratio is probably the most important of the 3 underwriting ratios.
The loan-to-value ratio is defined as: LTV Ratio = Total Loan Balances (1st mtg+2nd mtg +3rd mtg) / Fair Market Value of the Property
First let's look at the numerator. If the borrower is only applying for a first mortgage, and there will be no other loans on the property, then the beginning balance of the new loan requested should be inserted in the numerator.
However, if the borrower is applying for a second mortgage, then the "underwriter" (the person who determines whether or not the loan qualifies) should insert the sum of the first and second mortgages in the numerator. Similiarly, if the borrower is applying for a third mortgage, then the underwriter should insert the sum of the first, second and third mortgages into the numerator.
When the borrower is applying for a second or third mortgage, the loan-to-value ratio is often known as the combined loan-to-value ratio (CLTV ratio).
Now let's look at the denominator. Generally the fair market value of a property is determined by an appraisal. There is one important exception, however. When the proceeds of a mortgage loan are used to buy the same property that is securing the loan, then that mortgage is known as a "purchase money loan." If the appraisal comes in lower than the purchase price in a "purchase money" transaction, then the lender will use the LOWER of the purchase price or appraisal.
Mortgage brokers are often asked by real estate agents and buyers to base their loan on the appraised value rather than the purchase price. Their claim is that they have negotiated a super deal and that the property is worth much more than what they are paying for it. This may be so (although generally untrue), but lenders always base their maximum loan on the lower of purchase price or appraisal. The lender's argument (its their money, so there is really very little argument) is that an appraisal is really no more than an estimate of fair market value, no matter how competent or conscientious the appraiser may be. The only true indicator of value is the marketplace in which "a willing buyer and a willing seller, each in full knowledge of the salient facts, and neither under undue pressure, agree upon terms." If the property sells for "X," then it is probably only worth "X."
Debt Ratios
When analyzing the personal budget of a borrower, lenders use two different debt ratios to determine if the borrower can afford his obligations. These two debt ratios are:
Top Debt Ratio
Bottom Debt Ratio
The "top" debt ratio is defined as: Top Debt Ratio = Monthly Housing Expense/Gross Monthly Income
By "monthly housing expense" we mean either the borrower's monthly rent payments, or if she owns her own home, the total of the following -
Monthly Housing Expense
1st mortgage payment on home plus
Real estate taxes (annual cost/12) plus
Fire insurance (annual cost/12) plus
Homeowner's association dues(if home is a condo or townhouse) plus
Second mortgage payment (if any) plus
Third mortgage payment (if any).
You will often hear the term P.I.T.I. It refers to (P)rincipal, (I)nterest, (T)axes and (I)nsurance. While P.I.T.I. is not exactly the same as Monthly Housing Expense because it does not include homeowner's association dues, the two terms are often used interchangeably.
Lenders have learned over the years that a borrower's "top" debt ratio should not exceed 25%. In other words, a person's housing expense should not exceed 1/4 of his income. While lenders will often stretch this number to as high as 28%, traditional lending theory maintains that anyone with a debt ratio in excess of 25% stands a good chance of developing budget problems.
The second ratio that lenders use to determine if a borrower can afford her obligations is the "bottom" debt ratio. It is defined as follows: Bottom Debt Ratio = (Total Housing Expense + Debt Payments)/Gross Monthly Income
The only difference between the two ratios is the inclusion in the numerator of "debt payments." Debt payments include the following:
Debt Payments
Car payments
Charge card payments
Payments on installment loans, for example - a payment on a washer & dryer that the borrower purchased.
Payments on personal loans, for example - a signature loan from the borrower's bank.
What is not included in "debt payments" is Utilities such as PG&E, water or telephone and payments on real estate loans. Real estate loans are usually offset first by the net rental income from the property. If the borrower has a net positive cash flow from all his rentals, then the net income is usually added to his "gross monthly income." If the borrower has a net negative cash flow from all of his rental properties, then the amount of the negative cash flow is usually added to the numerator of the "bottom" debt ratio as if it were a monthly debt obligation, like a car payment.
