The Five Essential Elements of a Prearranged Bankruptcy


The use of prearranged bankruptcies, which have long been a viable option for companies undergoing a restructuring, are on the rise and for good reason. A well-executed prearranged bankruptcy — in which most of the biggest creditors agree to a plan of reorganization before going to court — allows a company to secure attractive financing; maintain the trust of employees, customers, and suppliers; and move through the bankruptcy process much more quickly and with less expense than a standard bankruptcy filing.

Moving swiftly through the bankruptcy process is particularly important today. Many companies limped through the Great Recession with impaired balance sheets. But with a great wall of debt scheduled to mature between 2012 and 2015, these companies need to act quickly to fix their capital structures.

What’s more, as the economy emerges from recession and begins to grow, companies need to position themselves to capture that growth. Being hobbled by an over leveraged balance sheet or being stuck for a prolonged period in bankruptcy court is certain to put a company at a competitive disadvantage.
This article outlines the five essential elements for orchestrating a successful prearranged Chapter 11 plan of reorganization (POR).

1. Examine the Circumstances.

The first thing to remember is that prearranged bankruptcies aren’t for every company. Prearranged plans are best suited to companies that need to fix an inadequate or over leveraged capital structure and have sufficient unencumbered assets or cash flow to secure debtor-in-possession (DIP) financing and exit financing.

Prearranged bankruptcy is not a viable option for a company that needs to discontinue certain lines of business or to make use of U.S. Bankruptcy Code Section 363, which allows for the sale of individual assets delivered to the purchaser free and clear of any liens or encumbrances.

Neither is a prearranged bankruptcy useful if litigation is involved because court action implies that major parties have taken adversarial positions. Prearranged bankruptcies only work if the major stakeholders can align their positions.

2. Secure Liquidity.

Liquidity is essential to continue smooth operations while a prearranged bankruptcy is negotiated. Liquidity can come from both internal and external sources. Internally, a company can defer some capital expenditures and cut costs to create liquidity. But companies need to be careful because deep cuts can shake the confidence of stakeholders in the company’s long-term viability. For example, a round of layoffs that hurts morale and sends other key employees looking for work could be very counterproductive.

In searching to obtain liquidity from an external source, a company should seek a lender who is familiar with the restructuring process and who will be a good partner. Ideally, a financing package should include (a) DIP financing so the company can maintain adequate liquidity during the bankruptcy period and (b) exit financing so it will emerge from bankruptcy with adequate capital to compete. This is a sophisticated package of financing and requires a lender that is steeped in the bankruptcy process and understands not just the company, but also the marketplace in which it competes.

3. Understand Stakeholders.

Prearranged bankruptcies require that at least 67 percent of the creditors agree to the plan, so an early and clear picture of the different creditors and their primary motivations is essential to line up the necessary votes before formal solicitation. This can be a complicated undertaking. Often creditors have differing views of the enterprise value of the company and what constitutes the fulcrum security, the debt instrument most likely to be converted into equity in a reorganized company.

For example, a second lien lender may perceive that it is the fulcrum security at a certain enterprise value. However, the unsecured note holders may believe that the company value is greater and that they are the fulcrum security. Coming to terms with the business valuation and finding common ground are critical to a prearranged filing.

Not all stakeholders are in the capital structure and get to vote, but it’s important to understand their interests as well. A company’s suppliers, for instance, want a healthy, thriving customer. And key employees want a company at which they can pursue meaningful, lucrative careers.

Adding to this tableau of players is the continued emergence of secondary debt holders and distressed investors. During the financial crisis these investors faded somewhat from the scene, but as the recovery gels and the prospects for a quick return improve they are snapping up debt, often the fulcrum tranche of the capital structure.

4. Document Agreements.

Once a company has won the necessary votes and financing to advance a prearranged bankruptcy, the company needs to properly document formal agreements. Prearranged bankruptcy filings are by their nature somewhat fluid since a third of creditors may not agree to the POR. But plan-support agreements involving creditors that do agree can help keep the process on track.

Plan-support agreements must describe the POR and the financing terms, outline achievable goals and promises, be customized for each investor class, and include the proper disclosure requirements associated with applicable bankruptcy and security laws. These agreements help ensure that everyone remains committed to the plan.

The wild card in the prearranged bankruptcy process is that one-third of the creditors might not agree to the terms and therefore won’t sign support agreements. But a well-documented set of agreements with the key constituents most likely will be well-received by a judge.

5. Clear Communications.

Clear communications with employees, partners, and investors are important so that these stakeholders aren’t thrown off guard or shocked by the bankruptcy plan. When employees understand a bankruptcy plan, they are more likely to cooperate with management and help prevent business disruption. Continuity is crucial to maintaining the company’s competitive position and in preserving the valuation assumptions that will determine how, or even if, the respective parties can come to agreement prefiling.

Poor communications, meanwhile, fuel gossip and create distractions that hurt employee effectiveness and productivity, and can also lead to the exodus of talented employees.

Similarly, clear communications with suppliers and customers helps prevent business disruption. If trade partners withdraw supplies, fearing the company can’t pay for them, or if customers turn elsewhere, fearing the company won’t survive to deliver or stand behind the products it sells, the implications for the company are dire.

By communicating with employees, suppliers, and customers, a company can explain its plan and hopefully convince all concerned that they should continue to do business together. A coordinated communications campaign also ensures that when employees work with suppliers and customers, everyone is on the same page and there are no miscommunications or surprises.

Powerful Tool

A prearranged bankruptcy in today’s economic and investing environment is a powerful tool to move a company through bankruptcy proceedings quickly, in a less costly manner, and with minimal disruption to the business. The end result can be a business that’s leaner, adequately financed, and more competitive.

Not surprisingly, this requires a sophisticated financing partner, one that is experienced with prearranged bankruptcies, has the resources and expertise to finance the process, and understands the market in which the company operates. To secure such a lender, a company must manage the prearranged bankruptcy process carefully by addressing five essential elements — examine the circumstances, secure liquidity, understand the stakeholders, document agreements, and implement clear communication.

This is a complicated, rigorous process, but well worth the effort if a stronger, more competitive company can emerge in the end.

The Art of Pre-acquisition Due Diligence

Due Diligence

The use of the word “art” in discussing pre-acquisition due diligence may seem confusing, even odd, to some readers. But just as with constructing an investment thesis and execution plan for a special situations acquisition, there’s an art to executing effective pre-acquisition due diligence.

Every special situations investment opportunity is unique, posing particular transactional, financial, integration, and human behavioral challenges.

As such, the art lies in taking a comprehensive due diligence template and effectively and efficiently customizing it to fit a particular special situations transaction.

Although this article discusses certain technical and technological aspects of executing effective pre-acquisition due diligence, it can’t pretend to teach the art of the process.

The art manifests itself when discussing the theoretical objectives of performing effective due diligence in combination with providing practical examples of certain procedures that result in successful investment decisions.

Theoretically, the fundamental objective of pre-acquisition due diligence is to validate the investment thesis of a particular acquisition or transaction. However, a more comprehensive objective of pre-acquisition diligence exists.

Utilized by certain special situations equity sponsors, these best practice due diligence procedures include investigations, analyses, strategies, and tactics relevant to the people and process decisions necessary to predictably close the transaction and integrate the post-acquisition 90-day business plan.

