Commercial real estate loans, and the industry in general, have gone through a tremendous amount of volatility in 2009.  Huge banks have gone out of business and many more have ceased lending.  Many of the banks that are still lending have created such conservative programs that very few borrower can even qualify.  Many of those that can quaily won’t accept the terms as they are to harsh.  Borrowers have become baffled as they take their perfectly good loan request to their previous sources only to hear “no and no and no…” 

The market is bad, you know this.  We estimate that literally 80% of all previous banks and lenders are either out of business or are not lending.  For example the conduit market was down 98% in 2008 compared to 2007. 

However, there still are commercial real estate loan options out there.  None of them are perfect but a few of them are viable.  For folks that operate their small business out of their commercial building, or at least 51% of it, they will have some of the reliable loans in the nation.

These programs are government guaranteed and go beyond just SBA business loans.  As you probably guessed, because the government has step up and further guaranteed the loans, it makes it a much safer, and attractive for the banks to take on the risk of a new loan. 

Further the secondary market for these types of loans has become stronger, year to date.  We are currently back up to about 60% of where we were in 2007 (Up from about 10% of where we were in the beginning of the year). This is where banks sell mortgages to one another.  So the returning of the secondary market and the stability of having the government backing has kept this segment of the industry alive. 

As far as terms, by far the biggest benefit of these loans is high levels of financing available.  For example, most conventional lenders will now only go up to 60% loan to value, while most of the government programs will still go up to 80% – 85% on refinances or 80% – 90% on purchases.  This high level of financing makes a huge difference in a market such as this where property values are declining.  Many conventional deals are getting killed as the bank lowers there loan to value guidelines and at the same time, property values decline.

Another benefit is the amortization schedule offered.  Government programs are typically amortized over 25 to 30 years while most banks are reducing their amortization schedule to 15 or 20 years.  The issue here cash flow for the borrower.  The difference in payment between a 15 year amortization schedules vs. a 25 year is often 20 – 25%.  Most businesses need to keep as much cash flow in their operation as possible.  Aggressively paying down their commercial real estate loan is not as important as having enough cash to pay the rest of their bills.

The current market is frustrating for all involved.  However, commercial real estate loans are still closing and often loan requests that keep getting declined are often fundable, if in the hands of the right lender/bank.  Keep working.        

Are you frustrated with the results that your current contacts are providing?  Are you concerned that they won’t be able to get your loan closed on time and at the quoted terms?    If so, call Jeff Rauth, President of Jeff Rauth is President of Commercial Finance Advisors, Inc, a national commercial mortgage firm.  He specializes in Commercial Real Estate Loans between $400,000 – $5,000,000, nationwide.  248 885-8797 or at SBA 7a Loans  \  commercial loan brokers

Whether you’re in the business or are a property owner, trying to a get a commercial mortgage loan closed in this market, is akin to having a hyena as a house pet.  You can do it, but it will be painful.   

Here’s  what is going on, from a commercial mortgage brokers perspective.  Conventional lending is all but dead.  If your property isn’t less than 60% loan to value, you’re going to have a difficult time getting it closed.  If you have a typical investment property (non multifamily like office or a warehouse), with a non national credit tenant(s), you had better have enough outside income to carry the loan on its own or you are going to have a tough go at it (though not impossible). 

Literally 80% of the banks either don’t want to lend or they can’t lend as their banking ratios have fallen below the feds standards.  And or they just don’t have the cash…  Many banks including some major national one have gone out of business, as its been well publicized.  So you have to work with what the remaining 20%.  Often times the offered terms are harsh and expensive.  For those of you that are in the business you know that the conduit and or CMBS market is completely broken and nonexistent.  It was literally down 98% in 2008 versus 2007.   98%…  That’s according the respected Mortgage Bankers Association.

The SBA and other more mysterious (and unpredictable government programs) have tried to step up and fill the void.  In some regards its working in others it has been disappointing.  For example SBA lending was down 60% as of May 2009 compared to the previous year.  Ironically, this is when we all thought they would really kick in and save small business.

Commercial Mortgage Loans

Without suddenly sounding optimistic one of the best things you can do for yourself is to work with the RIGHT bank and or lender.  You need to only work with the 20% that are still actively lending.  Conversely and especially if you are facing a balloon the worst thing you can do is tie up you loan request with a bank that is not aggressively lending.  Most of these commercial mortgage loans end up in the decline category wasting months of time and thousands of dollars, at a minimum, for the borrower. 

For those that qualify for the government programs such as the SBA commercial loans, this can be a blessing.  85% – 90% financing is a life saver as property values continue to decline.  In addition, the secondary market for these types of programs are the healthiest in the business and continue to improve.  Our fearless leader, Obama, has step up the guarantee to banks as well as bought $15 billion of SBA 7a loans that had clogged the system in early 2008. 

By the way, the main qualifying component to the SBA loans is that your business occupies at least 51% of the buildings space.  Contrary to their reputation, the SBA program have some of the easiest qualify standards out there, compared to other commercial mortgage loans.

Do you have to get it done?  Are you frustrated with the results that your current contacts are providing?  Are you concerned that they won’t be able to get your loan closed on time and at the quoted terms?    If so, call Jeff Rauth, President of Jeff Rauth is President of Commercial Finance Advisors, Inc, a national commercial mortgage firm.  He specializes in Commercial Real Estate Loans between $400,000 – $5,000,000, nationwide.  248 885-8797 SBA 7a Loans  or  Commercial Real Estate Loans    commercial loan brokers

Another component of this and a huge mistake borrowers make is that they send a loan request to a bank without knowing how healthy the bank truly is and what their specific appetite is for the type of loan submitted. This is difficult information to gather as the bank loan officer isn’t going to tell a borrower, “hey I think we have a 25% chance of getting this done.” The bank’s loan officer is most likely going to throw it against the wall and see if it sticks. Your chance of closing your loan will dramatically increase by hiring a commercial loan broker.
Are you frustrated with the results that your current contacts are providing? Are you concerned that they won’t be able to get your loan closed on time and at the quoted terms? If so, call Jeff Rauth, President of Jeff Rauth is President of Commercial Finance Advisors, Inc, a national commercial mortgage firm. He specializes in Commercial Real Estate Loans between $400,000 – $5,000,000, nationwide. 248 885-8797 or at SBA 7a Loans or Commercial Real Estate Loans commercial loan brokers

Year to date we have seen six, major national commercial banks come back to the market.  This is the best news we have seen in months.  Most of these banks are “circling the wagons” around government programs, such as the SBA, USDA and Fannie, Freddie Mac on apartment loans.  But they have still come back, and are still risking their capital.

Link to main site: http://www.cfa-commercial.com

“Borrowers need to keep in mind that not all commercial banks are out of business.  In fact, many are still healthy and continue to lend.  We get many calls from discouraged borrowers that have a “just thought I’d call” type attitude with no real belief that there might be a real solution for them.  Borrowers need to look beyond local banks”  Comments Jeff Rauth, President, “and find the national, non depository banks that are still funding deals.  This is something we can help borrowers with.  We know who the healthy commercial banks are.”

See detail of commercial bank loans here:  http://www.cfa-commercial.com/bank-loan.html

Benefits of the government sponsored programs are many.  Including the highest level of leverage in the business.  90% financing is still very much an option.  Low rates and depending on the programs fixed rates up to 10 years on purchases.

Multifamily loans via commercial banks are still fairing well, relative to other sectors.  Fannie Mae, and Freddie Mac are filling the void that the conduit/CMBS markets have left behind.  80% for apartment is still an option with, believe it or not 30 to 30 year financing. 

Click here to see our site devoted to apartment loans.  http://www.apartment-loan.biz/

An interesting trend regarding commercial mortgage loans is some banks have started waiving existing prepayment penalties and reducing principal balances, in an effort to encourage borrowers to refinance their commercial debt and move on. 

This is not just regarding commercial mortgage loans that are in default as you may have assumed.  We are seeing top notch borrowers and top notch deals being asked to refinance, and given substantial principle reductions. 

Why?  The bottom line here is that many banks need cash.  They have their own liquidity issues to deal with.  Banks understand better than anyone, what quality standards are for commercial mortgages that are still closing.  They know that the marginal loans (or poor loans), that they really want to get rid of, can’t be refinanced due to the tightened credit standards of other potential funding banks.  They are stuck and forced to get rid of their stronger borrowers that can qualify based on the new standards.  

So strong borrowers and their commercial mortgage loans are being enticed to refinance with other banks to free up capital.  For example, we are currently working with a restaurant loan that has an existing balance of $7.4 million (he owns 14 locations) and was offered a $3,000,000 discount just to “go away.”  His loan to value, cash flow, trends, etc are all strong.  Another client we’re currently working with is a hotel loan that was recently called out of the blue and told their pre pay, and $400,000 of the existing balance would be waived, if they could pay their existing loan off.  This is on an existing balance of $3,500,000, still a sizable discount for doing nothing.

Commercial borrowers should take some time to call their existing bank to see if they may be up for a substantial discount.  It could be the most profitable call they would have made in a long time.    

Apartment finance is weathering the current credit crisis nicely compared to other sectors of the commercial mortgage business.  For example, owner occupied conventional mortgages are experiencing significant restrictions and loan requests above 60% loan to value, that do not fit the SBA loan guidelines have few, if any options.

In contrast, 80% financing on purchases and 75% loan to value on refinances, is still an option.  Long term fixed rates, like five, ten year and even 30 year is available.  Also, interest rates themselves are very low (2/10/09) as we are seeing low 6%’s and even high 5%’s for strong borrowers on these long term high rate.  As a result many borrowers that went with floating conduit loans are now opting to refinance into long fixed rates due to concerns with where rates will go if inflation kicks in.    

Apartment Finance

One of the main changes with apartment loans is with underwriting going “global”.  Many veteran multifamily owners will be unaccustomed to the additional scrutiny.  Historically, most of the underwriting focused on the property itself, primarily in concern to the cash flow of the property.  Better known as the debt coverage ratio, underwriting wanted to determine if the properties income could carry all of the associated expenses, and the proposed loan.  That’s essentially was the main focus.    

Now however, underwriters also want to examine all of the borrower’s income and expenses both personally and from other, none related businesses.  What they are investigating is whether the borrower is above water on a cash flow basis, over the entire financial picture, including the subject property.    More on apartment underwriting here.

Most borrowers will put up with the additional “brain damage” as they really have no other choice with apartment finance.  As the golden rule points out “he who has the gold, makes the rules”.  And besides just accepting it, the loan programs are still very attractive for the borrower. 

“We are excited about expanding our operations into Virginia. Mr. Crush has worked with us for some time and we are even more pleased to have him on board. His background and experience is on the multifamily finance side of the business, which is a great fit for us.” Comments Jeff Rauth, President.

Multifamily loans are still viable for the most part and have hung in there well compared to most segments of the commercial mortgage market. Real estate investors are encouraged to look hard at multi family opportunities as there are many solid transactions and, importantly the liquidity is still there. Through programs offered via Fannie Mae and Freddie Mac banks and lenders can be assured that they will be able to efficiently sell the multi family loan after it has funded – creating the needed liquidity.

Conventional financing on multi family loans is still viable as well, though perhaps a little more battered than the government sponsored programs mentioned above.

Borrowers with loan amount less than $2,000,000 should take a serious look at these options as there still are long term fixed rates, amortization schedules to 30 – 35 years, etc and they are in general easy to get done (and less costly).

Multi family loans are still viable, and we are seeing some of the best cap rates ever in various regions of the country. If you have the stomach for it, now is probably a once in a lifetime opportunity to secure multifamily properties, at a real bargain.

commercial property loans

One of the biggest, current issues regarding property tax reduction is how cities are using sales from foreclosed properties.  He described that normally the cities are able to throw comps from distressed seller’s right out the “window” as they violate the “fair market value without undue influence” rule.  This language creates a rather large loop hole for the cities as they get to cherry pick comps.   

However, he pointed out that now approximately 60% of all sales are from foreclosed properties (we are in Michigan).  And that cities can be pushed into using these “distressed” comps now, as it would be ridiculous for the cities to ignore 60% of the market.  So owners should look really hard at these comps as they can by very powerful in presenting their property tax appeal. 

Another point he made regarding property tax reduction and this issue was that owners need to be very careful with the foreclosed property comps that they present.  He went on to say (I don’t have permission to reveal his name)  “If you compare a property that has been vacant for 18 months and all of the plumbing and electric has been ripped out, they will throw this comp out, and you will hurt your case.”  Even if in all other respects it is comparable to your property.  “What you want is 3 or 4 comps of foreclosed sales where the properties were in similar condition as yours and that they just show a much lower sales price than your current assessed value.” 

Commercial Finance Advisors, Inc is proud to announce it has launched a new, comprehensive website on commercial hard money.  As commercial hard money becomes more and more the main option for borrowers, due to the credit crisis, many people have questions about this side of the business.  The website is written to inform the borrower of the typical process and what scams to watch out for.      

Here a link to the commercial hard money site:  http://www.commercial-bridge-loans.com

“We wrote it to very informative, without the typical sales pitch.  We share with the reader the ins and outs of commercial hard money.  Borrowers need to be careful on this side of the business as it’s almost completely unregulated.  Unfortunately many borrowers get ripped off.  We tell the reader what to watch out for, as there are some definite warning signs. Commercial hard money lenders are aggressive.  Some are downright con artists.”  Says Jeff Rauth President.  “We give borrowers the information they need to pick the right commercial hard money lender in the beginning so they don’t waste thousands of dollars and month.” 

http://www.commercial-second-mortgage.com

The website will be added onto every week, with new fresh content.  Borrowers are encouraged to come back and post their questions regarding all aspects of commercial hard money loans.  Commercial Finance Advisors is a national commercial mortgage broker that focuses on commercial loans from $500,000 – $5,000,000.  SBA and commercial hard money is their specialty.   In addition they have a store of commercial mortgage brokers.

http://www.cfa-commercial.com

Check it out http://www.commercial-bridge-loans.com