Traditional lending theory maintains that a borrower's "bottom" debt ratio should not exceed 33 1/3%. In other words, the total of the borrower's housing expense and debt obligations should not exceed 1/3 of his income. Lenders often will stretch on this ratio to as high as 36%, and some have even been known to stretch as high as 40% or more. Obviously a loan with a debt ratio of 40% is a far more risky loan than a loan with a debt ratio of 32%.
Debt Service Coverage Ratio (DSCR)
The most important ratio to understand when making income property loans is the debt service coverage ratio. It is defined as: DSCR = Net Operating Income (NOI) / Total Debt Service
To understand the ratio it is first necessary to understand the numerator and the denominator. Let's take a look at net operating income (NOI) first.
Net operating income is the income from a rental property left over after paying all of the operating expenses:
Gross Scheduled Rents $100,000
Less 5% Vacancy & Collection Loss $5,000
________
Effective Gross Income: $95,000
Less Operating Expenses
Real Estate Taxes
Insurance
Repairs & Maintenance
Utilities
Management
Reserves for Replacement
Total Operating Expenses: $30,000
Net Operating Income (NOI) $65,000
Please note that lenders always insist on some sort of vacancy factor regardless of the actual vacancy rate in an area to cover collection loss. In addition lenders always insist on using a management factor of 3-6% of effective gross income, even if the property is owner-managed. Their logic is that they would have to pay for management if they took back the property. Finally, NOTE THAT WE HAVE NOT INCLUDED LOAN PAYMENTS AS AN OPERATING EXPENSE.
Next let's look at the denominator, Total Debt Service. This includes the principal and interest payments of all loans on the property, not just the first mortgage. NOTE THAT WE HAVE NOT INCLUDED TAXES AND INSURANCE. They were already accounted for above when we arrived at net operating income (NOI).
To calculate the debt service coverage ratio, simply divide the net operating income (NOI) by the mortgage payment(s). For the sake of simplicity, let us assume that there is only one mortgage on the property: $500,000 First Mortgage 11% Interest, 30 years amortized Annual Payment (Debt Service) = $57,139
Then: DSCR = Net Operating Income (NOI) = $65,000 Total Debt Service $57,139 DSCR = 1.14
Obviously the higher the DSCR, the more net operating income is available to service the debt. From a lender's viewpoint it should be clear that they want as high a DSCR as possible.
The borrower, on the other hand, wants as large a loan as possible. The larger the loan, the higher the debt service (mortgage payments). If the net operating income stays the same, and the loan size and therefore the debt service increases, then the lower the DSCR will be.
Life insurance companies are very conservative and generally require a 1.25 or 1.35 DSCR. This means that their loan-to-value ratios are low. Savings and loans (S&L's) generally only require a 1.20 DSCR, and sometimes will accept a DSCR as low as 1.10.
A DSCR of 1.0 is called a break even cash flow. That is because the net operating income (NOI) is just enough to cover the mortgage payments (debt service).
A DSCR of less than 1.0 would be a situation where there would actually be a negative cash flow. A DSCR of say .95 would mean that there is only enough net operating income (NOI) to cover 95% of the mortgage payment. This would mean that the borrower would have to come up with cash out of his personal budget every month to keep the project afloat.
Generally lenders frown on a negative cash flow. Some lenders will allow a negative cash flow if the loan-to-value ratio is less than around 65%, the borrower has strong outside income such as an electronic engineer, and the size of the negative is small. Lenders rarely allow negative cash flows on loans over $200,000.
HARD MONEY LOAN? READ BELOW...
Our hard money loans can solve your immediate needs now, even if you've been turned down elsewhere.
We know TIME IS OF THE ESSENCE when you need cash fast.
