Auction Financing For Commercial Real Estate

Real Estate Investing

Commercial real estate investors purchasing property through on line auction web sites often find it difficult to obtain proof of funds documentation that will enable them to participate.

Winston Rowe & Associates, a national full service commercial finance firm specializes in working with experienced commercial real estate investors through all phases; from the initial proof of funds documentation, to the hard money (bridge) financing then finally the long term conventional financing.

Commercial Property Auction Investor Program Highlights:

Their capital deployment is nationwide and starts at Two Million Dollars with no upper limit

Never an upfront or advance fee to process your transaction

Investors must have a verifiable cash down payment

A proven best practices business model must be in place

Major metropolitan areas are preferred

All commercial property types are considered

Loan to values (LTV) start at 60%

This program is only for direct investors, no brokers please

Winston Rowe & Associates always welcomes the opportunity to speak with clients directly. The can be contacted at 248-246-2243

 

 

 

Investing Guide For Apartment Buildings

Real Estate Investing

Winston Rowe & Associates a no upfront fee commercial real estate finance firm understands that picking the right apartment building investing strategy in the beginning will go a long way towards your success in the long run.

Economy of Scale:

An economy of scale is when you increase the efficiency of your business because you reduce expenses by buying in bulk.  In the case of buying apartment buildings, a 6-unit apartment building roof replacement expense would typically cost just a little more than a single family home roof replacement.

While your expenses for that roof replacement are similar, the income from the 6-unit would be much higher.  The economies of scale on your 6-flat apartment house would be much better than your single family investment.

Pick Quality Apartment Buildings:

Buy properties that will have positive cash flow from the start, based on the current income and all of your projected expenses including management.

If the current owner doesn’t have management, that is his problem. You are an investor, not a manager, and a good income property should pay for management and still produce positive cash flow.

Detailed Property Inspection:

Do an interior inspection to learn about the place, the tenants, and any problems that you will have to fix in the coming months or years. Look for pests, water and fire damage, as well as obvious “problem tenants. Are there any empty apartments that are listed as occupied? Use professional inspectors as needed for pest inspections and safety inspections.

For the exterior inspection, you will want to first walk around and take notes. Watch for anything that looks unusual or in need of repair.

Then you can get professional inspections, if necessary. You want to verify that the electrical and plumbing systems are up to date and meet current codes. You also want to get an estimate on how many years of use the roofing has left. You’ll look at driveways, landscaping, and exterior paint condition.

Due Diligence Investigation:

Here’s a simple definition of the term: “Investigation and verification of the details of the material facts for a particular investment.” You can start this process before you make an offer, but you should also have clauses in the offer that allow you to have inspections done, and reviews of the books and certain documents.

Verify The Business Income:

You’re buying a business; make sure it makes economic sense. Get the last 36 months income and expense statements, business tax returns with all schedules, all of the seller’s title paperwork, check the County Register of Deeds for liens,  judgments or back taxes and look for anything unusual, like expenses that are too low or income that seems too high. Review the rent roll, and find out if the rents are over or under the market rates for the area. If there are employees, look at the payroll records for any surprises.

 

 

Apartment Building Financing Fundamentals Winston Rowe & Associates

Apartment Financing

Based on Winston Rowe & Associates recent market analysis apartment buildings are gaining popularity due to exceptional levels of high occupancy combined with the low inventory nationwide.

This article has been prepared to provide their clients with an understanding of apartment building financing fundamentals.

If you would like additional information about Winston Rowe & Associates national apartment building financing platform, they can be contacted at 248-246-2243 or visit them on line at http://www.winstonrowe.com

CRE investors new to multifamily ownership most likely want to know as much as possible about the world of financing. While each transaction is unique and underwritten on its own merits it’s worth knowing that there are a few basic requirements commercial lenders use.

The Collateral:

Believe it or not with very few exceptions lenders do not like distressed properties and REOs. These apartment buildings come with a myriad of problems such as high vacancies, management and tenants issues, title, lack of maintenance and or upgrades, local economy, and in many cases inability to service debt. As a result, hard money may be one of the very limited financing options requiring a 50% or more down payment.

For conventional transactions great emphasis is placed on the property and its condition. In case of foreclosure, the lender wants to be sure it has a marketable property. This is the reason for which the lender will typically not allow the borrower to choose the appraiser.

