Click link to see article posted in Scotsman Guide in May 2016.
I have been involved in mortgage lending for over 30 years. My company, Select Commercial, focuses on originating commercial mortgage loans for the owners and purchasers of commercial real estate nationwide. Our clients range from first time commercial property buyers to seasoned investors who come back repeatedly each time they purchase a new commercial property or need to refinance an existing commercial mortgage loan. We have successfully financed all types of properties, including apartments, retail, industrial/warehouse, and office buildings. We have special programs for small business owners who are looking to purchase or refinance their own business properties – many of these properties are single and special use properties that are often rejected at local banks – such as gas stations, restaurants, motels and more.
I thought I would write about some of our recent closings in order to share some examples with you:
- We closed a $1,518,000 loan to allow our client to purchase a mobile home park/trailer park in Maryland. We offered the borrower a 75% LTV and gave him a 10 year loan and a 25 year amortization. The rate was fixed for 5 years at a time. The borrower’s local bank was not interested in a trailer park and did not like the remote location (it was in a small community). We liked the borrower’s qualifications and the property’s cash flow and approved this loan.
- We had a client that owned a restaurant in a suburban Colorado location. He needed to refinance his loan to obtain a lower rate and take cash out to build a second location. We approved a $1,400,000 cash out refinance for a 25 year term. Our loan was a renewable 5 year fixed rate loan at a lower rate than his current loan. Our borrower’s local banks were not interested in financing a restaurant. We did not have that restriction.
- Another client of ours was the owner occupant of a pizzeria located in a small strip center in Brooklyn, New York. He was looking to take cash out of his property to buyout a family member who was retiring. We closed a loan of $1,050,000 with a 5 year adjustable rate and a 25 year term. Our rate was much lower than the local bank offered.
- We closed a $1,116,000 loan for another one of our clients who was purchasing a 48 unit apartment building in Oklahoma City, Oklahoma. The borrower lived out of state, and the local banks did not want to lend to an out-of-state buyer. We made a loan at 75% LTV and offered a 7 year adjustable with a 25 year amortization.
These are just some recent examples of loans that Select Commercial closed for our clients. We would love the opportunity to help you purchase or refinance your next commercial real estate transaction. If you have a scenario you would like to discuss, please call me directly at 516-596-8537 or click here for a free loan quote.
When it comes to refinancing your Apartment Building the first thing you’ll want to know is how to qualify for the best rate. There may be things that have happened since you financed the building that could negatively affect your ability to refinance. Some of the factors that will be underwritten include: property value, loan-to-value ratio, debt-service-coverage ratio, borrower’s net worth, liquidity, and credit rating. If you are a good candidate for refinancing, your main goal will be to get the lowest rate and best terms possible.
While getting the best rate is very important there are other loan terms that need to be considered. For example: Is the rate fixed or adjustable? Your investment time horizon will help you answer that question. Are you considering selling the property? If so, the prepayment penalty will be important. Are you looking for a recourse loan or a loan without a personal guarantee? If there are multiple investors involved, it might be best to try to secure a non-recourse loan. What are the fees and closing costs involved in closing? A lower rate might look attractive until you factor in the costs involved. Is your lender capable of closing your loan on the terms promised? Some apartment mortgage lenders do not deliver on their promises and change terms during the underwriting of your loan. Is your lender experienced with apartment lending in your area? You should choose a lender that specializes in apartment loans. These are just some of the issues you should address with the apartment lender you choose to handle your loan application.
Here are some of the items lenders will consider when they analyze your apartment mortgage application:
- Property location – most lenders prefer large metropolitan or suburban areas and don’t consider loans in very rural areas. Loans in rural areas are often considered riskier for lenders as these properties are harder to rent. If your property is in a very rural location, make sure to discuss that with the lender upfront.
- Are the tenants signed to leases or are they month-to-month? Is the property subject to high turnover? Are rental concessions necessary to keep the units filled? Lenders do not like apartments that have to fight to attract and keep tenants.