Although more difficult to execute, especially in scenarios involving uncertain outcomes (e.g., a Chapter 11 Section 363 auction sale), these procedures are essential to forecasting the likelihood of a successful return on investment. An acquisition that integrates pre-acquisition due diligence with a transaction’s closing and initial post-acquisition integration plan has higher levels of predictability and probability of success.

To achieve this requires a distressed investor to develop a comprehensive understanding of the key qualitative and quantitative elements of an acquisition target—past, present, and future—especially as these elements relate to people, products, processes, trends, and markets.

Accurately predicting post-acquisition revenues and variable and fixed costs on both an accrual and cash-flow basis is one of the expected outcomes of executing best practice due diligence procedures.

Achieving predictability is much easier said than done, but experienced special situations investors understand what factors addressed through due diligence drive a post-acquisition forecast.

What are the target’s distinctive capabilities in relation to its competition (e.g., its hedgehog)? Which products and customers, suppliers, internal processes, and people are critical to executing the post-acquisition integration plan? If the investment is an add-on acquisition to an existing industry or product platform, what synergies does it bring to the existing platform?

Understanding key elements enables the acquirer to successfully flex the post-acquisition business plan to predictably exploit economic opportunities, including exit strategies, in both expansion and recessionary scenarios.

Of course, achieving high levels of predictability is impossible unless the numerous people decisions essential to identifying and underwriting the target, closing the transaction, and integrating the acquired asset are properly executed.

What should the decision criteria be for who is on the pre-acquisition team? The transaction closing team? The post-acquisition board of directors and senior leadership team? What should the composition be between the acquiring sponsor’s investment partners vs. operating partners vs. the target’s management team vs. outside professional advisors vs. other players?

These decisions have profound long-term effects on the predictability of an investment’s operational and financial performance, and thus investment values, under a variety of scenarios.
Understanding the respective performance goals for each of these positions; creating criteria and processes for deciding the initial who, what, when, where, and at what price questions; and establishing criteria to score and evaluate the respective performances of the people chosen should be established during the pre-acquisition due diligence processes.

That there is an art to the making these critical people decisions is evidenced by the number of private equity sponsors that engage outside professionals to advise them on these matters.

How does Warren Buffett choose the companies he buys?

Winston Rowe & Associates Online

Investors have long praised Warren Buffett’s ability to pick which companies to invest in. Lauded for consistently following value investing principles, Buffett has accumulated a fortune of over $60 billion dollars over the decades. He has resisted the temptations associated with investing in the “next big thing”, and has also used his immense wealth for good by contributing to charities.

Understanding Warren Buffet starts with analyzing the investment philosophy of the company he is most closely associated with: Berkshire Hathaway. The company has a long-held and public strategy when it comes to acquiring shares: the company should have consistent earning power, good return on equity, capable management, and be sensibly-priced.

Buffett belongs to the value investing school, popularized by Benjamin Graham. Value investing looks at the intrinsic worth of a share rather than focusing on technical indicators, such as moving averages, volume or momentum indicators. Determining intrinsic worth is an exercise in understanding a company’s financials, especially official documents such as earnings and income statements.

How has the company performed?

Companies that have been providing a positive and acceptable return on equity (ROE) for many years are more desirable than companies that have only had a short period of solid returns. The longer the number of years of good ROE, the better.

How much debt does the company have?

Having a large ratio of debt to equity should raise a red flag because more of a company’s earnings are going to go toward servicing debt, especially if growth is only coming from adding on more debt.

How are profit margins?

Buffett looks for companies that have a good profit margin, especially if profit margins are growing. As is the case with ROE, examine the profit margin over several years to discount short-term trends.

How unique are the products sold by the company?

Buffett considers companies that produce products that can easily be substituted to be riskier than companies that provide more unique offerings. For example, an oil company’s product – oil – is not all that unique because clients can buy oil from any number of other competitors. However, if the company has access to a more desirable grade of oil – one that can be refined easily – then that might be an investment worth looking at.

How much of a discount are shares trading at?

This is the crux of value investing: finding companies that have good fundamentals, but are trading below where they should be. The greater the discount, the more room for profitability.

Buffett is also known as a buy-and-hold investor. He is not interested in selling stock in the near-term to realize capital gains; rather, he chooses stocks that he thinks offer good prospects for long-term growth. This leads him to move focus away from what others are doing, and instead look at whether the company is in the position to make money.


How To Purchase A Shopping Center

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Acquiring an operating shopping center can be tricky business in any economic climate. In today’s market, more of our clients are finding great opportunities at attractive prices. But these days, extra caution and focus — during due diligence and beyond — is essential to be sure that your latest bargain won’t become your next headache.

Recognizing that these transactions are often quite complex (and that all potential issues cannot be addressed in a short article), we thought that it might nevertheless be helpful to highlight just a few of the issues that merit special attention when purchasing an existing shopping center.

Know the REA:

It is critical to carefully review any Reciprocal Easement Agreements (REAs) that may be in place at the site. Check the REA for use restrictions, no-build areas, parking ratios, operating covenants, and other restrictions that may affect your interests, which may very well include future development opportunities. Identify no-build or permissible build areas, as well as those uses that are prohibited under the REA.

Understand the parking allocations under the REA, considering how parking may be restricted by spaces reserved for other shopping center uses. Be sure to look for any access or other easement rights in favor of abutting uses or property owners that may negatively impact your use or future development. If necessary, how easy or difficult will it be to amend the REA down the road, and how many parties will need to consent? Focus on the reimbursement structure under the REA for CAM, taxes, and other costs – and watch for exceptions to other parties’ reimbursement obligations.

Protect your audit rights:

Under the purchase agreement, be sure that you have continued access to the seller’s books and records for a defined period of time after closing (and check the audit provisions in the individual space leases to determine that time period). This is important for CAM obligations and possible audits. Ensure that the purchase agreement requires the parties to reconcile applicable charges, if necessary, post-closing. The seller should stay on the hook for any overcharging of CAM, taxes, and other charges that are paid by tenants during seller’s ownership of the property (together with the audit costs if applicable under the lease(s)).

Know thy leases:

Be sure to carefully review all tenant leases in the shopping center and check for all of the typical “pitfalls,” such as exclusive use clauses and other prohibited uses that restrict re-tenanting, and conflicting use provisions that point to potential violations at the site. Do the leases contain site plan controls, and if they do, then how do they impact future development? Are there co-tenancy requirements that, if violated, allow individual tenants to reduce rent payments, or cease paying rent altogether?

Check to see if individual tenants have any purchase rights, such as a right of first refusal, that need to be waived. Review the tax and CAM apportionments and calculations to be sure that they make sense and will work economically going forward.

Get originals:

Wherever possible, ensure that the seller provides originals of all operative documents at closing. Pay particular attention to obtaining fully executed original leases (together with any assignments and/or amendments). In some jurisdictions, a landlord will need to go through evidentiary hurdles to bring an enforcement action against the tenant if the landlord does not have the original of the lease. Having a fully-executed copy of the lease, together with all associated amendments and assignments, certified by the tenant in an estoppel certificate may be helpful “insurance” as well.