The commercial appraisal is detailed and it utilizes three variables to derive the property value: income approach, replacement cost, and sales comparison method. The income approach carries the utmost important factor in determining the collateral approval. A building could be fancy, well-maintained, and in a great location, but if the income is not there to support the value the collateral does not pass the test.

The Cap Rate:

Among other factors worth mentioning are the age and condition of the property, the vacancy rate, and the area market capitalization rate. The “Cap Rate” is a ratio used to determine a property’s value based on its generated income. It’s computed by taking the rental net operating income (NOI) and dividing it by the property’s fair market value (FMV) or sales price.

The lender will then compare the property’s Cap Rate with the general area’s rate for similar properties. The red flag arises when the ratio is lower than the norm, therefore a higher cap rate is certainly desirable. Conversely, a very high ratio raises another red flag. Rest assured that an underwriter would question why a property has such a high ratio. Are there any underlying issues that could potentially affect the property in the future? Remember that an underwriter has a detective’s eye; they are looking for what could go wrong before looking at the positives.

The Cash Flow & DSCR:

Cash flow plays a significant role when underwriting a multifamily loan. Within the industry the cash-flow analysis is known as the Debt Coverage Ratio ( DCR). Such ratio measures the property’s net income ability to cover the annual debt service. The lender will analyze the property’s rent-roll – and the financials – and determine the annual income and expenses. After that it determines if the annual cash flow can service the new debt.

The DCR is calculated by dividing the property’s annual NOI by the property’s projected annual debt service (based on the new loan). Annual debt service includes the principal and interest payment only. Taxes, insurance, and the rest of the expenses have already been deducted when determining the NOI. Lenders are looking to see a minimum of 1.25 ratio, meaning that for every $1 of debt service the property must generate a minimum of $1.25 in net operating income. So, let’s say a building’s NOI is $35,000 while the annual P&I is $27,000 (or $2,250 monthly). The resulting DCR is 1.29, a ratio within the guidelines. However, a mere increase of a half percent on the rate could bring down the ratio below 1.25 thus putting the loan in jeopardy of being denied.

Borrower Strength:

Most loans funding today are recourse loans. It means that lenders are not satisfied with the collateral only and you, as the borrower must provide a personal guarantee; which implies that your credit and financial strength will be scrutinized. Keep in mind that even if title to the property is vested in the name of a corporation, LLC, or some other form, lenders still require personal guarantees from their owners or members.

Underwriting trend is rather conservative so lenders expect you to prove a great credit history, sufficient apartment building experience, and a decent net worth with a generous amount of liquid funds. When it comes to the capital invested or equity owned most programs want to see the borrower’s equity at twenty percent or more. Your net worth should look impressive. Fannie Mae, for instance, wants to see the borrower’s net worth be at least the loan amount requested.

Winston Rowe & Associates has a core focus on building long-term relationships, delivering exceptional and individualized customer service, and positioning financial products that best achieve their client’s goals.

Winston Rowe & Associates has an excellent free knowledge based resource for commercial real estate, valuation and market analysis located at:

http://www.winstonrowe.com/Free_Real_Estate_Resources.html

Winston Rowe & Associates has no upfront free commercial real estate financing solutions and in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,   Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming

Tips For Getting A Commercial Bridge Loan – With No Advance Fees

WINSTON ROWE & ASSOCIATES

Winston Rowe & Associates, a no upfront fee finance and advisory firm receives many inquiries from real estate investors every day concerning hard money bridge loans for their commercial properties from around the country.

Most are surprised by the more extensive supporting documentation for the initial due diligence and subsequent underwriting process.

This news article addresses the best uses for commercial real estate bridge loans and what real estate investors should expect when applying.

Commercial real estate investors who would like more information about Winston Rowe & Associates commercial bridge loan financing can contact them at 248-246-2243 or email to; processing@winstonrowe.com

Also investors can check them out online at http://www.winstonrowe.com

What is a commercial bridge loan?

Fist thing to understand about bridge loans is that they are short term loans. Generally between 12 to 36 months with interest rates at double digits.

The advantage of commercial bridge financing is that they fund very quickly, weeks not months and in some cases a bridge loan can be funded in just a few days.

Winston Rowe & Associates uses a best business practices streamlined business model that enables clients to quickly submit a bridge loan request for consideration, before they need to provide the bulk of the supporting documentation.