- How is the historical occupancy and cash flow? Lenders like properties with constant positive cash flow and good occupancy history. Major fluctuations in cash flow cause concern for lenders. Lenders like to see occupancy at 90%+. If your property has lower or uneven occupancy, you will need to provide an adequate explanation.
- Is the property in good condition or does it need repairs and/or renovation? A property in need of repairs could create a cash drain and affect the ability to pay the mortgage. Properties in need of work will often lose tenants when newer units come on the market. Make sure to complete major repairs which affect occupancy prior to applying for your loan.
- What are the loan to value and debt service coverage ratios? Underwriters have guidelines which need to be addressed upfront. Most borrowers understand the LTV. The debt service ratio looks at the proposed mortgage payment in relation to the net income. Lenders use this calculation to make sure that adequate cash flow exists.
- What is the credit rating of the borrower? We typically expect to see credit scores above 680. Lower credit scores will require a solid explanation.
- What is net worth of the borrower? Does the borrower have the ability to withstand a temporary setback? Lenders like to see a borrower with reserves, or cash liquidity of typically 5-10% of the loan amount.
- Does the borrower have experience managing property apartment properties? Most lenders will require that a borrower has prior experience owning or managing real estate.
These are some of the questions that a lender will ask when reviewing an apartment building loan application.
Another tip to getting the best rate and best terms is to consult a licensed and qualified commercial mortgage broker. A competent commercial mortgage broker who deals with many different types of lenders has an advantage over going to a local bank. Apartment mortgage brokers represent not only local banks, but agency lenders, national commercial banks, insurance companies, Wall Street CMBS lenders, credit unions, and private lenders. A wide choice of lenders will increase the likelihood of obtaining the best rates and terms available in the market.
If you have a question about refinancing an apartment building or anything related to apartment mortgage lending, please don’t hesitate to contact me at 1-877-548-9454.
Investment properties include:
Apartment Buildings – apartment properties are a great way for small and large investors to obtain investment properties. In today’s economy, many people are choosing to rent rather than purchase a home. The market for apartment building purchases is very strong and many investors are choosing to buy apartment buildings as investment properties.
Commercial Buildings – other common investment properties include office buildings, retail centers, warehouse and industrial properties and many other types of income producing properties. Some of these investment properties might contain multiple tenants while others might be single tenant properties. Some examples include an anchored retail shopping center, a medical office property, or a single tenant chain drugstore or fast food restaurant. Regardless of the property type, they all share one thing in common: the rents received from the tenants provides both return on investment and potential appreciation in value.
Single Family Homes – some investors choose to own multiple single family homes for rental purposes. These investors often find that residential lenders have a maximum number of home loans that they will approve for one borrower. It often makes sense to obtain one investment property loan to cover multiple investment properties.
Two to Four Unit Rental Homes – many home lenders will not lend on 2-4 unit rental homes that are owned by a partnership, corporation, LLC or trust. An investment property lender understands these transactions and will be able to make an appropriate investment property loan.
How Much Can I Afford to Borrow?
An investment mortgage calculator is used to calculate the monthly payment on an investment property loan. The investment property calculator will require the following inputs: length of loan in years, loan amount and interest rate. The investment mortgage calculator will output the monthly payment to be paid. The monthly payment covers principal and interest only. Many lenders escrow for taxes, insurance and replacement reserves. If these escrows are required, you will need to add those amounts to the monthly payment in order to calculate the true monthly cost of your loan. Many borrowers find it helpful to use an investment mortgage calculator in advance of shopping for a property to get an idea as to what they can afford.