Estoppels, estoppels, estoppels:

Be sure to obtain estoppel certificates for leases, REAs, and other critical documents. In drafting the estoppels, avoid a “one size fits all” approach. Carefully review each applicable document to identify points of ambiguity, concern or exposure, and craft your estoppel certifications accordingly. And, when reviewing response drafts from the certifying party, be sure to watch for edits like knowledge qualifiers that can take the teeth out of estoppel protections. Finally, be sure that the estoppel states that it can be relied upon by your successors, assigns, and lenders.

Review zoning and future development plans:

Be sure to analyze the property’s existing compliance with applicable zoning requirements, and identify any areas of non-compliance. Is any non-compliance subject to “grandfathering” protection and, if so, what restrictions might apply to future alteration, expansion, or reconstruction? If future development is part of your strategy for this asset, then carefully review the zoning code to determine whether it would restrict any such development and, if so, how such restrictions may be overcome (whether by obtaining zoning relief or otherwise). If floor area ratio (FAR) and other similar zoning restrictions apply, consider whether future development by other property owners in the shopping center could “eat up” all remaining FAR and effectively preclude your further development of the site.

Read your title:

In conjunction with your title company, carefully review your title commitment and exception documents to evaluate title, and look for any critical easement documents that may have been missing from your due diligence materials (or any “surprise” occupancy agreements). Be prepared for your list of required estoppels to expand based upon this review. Review the manner in which your seller received title to the property and look for any potential issues or defects. This is especially important if your seller acquired the center in connection with a bankruptcy or foreclosure.

Don’t mess with taxes:

Transfer, recording, and/or mortgage taxes can have a substantial economic impact on your transaction. The applicability and amount of these taxes varies depending on the jurisdiction. Also, be sure that your real estate tax proration clause works as intended if you happen to be buying a center in a jurisdiction where real estate taxes are paid in arrears. For the above and many other reasons (including ensuring an accurate pro forma for the purchase), these issues should be vetted as early in the transaction as possible.

Each transaction certainly is unique and presents its own challenges, but, with careful diligence and thoughtful attention to possible areas of risk, your next acquisition can be a reliable and profitable investment for years to come.

What America’s $2 Trillion Underground Economy Says About Jobs

Winston Rowe & Associates Online

Doing what they can to survive in a dour job market, millions of Americans exist in an underground economy that has ballooned to $2 trillion annually.

By “underground economy,” we’re talking about all the business activity that is not reported to the government, which includes a growing number of people getting paid for their labor in cash.

That means the shadowy figures of the underground economy – the drug dealers and Mafia godfathers, for example – now have a lot more company.

But most of these new participants in the underground economy are ordinary hard-working Americans who are increasingly taking jobs that pay “under the table” either because nothing else is available or they need a second source of income to make ends meet.

America’s underground economy is nothing new, but since the Great Recession hit, experts estimate it has doubled in size, driven by unemployed or underemployed people desperate for income.

Paying workers off the books also has great appeal to employers, who then can avoid paying benefits and, starting next year, some of the costs imposed by the Obamacare law.

“It’s typical that during recessions people work on the side while collecting unemployment,” Bernard Baumohl, chief global economist at the Economic Outlook Group, told The New Yorker. “But the severity of the recession and the profound weakness of this recovery may mean that a lot more people have entered the underground economy, and have had to stay there longer.”
Who Lives in America’s Underground Economy?

Some of the folks who’ve become trapped in the underground economy have been there for years, such as construction workers, childcare workers, illegal aliens and housekeepers.

People who do such service jobs often get paid partly or entirely under the table. The huge job losses caused by the Great Recession forced more people to switch to service jobs.

Many long-term unemployed people have struggled to survive by taking odd jobs, for which they almost invariably get paid in cash.

But the biggest contributor to the underground economy in the past few years has been employers increasing their use of freelancers or “independent contractors” – even many who actually work full-time.

The weak U.S. economy has already given businesses plenty of incentives to cut costs by paying workers under the table. But the arrival of Obamacare Jan. 1 – particularly rules that requireemployers with 50 employees or more to offer health insurance while allowing them to avoid offering plans to part-timers — will give them even more.

“This type of regulation could put more people out of work and into an underground economy,” Peter McHenry, an assistant professor of economics at the College of William & Mary, told CNBC.

It’s a sea change in how businesses traditionally have hired, and if it sticks through a recovery of the U.S. economy, it will have grim implications for American workers.

“Businesses are not angels, and they exist to make a profit,” Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver, told CNBC. “They are going to do everything they can to keep costs down, and if that means paying people off the books, they will do it. The government doesn’t really have the resources to track down every business that does this.”
A Crash Bigger than 2008
Watch the full presentation.
What the Underground Economy Costs

The rapidly growing amount of unreported wages in the U.S. is costing the nation billions in lost tax revenue.

The Internal Revenue Service estimated that the losses from unreported wages have grown from about $385 billion in 2006 to about $500 billion last year.

State governments lose another $50 billion to the overall underground economy.

That means the people who play by the rules are getting a raw deal.

What to Expect when Applying for a Commercial Mortgage Loan From Winston Rowe & Associates


If you have never borrowed money for your business before, you may be in for a surprise.

Whether you want to borrow working capital to expand your business or leverage equity in a commercial real estate venture, you will soon find out the commercial loan process is very different from the more common home mortgage process.

Commercial loans, unlike the vast majority of residential mortgages, are not ultimately backed by a governmental entity such as Fannie Mae. Consequently, most commercial lenders are risk-averse; they charge higher interests rate than on a comparable home loan. Some lenders go a step further, scrutinizing the borrower’s business as well as the commercial property that will serve as collateral for the loan.

This means that the business borrower should have different expectations when applying for a loan against his commercial property than he would have for a loan secured by his or her primary residence.

Following is a list of questions the borrower should ask himself and the lender before applying for a commercial loan.

1. How am I going to meet the loan repayment terms?

Typically, bank loans require the borrower to repay his or her entire business loan much earlier than its stated due date. Banks do this by requiring most of their loans to include a balloon repayment.

This means the borrower will pay interest and principal on his 30-year mortgage at the stated interest rate for the first few years (generally 3, 5 or 10 years) and then repay the entire balance in one balloon payment.

Many borrowers do not save enough in such a short time frame, so they must either re-qualify for their loan or refinance the loan at the end of the balloon term.

If the business happens to have any cash-flow problems in the years immediately preceding the balloon term, the lender may require a higher interest rate, or the borrower may not qualify for a loan at all. If this happens, the borrower runs the risk of being turned down for financing altogether and the property may be in jeopardy of foreclosure.

A balloon loan has other risks as well. If the borrower’s business is in a “risky” industry at the time the balloon is due (think of the oil and gas bust in the 1980s or the telecom implosion of the 2000s), the lender may back out of all refinancing for the enterprise.

Alternatively, a lender simply may decide its loan portfolio has too many loans in a given industry, so he will deny future refinancing within that trade.

Non-bank lenders generally offer less stringent credit requirements for commercial loans. Some non-bank lenders will make long-term commercial loans without requiring the early balloon repayment.

These loans, which may carry a slightly higher interest rate, work like a typical home loan. They allow a steady repayment over twenty or thirty years. It is often worth paying a one- or two-point higher interest rate for a fixed-term loan in order to ensure the security of a long-term loan commitment.

2. How much can or should I borrow?

Most bank loans prohibit second mortgages, so the borrower should go into the loan process intending to borrow enough to meet current business needs, or enough to sufficiently leverage real estate investments.