Our funding sources can do these loans very quickly. To get started fast you will need to provide an Executive Summary that includes the following information:
Complete Contact information
Complete description of the Property and the Project
Value of Property or Project
Amount you wish to borrow
Amount of cash or equity you have in the project
Additional collateral that you can pledge
Complete description of how you plan on using the loan
Complete discussion on how you plan on paying off the loan
Describe documentation available such as Appraisal, Title Report, Environmental Reports, Financial Statements,Tax returns, Color photos, Pro Formas
HARD MONEY ADVICE FROM BAY PORTAL TEAM...
Recent economic events internationally and on Wall Street have created a sudden shortage of capital to finance many worthwhile commercial real estate transactions. This has resulted in many borrowers seeking financing from lenders with privately raised and administered capital – sometimes called "hard-money lenders." These lenders fund a wide range of transactions – from local to national; loans from under a million dollars to under $100 million; construction loans to refinancing loans; and more. Most have one major theme in common – we are very busy (particularly lately). We need to review prospective projects quickly; and then speedily but carefully price, quote, finalize and close transactions.
The following are some do’s and don’t’s to think about as you undertake a loan with a hard-money lender.
DON’T send the lender an enormous pile of disorganized papers. Prepare a short deal synopsis, not more than two pages, which addresses the project and the loan requirements. Back this up with brief financial analyses, a map, photos, information on the borrower, and other supporting documents. Imagine a neat 6 page submission as compared to a 40 page disorganized pile of papers. Which do you think will receive the most attention the quickest?
DO describe the transaction: type of real estate project; location of real estate; type of loan; loan amount; equity available and source; term of loan; exit strategy; amount and types of debt that exist on the property; payoff situation; description of the borrower.
DON’T ignore or try to hide the "hair" on the deal. This will come out through the due diligence carried out by your lender, and will cast a negative shadow over the deal. If there is "hair" on the deal, a brief overview of the "story," or the events leading up to the story should be included.
DON’T tell the story of your life and the project’s entire life at the outset of your submission. Rather, start with the conclusion, the "therefore", (project, loan amount, purpose and term), and then support the "therefore" with the supplemental information you will provide. The details of the "story" will probably come out during a telephone conversation at a later date.
DON’T expect your lender to be willing to do your deal unless there is an exit strategy in place. You should identify the exit plan in your initial submission, and be prepared to defend the strategy. Two exit plans are better than one. Your lender is not likely to be interested in not being able to be repaid when your loan matures.
DO provide last year’s profit and loss statement showing Net Operating Income (NOI), as well as this year’s year-to-date profit and loss statement.
DON’T include mortgage interest and depreciation in the financial or P&L statements. NOI before depreciation and debt service is what the lender will want to see. Don’t make your lender do the arithmetic.
DO show actual vacancy information clearly, as well as management fees, reserves for replacement, etc. in the budgets. Assuming there will be no requirement for a management fee since the project is self managed is not useful. In the event of a default, the lender will most likely call in a professional management firm, and the cash flow must allow for this contingency.
DO provide a detailed rent roll, (and list each vacancy), list every tenant, lease term, rental rate, passthroughs, etc. Be sure that the numbers are all totaled and add correctly.
DO make certain that the total square feet of the rent roll is equal to the total square feet of the building; or the number of units and the number of tenants plus vacancies, are equal, etc.
DON’T send a complete appraisal report with the preliminary submission. Rather, copy and send the "Opinion of Value" or "Value Reconciliation" page, (be sure it includes the date) and perhaps the 2 or 3 pages of worksheets that explain how the value was determined. At this point in the deal evaluation, your lender has little interest in the neighborhood characteristics of the town or the largest employers where the property is situated!
DO include a page or two from the phase I environmental assessment (including the date), if available. The section showing "Conclusions" is sufficient, plus the cover page or letter of transmittal, showing the name of the firm that carried out the study and the date of the report.
DON’T hire an environmental assessment firm or an appraiser, if you don’t already have the reports on file. You will expect your lender to automatically accept your selected third party consultant. Routinely, the lender will prefer to engage one of their own selection, later, if they elect to pursue the deal.
DO send along a copy of the local town’s vote(s) on zoning, permits, and other approvals, only if a to-be-built or expansion project, as applicable. Don’t send the entire package of minutes; extract the vote and note clearly the purpose of the particular document.
DO include a few select color photographs. Obviously, a picture is worth many words, as well as a locator map, and 81/2 x 11 site plan.
DON’T send a full set of architectural and working drawings with your preliminary submission. What do you think your lender will do with another 5 pounds of paper?
DON’T send the lender originals. A busy, successful lender, (your preferred source of capital), probably receives dozens of deals every week. Keeping track of them is challenge enough, without being concerned about protecting your valuable originals. Also, returning them, if required, is time consuming and an unnecessary expense to your lender. Finally, you should be aware that it is your risk to send originals with your first submission.
DON’T package up a number of different properties into one deal analysis. Each property must be evaluated and stand alone. A consolidated financial analysis and spread sheet will not help the lender to identify and study each property separately. Even if the properties must be consolidated so that the "losing" property is supported by a "winner", each will require its own underwriting.
DON’T, at the outset, demand that the lender make a site visit. The lender’s time is of prime importance, and a site visit will not influence the lender to make a loan that is of little interest based on the documents. If the numbers and documents are a fit, the site visit will likely cement the deal, but not until then.
DON’T rely solely on your mortgage broker to make the deal. Shortly into the evaluation of the deal, the lender will probably want a direct conversation with the borrower. Offer a 3-way conference call including the lender, borrower and broker fairly early in the transaction based on your lender’s preference, to permit the lender and borrower to evaluate each other’s interest, style and objectives.
DON’T permit the mortgage broker to reply to questions directed by the lender to the borrower during telephone conference calls. The lender usually has a specific purpose in inquiring of the borrower, and is expecting the borrower to respond. Failure, or inability, to respond, is as powerful a reply as a timely and detailed response. The broker’s input is valuable when he/she is called upon during such a telephone call, and also to follow-up when appropriate, perhaps later, as the deal develops.
DON’T arrange to do a deal with a selected lender until you have completed your initial due diligence on the lender, including the lender’s interests, experience, qualifications, and references. If, after a week or two of negotiations, you then suddenly determine that you are uncomfortable with the selected hard money lender, you have wasted a great deal of time for each of you as well as your borrower, and the lender will not be pleased with this sudden revelation. If the lender resists providing evidence of their ability to make the loan being contemplated fairly early, move on to another who is more cooperative.
DON’T expect anyone to provide 100% financing.
DO expect to invest between 15% and 25% in cash (or legitimate equity in the property’s value if the property has already been acquired.) You have heard, often enough, that there are no more no-cash deals. DO rely on this rule, particularly in the recent economic climate.
DON’T expect the lender to accept the difference between the price you actually paid for a recent acquisition and the appraised value if higher, as your share of equity. From the lender’s perspective, the price you paid in an arms length transaction is the market value, You may believe that you "stole" the property for substantially less than the appraised value. Your lender will probably congratulate you for your accomplishment, but the purchase price will nevertheless be the demonstrated market value.
DO expect the lender to recognize an appraised value that is significantly higher than the price you have recently paid for a property, if, and only if, you have successfully completed a significant number of bureaucratic accomplishments since the purchase date (such as obtaining full entitlement), have newly negotiated signed leases, or have physically improved the property, and you can prove it.
DON’T expect your lender to lend you operating capital. One of the best ways to demonstrate your capabilities as a developer/operator is to invest your own capital into the project to underwrite startup expenses. And what is the collateral for a business startup? Unless your lender is also your business partner, why should you be loaned the startup money for your own business?
DON’T expect your lender to rely solely on your enthusiasm for your deal as the only reason why your project will be a success. DO generate pre-leasing, pre-sales, or other demonstration of marketability. Market studies alone are seldom sufficient. Real prospects will ensure that your lender has serious interest in your project.
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