How to Shop for an Investment Property
Before you begin shopping for an investment property, the first thing you should do is to obtain your credit scores. There are many sources on the Internet that will provide your credit scores for free. Lenders will base their credit decision partly on your credit score, so it is important to know up front if there any negative issues affecting your credit. The next thing you should do is to determine what type of property you would like to own. Would you rather own an apartment property or a commercial property? Would you prefer one tenant or multiple tenants? Next, you should determine your investment time horizon. Are you looking to own the property for a short-term before trading up, or are you looking to buy and hold for the long-term? The term of the loan that you request should match your investment time horizon. After you determine the type of property that you are interested in, you should consult a competent realtor that specializes in those types of properties. Many residential brokers are not experienced when it comes to commercial real estate transactions. A commercial realtor will present several options for you to examine. It is important that you perform adequate due diligence and verify all of the income and expense projections which are presented to you. Once you have narrowed your decision down to one or two possible purchases, you should contact a competent investment mortgage lender that specializes in financing that type of property. Your mortgage lender will be able to help you analyze the investment property fundamentals and determine which investment property loan is appropriate for you. For more information please contact Select Commercial Funding LLC.
Commercial mortgage lenders are holding their breath as the Federal Reserve has made it clear that they are preparing to tighten the reins. Lenders are preparing for an increase in rates very shortly. At the end of July 2014, the Federal Reserve reduced its bond buying program by $10 billion a month and announced that they would end the plan in October. Notes from the Fed’s July meeting, revealed recently, indicate that the Fed action is due to the strength of the economic recovery. Once the Fed stops its bond buying program, market rates will begin to rise as the competition for available funds increases.
If you are considering buying a commercial property, or refinancing your existing loan, now is the time to act before rates increase. If you have been sitting on the fence waiting, now is the time to act. If you are in need of a commercial mortgage lender, Select Commercial Funding LLC is a highly qualified commercial mortgage lender. As President of Select Commercial, I have over 30 years of commercial lending experience. Select Commercial is a nationwide leader in the commercial mortgage industry and we are currently lending on the following types of properties:
- Apartment Buildings
- Office Buildings
- Retail Properties and Shopping Centers
- Doctor’s Offices
- Dental Offices
- Gas Stations
- Car Washes
- Special Use
Select Commercial Funding LLC offers extremely low commercial mortgage rates, personalized service, no application fees, 24 hour written pre-approvals and much more.
If you are in need of a commercial mortgage loan for a purchase or refinance, do yourself a favor and contact us. Not only will we will show you how much money you can save, we will also simplify the process as much as possible. Select Commercial is a trusted name in the commercial mortgage industry and that is why we have earned an “A+” rating from the Better Business Bureau. We can be reached at 1-877-548-9454 or click here.
Stephen A. Sobin is the Chief Executive Officer of Select Commercial Funding LLC. Mr. Sobin has over 30 years’ of mortgage banking experience. In 1981, he started State-Wide Capital Corp., one of the leading residential/home equity loan providers in the country. The company was well known through its extensive television, radio and newspaper advertisements promoting its 1-800-DIAL-CASH phone number. Mr. Sobin sold State-Wide Capital to Superior Bank FSB, a federal savings bank headquartered in Chicago, Illinois in 1995. Mr. Sobin became the President of a mortgage lending division of the bank until 1997.
Mr. Sobin then founded Select Commercial Funding LLC and began to offer commercial mortgage banking and real estate capital advisory services on a national basis. His vision was to become an advocate for his clients and help borrowers navigate the difficult economic conditions facing the commercial mortgage industry and to assist them achieve their goals despite uncertainty in the capital markets. Select Commercial is acts as a correspondent with many leading national real estate lenders, including: national, regional, and local community banks, life insurance companies, finance companies, investment banks, Fannie Mae, Freddie Mac, FHA, hedge funds, and private lenders. Mr. Sobin’s expertise, knowledge of the market, underwriting skills, understanding of lender’s requirements, and wide array of lending sources guarantee that Select Commercial’s clients receive the very best rates and terms available in the market.
Select Commercial funds all types of commercial properties, including: apartments, retail, office, mobile home parks, warehouse, industrial, self-storage, hospitality, medical, automotive, restaurants, motels, gas stations and other many other special use properties.
Select Commercial is a proud member of the InterCapital Group of commercial mortgage professionals.