For a traditional acquisition loan in which the borrower is buying a new property, banks usually require a down payment of 20-25%. So for a $600,000 acquisition, the borrower will need to come up with $120,000-$150,000 for the down payment.

Some non-traditional loans will allow the borrower to make a smaller down payment, maximizing the loan-to-value (LTV) at 85-90%. Such loans are generally not bank loans, but are offered by direct commercial lenders or pools of commercial investors. If the customer wants to borrow the maximum amount possible, the interest rate on such loans may be a point or two higher than typical bank loans. Before deciding how much to borrow, potential borrowers should:

Evaluate how much cash they are likely to need
Analyze their ability to repay the loan as it is structured

Research has consistently shown that the number one reason behind the failures of most small businesses is the lack of adequate capital to meet cash-flow needs. Because of this it may actually be safer for a small business to leave a larger cushion against unforeseen events by borrowing more money at the slightly higher rate.

The amount of the loan requested has an effect on which commercial lenders will fund the loan. Small businesses borrowing less than $2,000,000 will visit a different pool of potential lenders than those seeking loans of over $5 million.

Small business loans are generally made by direct commercial lenders (easily located by internet searches) or by small local banks. Larger loans are generally made by regional banks, and very large loans are made by mega-banks or Wall Street lenders.

3. How long will it take to get a commercial loan?

Borrowers generally start the loan process by contacting their bank. Unfortunately, it is difficult to secure business loans from most banks. Besides, bank loans:

Contain the most stringent requirements
Impose the most loan covenants
Take the longest time to secure the loan.

Bank loans go through several phases of review. First, they will look at your historical income statements, balance sheets and statements of cash flow. Then they will review 5 years of tax returns on the borrower and all owners who will guarantee the loan.

Generally it takes several weeks before the borrower can get a verbal or written commitment letter from a bank. Even after the loan commitment, the bank’s credit committee may veto the loan. The business will then have to start the process over with a new lender.

If a firm has very good credit rating, a good relationship with its bank, a solid and confirmable history of earnings and profits, and is not in a hurry, a local bank will probably give them the lowest stated interest rate on the loan.

If you need to be pre-qualified quickly, you should shop for credit over the Internet or look at non-bank sources of funds first. Once you secure a commitment from a direct lender, then you may start a parallel process with your bank.

Some direct non-bank lenders can give you a verbal commitment in a few days, but keep in mind that you are only searching for “commercial” loans-offers from Internet companies may often be for residential property, so you will need to screen your searches.

Keep in mind the parameters of the terms you will accept: Will you take a balloon loan? What about a covenant or condition on the loan?

If you know that your profit and loss statements are not provable and solid, or you do not have a high credit score, applying at banks is generally a waste of time. Instead, go directly to non-bank commercial lenders.

4. What kind of covenants and conditions are required?

Many borrowers are not aware that much more may be required than simply making regular monthly payments on time. Many loans ask you to provide quarterly or annual income statements, balance sheets and tax returns. Some loans will require covenants-promises that your business will meet certain tests in the future.

They may require a certain positive cash flow, or a certain debt-to-cash-flow ratio, or other financial criteria. During a downturn in your industry or the economy, your business may face temporary cash flow or profit shortages.

If your business falls short of the terms and conditions contained in the loan covenants, your bank may deem that your loan has entered into default. Default triggers numerous penalties. It may require that you pay back the loan immediately.

This can cause you to have to find another lender very quickly, or face foreclosure on the property.

Different lenders require different conditions, so ask the lender up front what conditions or covenants apply. Some non-bank loans charge a slightly higher interest rate but will waive all covenants and conditions except for timely repayment of the loan.

If you feel that your business cash flow is uncertain, you might want to consider these non-bank loans first.

If your business does not have its financial statements certified regularly by one of the larger CPA firms, you may opt for a slightly higher interest rate loan.

This may relax the reporting process or not require future covenants. Likewise, if losing your business or property to the bank is likely because of the financial test requirements, then find another lender.

Ask any real estate developer who has managed to stay in the business for 20-30 years about the risks inherent with traditional bank commercial property loans; he will name many other developers who lost all their assets during lean times in the industry.

5. What kind of documentation will be required?

Traditional lenders require 3-5 years of financial statements, income tax returns, and other documentation. This may include:

Asset statements
Original corporate documents
Personal financial records of the business owners

Keep in mind that many small businesses do not have the level of income documentation some lenders require.

If you ask ahead of time, it will save you numerous headaches from delays or rejected loan applications.

The documentation required and the timelines for approval are related-the more information required, the slower the loan approval and funding process.

6. What if I want to sell the property?

If your business booms, you may want to repay the loan early or sell the property and move to a larger space. Commercial mortgages, unlike residential loans, usually have pre-payment penalties.

However, some lenders will allow the purchaser of the property to assume the mortgage by taking over the seller’s payments.

An assumable loan is an excellent selling point, because it provides built-in financing for the buyer.

7. What are the “hidden” or total costs of the loan?

The stated interest rate is often artificially low when one considers all the costs of a loan. Points, for example, are direct percentages of the loan that the lender deducts from your loan.

If your interest rate is 9% with two points that means your real cost of the loan is 11%. The extra 2% comes right off the top into the lender’s pockets. Other costs may include:

Legal fees,
Survey charges,
Loan application fees,
Appraisal charges
Every item that will be charged against your loan or that must be pre-paid.

For some loans, these charges can be tens of thousands of dollars. They often must be pre-paid before the loan will be approved or rejected. You will need to know whether you are likely to be approved before spending money just to qualify for a commercial loan.

Other questions to ask

Will my interest rate go up if U.S. interest rates go up in general?
Is a fixed-rate alternative available?

Can I get a discount for paying your mortgage faithfully and consistently over a period of time?

Some lenders allow for decreases in the interest rates over time if you pay the mortgage on time. But if you want to refinance and repay your mortgage early, the lender may penalize you and charge extra interest. All of these details are important, and they can seem overwhelming.

Keep in mind how you expect your business to perform in the future and how you plan to repay the loan. Do not ignore worst-case scenarios.

You do not want to be so optimistic about the possibilities that you lose sight of the fact that the lender may take away your business or livelihood if you do not meet all the terms. Sometimes the lowest interest rates represent the riskiest loans.

The Best Lender

When considering a commercial mortgage, borrowers should seek out lenders who are willing to fund the loan under acceptable time constraints, keeping in mind their general creditworthiness.

Borrowers should look at both bank and non-bank funding in order to get their needs met in a timely manner.

Asking questions and obtaining unbiased evaluations will reduce delay and frustration. Fortunately, new lenders have emerged to challenge banks on their traditional terms, so borrowers have more leverage now than ever before when seeking commercial loans.

7. What are the “hidden” or total costs of the loan?

The stated interest rate is often artificially low when one considers all the costs of a loan. Points, for example, are direct percentages of the loan that the lender deducts from your loan.

If your interest rate is 9% with two points that means your real cost of the loan is 11%. The extra 2% comes right off the top into the lender’s pockets. Other costs may include:

Legal fees, Survey charges,
Loan application fees,
Appraisal charges
Every item that will be charged against your loan or that must be pre-paid.

For some loans, these charges can be tens of thousands of dollars. They often must be pre-paid before the loan will be approved or rejected. You will need to know whether you are likely to be approved before spending money just to qualify for a commercial loan.

Other questions to ask

Will my interest rate go up if U.S. interest rates go up in general?
Is a fixed-rate alternative available?

Can I get a discount for paying your mortgage faithfully and consistently over a period of time?

Some lenders allow for decreases in the interest rates over time if you pay the mortgage on time. But if you want to refinance and repay your mortgage early, the lender may penalize you and charge extra interest.

All of these details are important, and they can seem overwhelming.

Keep in mind how you expect your business to perform in the future and how you plan to repay the loan. Do not ignore worst-case scenarios.

You do not want to be so optimistic about the possibilities that you lose sight of the fact that the lender may take away your business or livelihood if you do not meet all the terms. Sometimes the lowest interest rates represent the riskiest loans.

The Best Lender

When considering a commercial mortgage, borrowers should seek out lenders who are willing to fund the loan under acceptable time constraints, keeping in mind their general creditworthiness.

Borrowers should look at both bank and non-bank funding in order to get their needs met in a timely manner.

Asking questions and obtaining unbiased evaluations will reduce delay and frustration. Fortunately, new lenders have emerged to challenge banks on their traditional terms, so borrowers have more leverage now than ever before when seeking commercial loans.

Renters Face Affordability Crisis – Winston Rowe & Associates

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Winston Rowe and Associates, a nationwide no advance fee commercial real estate financier has prepared this analysis of the challenges to obtain affordable housing in the current rental markets.

With increased competition for units, rents are shooting up, and the increases are biting renters’ wallets as they find themselves increasingly getting priced out of the market, with wages failing to keep pace.

Nationwide rents have risen about 6 percent from a year ago, due to rising demand and still-limited supply, CNBC reports. Renters in San Francisco, San Diego, Boston, Baltimore, Washington, D.C., and Chicago are paying more than 30 percent of their wages on a two-bedroom rental, according to an analysis by Trulia. Financial experts often recommend spending no more than 30 percent of wages on housing expenses.

Rental demand is strong and likely will remain so for the foreseeable future, analysts note. Apartment vacancies rose slightly in the third quarter for the first time in four-and-a-half years, but was mostly attributed to more rental supply coming on the market, according to Reis analytics firm.

Winston Rowe & Associates has some of the most aggressive rates and terms available, while managing every step of the financing process from document collection to commitment negotiation and closing.

They have national solutions for conforming and non-conforming commercial loan refinance programs, each designed to provide the most competitive financing terms based on a combination of property constraints, borrower investment and personal objectives.

When you call Winston Rowe & Associates, a principal is always available to speak with prospective clients. They can be contacted at 248-246-2243 or visit them online at


Benefits of Managing Your Own Commercial Properties


Investing in commercial real estate can be a very profitable venture – if you find a building for the right price, with good potential cash flow and in a good investment location. If the location is not desirable, it won’t matter if you have the nicest building on the block or offer the most amenities for the lowest rents.

You need to crunch the numbers to make sure you have a profitable investment.

Winston Rowe & Associates, a national advisory and due diligence firm specializes in structuring; acquisition, refinance and portfolio repositioning of large and small commercial buildings.

They have prepared this knowledge based news article to provide current and prospective commercial real estate investors with a strategy of managing you own properties.

When you call Winston Rowe & Associates, a principal is always available to speak with prospective client’s 248-246-2243.

They also have many other solutions that meet almost every need. Check them out online at

Cost of a Property Manager

Some property owners decide to hire a management company to handle their commercial property, which can provide several benefits, but may wonder if the outcome is worth the cost.

Most property management companies charge between 5 to 10 percent of the rental fee.

To avoid paying the fee, a property owner can handle the same services and improve the return on investment.


You can use advertising locally and online to find an appropriate tenant. Placing a “For Rent” sign outside of the property that includes basic details may be effective. An ad in a local weekly publication or flyers distributed in the area can also generate interest.

Placing an ad on Craigslist or another online website or publication may also be a good option. Finding a responsible tenant can be one of the most key steps in making your rental experience profitable.


Screening a potential tenant to your comfort level may involve a credit or background check, and a tenant application. When meeting the prospective renter in person, engage in a discussion with them to establish rapport and use your best judgment with the following goals in mind that can increase your return on investment give you fewer headaches:

The property will be well-kept and therefore require fewer repairs and maintenance.

Rent will be received on time.

The lease could extend beyond the first year.

Legal Issues

Taking a class that reviews real estate and rental property legal issues will help you avoid complications, such as observing discrimination laws during tenant application and screening, drafting a secure lease agreement and minimizing risk in the property and on its grounds.

Timely Maintenance and Repairs

Handling repair and maintenance requests quickly can maintain a positive owner-tenant relationship and can prevent smaller repairs from growing and becoming costly expenses.

You may need to find a maintenance and repair and HVAC company to retain for standard and emergency repairs. Read about preventive maintenance requirements

Winston Rowe & Associates has some of the most aggressive rates and terms available, while managing every step of the financing process from document collection to commitment negotiation and closing.


7 Steps To A Hot Commercial Real Estate Deal Winston Rowe & Associates

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There’s an old joke in commercial real estate: If you think nobody cares you’re alive, just miss a few mortgage payments.

Unfortunately, there was a lot of that going on during the credit crisis that started in 2008, as commercial real estate values went into a freefall. According to the Massachusetts Institute of Technology Center for Real Estate, commercial property values fell by 10.6% in the fourth quarter of 2008, alone – the biggest price drop since 1984.

But to savvy real estate investors, times of lower prices typically reveal genuine investment opportunities. For instance, according to a survey by Marcus & Millichap Real Estate Investment Services, of 1,129 commercial property investors, 51% planned to increase commercial real estate allocations during the 2008 credit crisis.

So, despite the significant drop-off in acquisition plans from the peak in 2005, more than half of investors still planned to increase their commercial real estate holdings. A mere 11% planned to reduce their real estate portfolios in 2009.

Finding a Good Commercial Real Estate Deal

Ask any real estate professional about the benefits of investing in commercial property and you’ll likely trigger a monologue on how such properties are a better deal than residential real estate. Commercial property owners love the additional cash flow, the beneficial economies of scale, the relatively open playing field, the abundant market for good, affordable property managers and the bigger payoff from commercial real estate.

But how do you evaluate the best properties. And what separates the great deals from the duds?

Like most real estate properties, success starts with a good blueprint. Here’s one to help you evaluate a good commercial property deal.

Learn What the Insiders Know

To be a player in commercial real estate, learn to think like a professional. For example, know that commercial property is valued differently than residential property. Income on commercial real estate is directly related to its usable square footage. That’s not the case with individual homes. You’ll also see a bigger cash flow with commercial property. The math is simple: you’ll earn more income on multifamily dwellings, for instance, than on a single-family home. Know also that commercial property leases are longer than on single-family residences. That paves the way for greater cash flow. Lastly, if you’re in a tighter credit environment, make sure to come knocking with cash in hand. Commercial property lenders like to see at least 30% down before they’ll give a loan the green light.

Map Out a Plan of Action

Setting parameters is a top priority in a commercial real estate deal. How much can you afford to pay? How much do you expect to make on the deal? Who are the key players? How many tenants are already on board and paying rent? How much rental space do you need to fill?

Learn to Recognize a Good Deal

The top real estate pros know a good deal when they see one. What’s their secret? First, they have an exit strategy – the best deals are the ones where you know you can walk away from. It helps to have a sharp, landowner’s eye – always be looking for damage that requires repairs, know how to assess risk and make sure to break out the calculator to ensure that the property meets your financial goals.

Get Familiar With Key Commercial Real Estate Metrics

The common key metrics to use for when assessing real estate include:

Net Operating Income (NOI)

The NOI of a commercial real estate property is calculated by valuating the property’s first year gross operating income and then subtracting the operating expenses for the first year. You want to have positive NOI.

Cap Rate

A real estate property’s “cap” – or capitalization – rate, is used to calculate the value of income producing properties. For example, an apartment complex of five units or more, commercial office buildings, and smaller strip malls are all good candidates for a cap rate determination. Cap rates are used to estimate the net present value of future profits or cash flow; the process is also called capitalization of earnings.

Cash on Cash

Commercial real estate investors who rely on financing to purchase their properties often adhere to the cash-on-cash formula to compare first-year performance of competing properties. Cash-on-cash takes the fact that the investor in question doesn’t require 100% cash to buy the property into account, but also accounts for the fact that the investor will not keep all of the NOI because he or she must use some of it to make mortgage payments. To uncover cash on cash, real estate investors must determine the amount required to invest to purchase the property, or their initial investment.

Look for Motivated Sellers

Like any business, customers drive real estate. Your job is to find them – specifically those who are ready and eager to sell below market value. The fact is that nothing happens – or even matters – in real estate until you find a deal, which is usually accompanied by a motivated seller. This is someone with a pressing reason to sell below market value. If your seller isn’t motivated, he or she won’t be as willing to negotiate.

Discover the Fine Art of Neighborhood “Farming”

A great way to evaluate a commercial property is to study the neighborhood it’s located in by going to open houses, talking to other neighborhood owners, and looking for vacancies.

Use a “Three-Pronged” Approach to Evaluate Properties

Be adaptable when searching for great deals. Use the internet, read the classified ads and hire bird dogs to find you the best properties. Real estate bird dogs can help you find valuable investment leads in exchange for a referral fee.

The Bottom Line

By and large, finding and evaluating commercial properties is not just about farming neighborhoods, getting a great price, or sending out smoke signals to bring sellers to you. At the heart of taking action is basic human communication. It’s about building relationships and rapport with property owners so they feel comfortable talking about the good deals – and doing business with you.

Simple Ways To Invest In Real Estate – Winston Rowe & Associates

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Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. In this article, we’ll go beyond buying a home and introduce you to real estate as an investment.

Tutorial: Exploring Real Estate Investments

Basic Rental Properties
This is an investment as old as the practice of landownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage, leaving the landlord with a more valuable asset. According to the U.S. Census Bureau, real estate has consistently increased in value from 1940 to 2006, then proceeded to dip and rebound from 2008 to 2010. (To learn more, read The Benefits of Mortgage Repayment and Understanding Your Mortgage.)

There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. There is also the matter of finding the right property; you will want to pick an area where vacancy rates are low and choose a place that people will want to rent.

Perhaps the biggest difference between a rental property and other investments is the amount time and work you have to devote to maintaining your investment. When you buy a stock, it simply sits in your brokerage account and, hopefully, increases in value. If you invest in a rental property, there are many responsibilities that come along with being a landlord. When the furnace stops working in the middle of the night, it’s you who gets the phone call. If you don’t mind handyman work, this may not bother you; otherwise, a professional property manager would be glad to take the problem off your hands, for a price, of course. (For further reading, see Tips For The Prospective Landlord.)

Real Estate Investment Groups
Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all the units, taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups, but in the standard version, the lease is in the investor’s name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive enough to pay the mortgage even if your unit is empty. The quality of an investment group depends entirely on the company offering it. In theory, it is a safe way to get into real estate investment, but groups are vulnerable to the same fees that haunt the mutual fund industry. Once again, research is the key.

Real Estate Trading
This is the wild side of real estate investment. Like the day traders who are leagues away from a buy-and-hold investor, the real estate traders are an entirely different breed from the buy-and-rent landlords. Real estate traders buy properties with the intention of holding them for a short period of time, often no more than three to four months, whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.

Pure property flippers will not put any money into a house for improvements; the investment has to have the intrinsic value to turn a profit without alteration or they won’t consider it. Flipping in this manner is a short-term cash investment. If a property flipper gets caught in a situation where he or she can’t unload a property, it can be devastating, because these investors generally don’t keep enough ready cash to pay the mortgage on a property for the long term. This can lead to continued losses for a real estate trader who is unable to offload the property in a bad market.

A second class of property flipper also exists. These investors make their money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment depending on the extent of the improvements. The limiting feature of this investment is that it is time intensive and often only allows investors to take on one property at a time.

Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it’s not surprising that Wall Street has found a way to turn real estate into a publicly-traded instrument. A real estate investment trust (REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends, to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends.

Much like regular dividend-paying stocks, REITs are a solid investment for stock market investors that want regular income. In comparison to the aforementioned types of real estate investment, REITs allow investors into non-residential investments such as malls, or office buildings, and are highly liquid, In other words, you won’t need a realtor to help you cash out your investment. (For further reading, check out How To Analyze Real Estate Investment Trusts, How To Asses A Real Estate Investment Trust and The REIT Way.)

With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order. Even if you are buying on margin, the amount you can borrow is still much less than with real estate. Most “conventional” mortgages require 25% down, however, depending on where you live, there are many types of mortgages that require as little as 5%. This means that you can control the whole property and the equity it holds, by only paying a fraction of the total value. Of course, your mortgage will eventually pay the total value of the house at the time you purchased it, but you control it the minute the papers are signed.

This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value. (For more on taking out a second mortgage, read Home-Equity Loans: What You Need To Know and Home-Equity Loans: The Costs.)

The Bottom Line
We have looked at several types of real estate investment, however, as you might have guessed, we have only scratched the surface. Within these examples there are countless variations of real estate investments. As with any investment, there is much potential with real estate, but this does not mean that it is an assured gain. Make careful choices and weigh out the costs and benefits of your actions, before diving in.

Protecting Your Real Estate Investments – Winston Rowe and Associates

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The assets that you have worked long and hard to accumulate can be lost within a very short period if they are not properly protected and you are sued, you file for bankruptcy or you are otherwise subject to judgments proceedings. However, understanding that certain assets should be protected from being lost in such circumstances, lawmakers have passed acts under which certain types of assets are, or can be, shielded. In this article, we’ll show you what measures you can take to protect your savings.

Anyone With Assets at Risk

You may think that only doctors, corporate executives and others in litigation-prone professions are the only ones who need to worry about protecting their assets. Not so. There are many circumstances under which your assets can be attached or garnished. These include if your file for bankruptcy, you get a divorce or you are on the defensive end of a civil lawsuit. Many of these circumstances are ones that most people don’t even consider until they occur. For instance, if your teenage child is on the wrongful end of a motor vehicle accident, that could result in the damaged party going after your assets. (To read more on this subject, see Marriage, Divorce And The Dotted Line.)
Picture this scenario: You hear a knock at the door one night. You find an elderly couple looking for the Smiths. Your name is Jones. The Smiths live next door, you inform the couple. The couple thanks you and walks across your lawn to go to the Smiths. As they are half way there, the man steps into a hole your dog dug that afternoon and breaks his hip – the one he just had replaced. Then what? The next call you get may be from a lawyer trying to find out your financial worth and the type of insurance you carry.
It doesn\’t matter that the couple should have stayed on the sidewalk or at least taken care to ensure that they avoided such an accident. In the end, your home + your dog + your hole = your fault.

Laws May Protect Your Assets
Federal and state laws determine what type of protection most of your assets have from creditors and judgments.

Traditional and Roth IRAs
Contributions and earnings in your Traditional IRAs and Roth IRAs have an inflation-adjusted protection cap of $1 million from bankruptcy proceedings. The bankruptcy court has the discretion to increase this cap in the interest of justice.

In addition, amounts rolled over from qualified plans, 403(b) and 457(b) plans have unlimited protection. However, bear in mind that this protection only applies to bankruptcy and not to other judgments awarded in other courts. In such cases, state law must be consulted to determine whether any protection exists and the degree of such protection.

Qualified Retirement Plans
Employer-sponsored plan assets have unlimited creditor protection from bankruptcy, regardless of whether the plan is subject to the Employee Retirement Income Security Act (ERISA). This includes SEP IRAs, SIMPLE IRAs, defined-benefit, defined-contribution, 403(b), 457, and governmental or church plans under code section 414.

Note: Amounts in your SEP IRA that are attributable to regular IRA contributions are subject to the $1 million cap.

ERISA plans are also protected in all other cases, except under a qualified domestic relations orders (where assets can be awarded to your former spouse or other alternate payee) and tax levies from the IRS. For this purpose, a qualified plan is not considered an ERISA plan if it covers only the business owner (owner only plans). Protection for owner-only plans are determined by state law. (For more on protection for your retirement plan assets, see Bankruptcy Protection For Your Accounts.)

The amount of protection you have on your home varies widely from state to state. Some states offer unlimited protection, others offer limited protection and a few provide no protection at all.

Annuities and Life Insurance
Like the protection on homesteads, state laws determine the level of protection that applies to annuities and life insurance. Some protect the cash surrender values of life insurance policies and the proceeds of annuity contracts from attachment, garnishment or legal process in favor of creditors. Others only protect the beneficiary’s interest to the extent reasonably necessary for support. There are also states that do not provide protection at all. (To read more about life insurance, see Understand Your Insurance Contract, How Much Life Insurance Should You Carry? and Exploring Advanced Insurance Contract Fundamentals.)

To find your state’s asset protection laws, visit your state’s official website or the Asset Protection Book website.

How to Protect Your Assets
Although asset protection may have had a tainted past, legitimate strategies are available. Look at it as a way to put up as many obstacles as possible that potential creditors must jump over before they can get to your property. This might encourage these creditors to make favorable settlements instead of getting involved in long and expensive litigation processes.

Some of the common methods for asset protection include:

Asset Protection Trusts
For years, wealthy individuals have used offshore trusts in such locations as the Cook Islands and Nevis to protect assets from creditors. But these trusts can be expensive to establish and maintain. Now several states, including Alaska, Delaware, Rhode Island, Nevada and South Dakota, allow asset-protection trusts. You don’t even have to be a resident of the state to buy into one.

Asset protection trusts offer a way to transfer a portion of your assets into a trust run by an independent trustee. The trust’s assets will be out of the reach of most creditors, and you can receive occasional distributions. These trusts may even allow you to shield the assets for your children.

The requirements for an asset protection trust include the following:

It must be irrevocable.
It must have an independent trustee that is an individual located in the state or is a bank and trust company licensed in that state.
It must only allow distributions at the trustee’s discretion.
It must have a spendthrift clause.
Some or all of the trust’s assets must be located in the trust’s state.
The trust’s documents and administration must be in the state.

If you are considering looking into an asset protection trust, be sure to work with an attorney who is experienced and proficient in this field. Many individuals have run afoul of tax laws because their trusts did not satisfy regulatory requirements.

Accounts-Receivable Financing
If you own a business, you could borrow against its receivables and put the money into a non-business account. This would make the debt-encumbered asset less attractive to your creditors, and make otherwise reachable assets unreachable by creditors.

Strip Out Your Equity
One option for protecting your assets is to pull the equity out of them and put that cash into assets your state protects. For example, suppose you own an apartment building and are concerned about potential lawsuits. If you took out a loan against the building’s equity, you could place the funds in a protected asset, such as an annuity (if annuities are sheltered from judgments in your state).

Family Limited Partnerships
Assets transferred into a family limited partnership (FLP) are exchanged for shares in the partnership. Because the FLP owns the assets, they are protected from creditors under the Uniform Limited Partnership Act. However, you control the FLP and, thus, the assets. There is no market for the shares you receive, so their value is significantly less than the value of the asset exchanged.

Less Complex Ways to Protect Assets
There are some inexpensive, simple ways to protect assets that anyone can implement:

You could transfer assets to your spouse’s name. However, if you divorce, the end results could be different from what you intended.
Put more money into your employer-sponsored retirement plan because it might have unlimited protection.
Buy an umbrella policy that protects you from personal-injury claims above the standard coverage offered in your home and auto policies.
Make the most of your state’s laws regarding homesteads, annuities and life insurance. For instance, paying down your mortgage could protect cash that is otherwise vulnerable.
Don’t mix business assets with personal assets. That way, if your company runs into a problem, your personal assets might not be at risk and vice versa.

Some Final Words of Caution
You may have seen self-proclaimed asset-protection experts advertise their seminars or easy-to-use kits on TV or the internet. Perform extensive research, including checking with the Better Business Bureau before deciding to use any of these services. And before you take any of the steps discussed in this article, meet with an attorney who is familiar with the laws of your state and an expert in the asset protection field. Most importantly, don’t wait until you have a judgment against you. By then it may be too late, and the courts could declare that you made a “fraudulent transfer” to get out of meeting your obligations.

How To Buy And Finance A Medical Building With No Upfront Fees

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Medical real estate is a good investment, but it’s important to understand what the medical community needs to function at the highest possible level. Some of that the tenants can handle themselves; other amenities and comforts you as the building owner will need to provide for them.

Evaluate your investment. Have the building inspected and appraised, then have a study done on vacancy rates and average rental and lease prices in the neighborhood you’re buying in.

You don’t want to price yourself out of the market and you don’t want to undercharge either. Is the demand there? Will the industry be able to sustain another medical building in that community? Are there any medical industry changes on the horizon that could affect your business? Issues like health insurance reform and FDA regulations can change the landscape quickly and dramatically. Have you taken those into account and thought about more diversity in your tenant base?

These are all questions you should ask yourself when you’re creating a business plan for the lender that will provide you the financing you need to buy a medical building.

Winston Rowe and Associates, a national recognized leader, provides financing without the usual upfront fees for medical buildings and commercial properties.

Medical Building Financing Solutions:

Capital Deployment Starting at $1,000,000 with no upper limit

Nationwide Coverage

No upfront or advance fees

Purchase, Refinance and Cash out

If you would like more information about Winston Rowe and Associates, you can contact them at 248 246 2243. A principal is always available to speak with clients. You can also check them out online at

North Dakota Apartment Loans No Upfront Fees



Many commercial real estate investors in North Dakota have been dismayed when they are rejected by traditional banks when they apply for commercial real estate financing.

Somehow traditional bankers see the North Dakota Oil Boom as a onetime temporary thing and down the road no one will be using oil in the future.

Savvy commercial real estate investors searching for apartment financing in North Dakota are turning to Winston Rowe & Associates, a North Dakota apartment lending intermediary, for multifamily properties with 5 or more units.

They offer clients a full spectrum of apartment building loan options to help customize a product to meet each individual investor’s apartment financing needs.

All of Winston Rowe & Associates apartment building financing solutions are offered at competitive rates, so owners and investors can spend less on interest and fees and turn an even bigger profit from their investment in an apartment building or complex.

There are flexible loan terms and payment schedules available to fit the needs of any owner or investor, whether the funding is used on the purchase of an existing building, the construction of a new building, or the renovation of an existing structure. Refinancing loans are available to save current owners money on their mortgage loan payments.

North Dakota Apartment Building Lending Highlights:

No Upfront or Advance Fees

Loans Starting at $500,000. to $100,000,000.

Hard Money for a Fast Close

Super Competitive Hard Money and Conventional Rates

The goal at Winston Rowe & Associates is to add value to client’s acquisition or refinance by offering a wide range of financing solutions and direct access to top national, regional, and local retail banks, hedge funds and private capital lenders.

When you call Winston Rowe & Associates, a principal is always available to speak with prospective clients. They can be contacted at 248-246-2243 or visit them online at

Rents are soaring — and so are evictions nationwide

In cities across the United States, millions of people will be kicked out of their homes this year.

Some can’t afford their soaring rent, others are getting evicted over minor violations by landlords eager to get higher paying tenants in place.

Rents have risen 7% in the past year, while incomes have inched just 1.8% higher — making it that much harder for people to afford their housing payments. In fact, the average renter now spends 30% of their income on rent, up from a longtime average of about 25%, according to Zillow.

One big emergency or unexpected expense and it can mean a missed payment — and an eviction notice.

The Neighborhood Law Clinic at the University of Wisconsin Law School estimates that several million families a year face evictions nationwide. In Milwaukee County alone, eviction notices were up by about 10% in 2013. Statewide, they’ve risen 10 years straight to about 28,000 a year.

In Georgia, there was one eviction notice filed for every five rental households, more than 200,000 total filings last year. Many cases involved renters who were unable to keep up with rent increases.

Most evictions from Baltimore’s public housing are for just causes like failing to pay rent, hoarding and noise complaints, said Shawn Boehringer, chief counsel at Maryland Legal Aid. But other evictions are occurring as some subsidized, low-income buildings are being converted into middle-income or luxury housing.

For the displaced, it can be a long road back. Once renters are out, most landlords don’t want them. They often wind up in substandard housing with leaky roofs, broken windows, rodent infestations and no heat, said Boehringer. “It’s a tremendous hardship for them.”

Even for the solidly middle class, evictions can force families out of familiar neighborhoods and make it harder to rent new homes.

In San Francisco, an influx of thousands of highly-paid tech workers has sent rents soaring and longstanding tenants are being pushed out as landlords seek to make a small fortune by selling their buildings or converting the units into condos.

The city’s Rent Board reported 2,064 wrongful eviction appeals during the 12 months ended last June, up 45% since 2011. The total number of evictions have surpassed 5,000.

Tom Gullicksen, the director of the San Francisco Tenants Union, said the same thing happened during the dot-com boom. As a result, the city lost a large number of middle and working class residents.

“But this time is the worst,” he said. “It has made the city less diverse, less artistic and, definitely, less cool.”

Affordable apartments have been converted into million-dollar condos. Mom-and-pop stores have become expensive boutiques. Teachers, policemen and nurses have moved to places like Oakland and distant suburbs like Concord and Hayward, which are also getting very expensive but are still more affordable than the city.

Many of the eviction cases have been for minor violations, often for behavior that was formerly tolerated, like keeping a canary when there is a “no pet” policy or storing a bicycle in the hall, said Deepa Varma, a litigator with the Eviction Defense Collaborative (EDC).

Making matters worse in San Francisco is the Ellis Act, state legislation that allows landlords to escape strict rent control and tenant rights laws by taking rentals off the market for a minimum of five years.

Some owners have invoked the act to clear their buildings out and then sell the vacant apartments as condos.

Since February 2013, Evan Wolkenstein, a 40-year old teacher, and four of his neighbors have been fighting Ellis Act evictions on their apartments in the Mission District, where he has lived for almost 10 years.

“Rents have skyrocketed to the point that an Ellis Act eviction is tantamount to an eviction from the city,” said Wolkenstein. “People who are not wealthy cannot afford to stay. This effects, naturally, the most economically vulnerable people more profoundly.”

Direct Hedge Fund Commercial Real Estate Loans

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Winston Rowe & Associates, a nationwide no advance fee commercial real estate financier has direct access to a non-bank, direct lender offering small-balance commercial real estate financing from $750,000 to $10,000,000 nationwide.

They consider the total picture of the borrower and transaction, offering a diverse array of loan products and terms, with an efficient process and quick closings.

Winston Rowe & Associates has a highly experienced commercial team that delivers hands-on service to our customers, which include mortgage brokers, bankers, borrowers, investors and other lenders.

Each borrower and every project is unique – that’s why Winston Rowe & Associates takes a flexible, common-sense approach to financing commercial real estate.

Financing Solutions from Winston Rowe & Associates:

National Coverage

No Upfront or Advance Fees

Deployments Starting at $750,000 through $10,000,000

Purchase, Refinance and Cash Out

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Winston Rowe & Associates is driven by their vision to ensure our customers see them as the undisputed leader in small-balance commercial real estate financing.

Their mission is to leverage their team’s expertise to provide flexible commercial lending solutions, quick closings and exceptional customer service.

Winston Rowe & Associates can be contacted at 248-246-2243 a principle is always ready to take your call. Their web site is

Insurance Claims Can Send Premiums Soaring

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Household insurance is there for your peace of mind, but a new report shows filing even just one claim can send your premiums soaring. This increase can run into hundreds of dollars in certain states.

Apparently filing just a single claim for anything from tornado damage to a stolen bicycle will see your premiums being raised by around 9%. If you dare to file a second claim then you can expect to see premiums increase by an average of 20%. What this means is that making a small claim could cost you more money in the long run, and experts point out that homeowners need to be particularly careful when making any sort of claim, as even one which is denied can cause premiums to increase.

In spite of this, the type of claim you make it does matter, as liability claims are the most expensive kind with insurance premiums increasing by an average of 14%. Other types of claims that can lead to big increases include vandalism and theft as this can indicate the house is in a poor neighborhood where crimes may recur.

Premium increases also vary tremendously according to where you live, with homeowners in Wyoming faring worst with average increases of 32% once a claim has been filed. However these increases are at least partially offset by low premiums which average around $770 a year whereas the national average is $978. In comparison, insurers in Texas cannot raise premiums after a homeowner has made a single claim, and property owners in Massachusetts and New York also pay very little in the way of increases after filing claims.

Insurance premiums can range from just $513 a year in Idaho to a much heftier $1933 in Florida, where costs are high due to the frequency of hurricanes. One problem is that once your insurance premiums have been raised it can be very difficult to get them lowered. This is because insurers keep a database showing seven years of property and insurance claims as well as any inquiries made about claims. The information is used to compile a report on your claims history and is available to all insurers, so it may not help to switch providers.