The most common reasons for bridge financing are the ensuing:

• Distressed real estate acquisitions

• Opportunistic purchases

• Chapter 11 Debtor in Possession (DIP) exit financing

• Bank Payoff Discounted note (DPO) financing

• Upcoming balloon payment

• Cash out refinance

Winston Rowe & Associates provides no upfront or advance fee commercial real estate asset back bridge loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming

 

 

How To Structure A Commercial Bridge Loan – Winston Rowe & Associates

Structuring Commercial Real Estate Bridge Loans

 

Winston Rowe & Associates, a no advance fee advisory and finance firm specializing in commercial real estate bridge loans nationwide.

They have prepared this news article to provide investors with the fundamentals of structuring a commercial bridge loan.

When speed and experience are important and crucial to your real estate success, contact Winston Rowe & Associates, a principle is always available to speak with prospective clients. They can be contacted at 248-246-2243 or email them at processing@winstonrowe.com

They also have many other commercial real estate financing solutions that meet almost every need. Check them out online at http://www.winstonrowe.com

Basic Bridge Loan Structures:

Commercial real estate bridge loans are utilized for distressed and higher risk purchasing, refinancing or holding properties that are being repositioned, re-tenanted, improved or otherwise redeveloped, that traditional banks won’t finance.

The typical structure for a bridge loan has a low loan to value, higher interest rates than a conventional loan and a very short term, hence the term “bridge”. This type of loan needs to have a clearly defined exit strategy for long term financing.

Purchase Bridge Loans:

When utilizing a bridge loan for the purchase of a distressed or higher risk property you need to realize that a cash down payment will be required, there will be personal FICO standards and your past business experience will be scrutinized by your potential lender.

Many new commercial real estate investors make the mistake of thinking that an appraisal or future completed value is the equity (down payment) into the purchase transaction if it is greater than the sales price.

This is never the case, here’s why. The actual value of the property is the sales price, not the asking (appraised) value or its future value. Think of buying a vintage car for one price them fixing it up and selling it for a higher price. Why would you over pay for the future value? The lender looks at the transaction the same way.

Another issue that new real estate investors run into is, trying to use a bridge loan as a down payment to purchase a commercial property trying to structure no money down transaction.

In the current market, you will need to have skin in the game (cash). All lenders will require that the investor share in the risk.

Refinance Bridge Loans:

It’s very common for an existing property owner to be approached by their current bank with a discount on their commercial mortgage.

There are many reasons for this. Local market conditions, a drop in occupancy, the repositioning of the banks portfolio or the borrower does not meet current personal or business credit requirements.

The initial response from the real estate owner is. I’ll just go down the street and apply for a new loan with another bank. After a number of bank applications, you quickly discover your property does not qualify for traditional financing. Even though you have a very low loan to value and you’ve been making your payments on time.

Here’s why. All FDIC banks have the same underwriting guidelines for commercial loans. When your application is reviewed buy a new bank the same reason(s) your current bank had used to ask you to seek new financing, will be utilized to decline your new request.

Your next option is going to be a short term bridge loan that will enable you to correct the decencies or to stabilize the property so it can qualify for more traditional financing, within the next 12 o 36 months.

Myths About Bridge Loans:

There are some common misconceptions that commercial real estate borrowers have when it comes to bridge loans.

The first one is. You don’t need good personal credit or bridge lenders never check credit.

All lenders, both private and agency will review your personal credit as part of their global due diligence and underwriting approach. If you have a low credit score, in the 500’s, no lender is going to consider you as potential client.

The second most common misconception is. The lender only considers the value of the property; hence I don’t have to have a down payment, or any kind of documentation.

Value and loan to value are only part of the equation. You will need a down payment. The lender is going to take a hard look at your previous business experience, business and personal financials as well as exit strategy.

The third most common misconception is. I don’t need to have any liquidity (cash) in my bank account because all my money is in the deal.

One of the first things all lenders review is a client’s personal financial statement. If you are not liquid a lender will be very hard pressed to approve your loan request. They take the position. They’re not a charity and if you’re out of cash you’re out of business.

The Winston Rowe & Associates Advantage:

Winston Rowe & Associates best business practices process ensures that their clients receive lighting fast funding with the most aggressive rates and terms available, while managing every step of the financing process from document collection to commitment negotiation and closing.

Winston Rowe & Associates provides no upfront or advance fee commercial bridge loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming