Commercial Real Estate Deals And Finding Funding

Finding financing for commercial real estate deals can be a laborious and time consuming, if not expensive experience. The traditional ways of using loan brokers can be frustrating and sometimes futile. By doing some research, I found a terrific resource for funding commercial real estate deals that cut out the middle-man thus saving me a lot of money and headaches.

I found out about finance companies when I was doing the Addison Business Center deal, a $48,000 floater that I eventually borrowed 100% on. I was dealing with the mortgage broker who had done some leasing for one – I’d even leased him some space in the center. So, of course, I called him up and gave him a shot at getting me a loan.

The first four places he tried were the same banks that I’d told him had already turned me down. I thought that was kind of strange, so when he reported back, I asked him about it and said, “I thought I told you not to bother with those banks.” He said, “You’re a well-known commodity, so I just thought I’d take another shot at them.”
I continued, “Okay. Who else have you got?” He says, “Of course, I’ve got plenty of other sources – more finance companies, insurance companies, the works!”

Two or three weeks went by and he didn’t bring me any quotes. When I called him on the telephone and asked how it was going, he responded, “It’s kind of a slow market right now. I’m hoping to have something for you by the end of the month.” “Well,” I said, “The end of the month is too late. I have to get a quote pretty quick because I must have a commitment by the end of the October if I am going to close in January, wouldn’t you say?” Although he agreed with me, he still wanted me to give him until the end of the month, but I didn’t-I fire him on the spot.

That morning I had been in the library, where I saw a ten- year-old book bigger than a video projector entitled, “Crittenden Real Estate Finance Directory.” It was a reference book you couldn’t check it out, but I figured I needed my own copy of it. So, I called the company and got them to ship it to me for $300, which in 1987 was quite a lot of money.

When the book arrived and I started going through it, I was like a kid in a gigantic candy store. They had a page for every lender in the United States-the little banks and the big banks, the finance and insurance companies, all the pension funds-everybody.

So, I started through the book, looking for what their criteria was in other words where would they lend, how much or how little would they lend, what kind of loan-to-value, and what kind of debt coverage ratios did they use. I started writing everyone who seemed to meet my criteria. A number of them responded by saying they would make 100% loans with the right setup. Five days later, I received a call from a guy at the Abacus, which tells you how far I got in the book.

A finance company in Chicago was owned by H. G. Heller, which is a huge finance company owned by the Fuji Bank and, at that time, was the biggest bank in the world. The guy at Abacus quoted me right over the phone. He says, “I’ll follow this up with a fax and then I’ll ship documents to you. If you fill them out and ship them back immediately, I can have a commitment to you within 10 days.” I said, “Wow!” Now, if I’d been going through my mortgage broker, that would have cost me a point-and a point on $3,200,000 is $32,000.
Instead, I spent $300 on a book, wrote letters for four or five days, then talked on the telephone for 20 minutes, and got this great deal.

You can find other reference books like this, but I still think that the Crittenden Directory is the best. You can also find it online at crittendenonline.com. They have all kinds of products and even carry newsletters from all sorts of lenders, including insurance companies.

They still have the original three major directories: the Crittenden Directory of U.S. Real Estate Financing, the Directory of U.S. Investors and Buyers, and the Directory of U.S. Retail Space Users. Each of these cost about a $1,000. The last one I bought was three years ago and it was on a CD-ROM, which is very cool because you can quickly search it.

This directory lists all active lenders across the U.S. that make commercial loans. It includes contacts for construction loans, joint ventures, acquisition and development loans, and much more. They’ll lock in the rates when they have a written commitment. Brokers are accepted, but not given preference. It gives you the contact information on everybody.

Positive Things To Expect From Foreclosure Houses

With people discovering the gold mine that is foreclosure houses, there are things that you need know so that you can make a well informed decision. There are differences between these houses and normal houses and so expectations should be different too. If you buy a house in the normal way from a real estate agent, you expect to be given the keys to your property the moment the deal is. For foreclosed houses, the expectations are slightly different and you should not listen to the rumors on the streets that downplay these houses.

The truth of the matter is that they are a good bargain and even the slight damage that you may find will more than be taken care of by the large amount you will save and you will have some extra left. Another thing you can expect is that you will receive you deed the moment you make the deal.

When you buy foreclosed homes, you can expect the price to be way lower than what similar houses are going for in the market. You can also expect these deals to be safe because the houses are being sold by either the government or the bank or whoever the lender may be. This is said to be safer because if you buy a house from a real estate agent, there is a likelihood of such things as hidden charges, property tax that may have accumulated, etc. But with foreclosure houses especially those by banks and the government, what you see is really what you get.

You can expect lower interest rates, reduced closing costs and a lower down payment and the financing is very flexible, making foreclosure houses to be a good investment.

Pre Foreclosed Homes

Before being sold at auctions, foreclosed properties actually pass through the stage of pre foreclosure. Pre foreclosed homes are also offered in real estate listings and selling them actually benefits all the persons involved, namely the seller, the buyer, and the lender. Here are some of the reasons why:

1. Preserving the credit rating of the borrower

Having a foreclosed property is not a good thing to have in any credit report, especially during this present time when lenders are known to implement more stringent rules when it comes to extending credit. Logically, most borrowers faced with the prospect of foreclosure would prefer to sell their homes than have their credit records sullied. Some may even actively market their pre foreclosed homes in the effort of finding a buyer who can actually pay cash or can assume the mortgage loan. Good credit ratings and credit history are important requirements for an average citizen to obtain whatever they seek to have their loans approved by a lender.

2. Getting a good bargain for the buyer

Because of the prospect of getting bad credit history, some owners of pre foreclosed homes even offer discounts to interested buyers. These discounts range from 10% to 35%, which is quite a considerable savings in the part of the buyer. More so, some buyers can even negotiate for low down payments and a payment structure that can be favorable to him. Additionally, pre foreclosed homes are typically well-maintained, unlike foreclosed properties that might have become rundown due to long vacancy.

3. Control the lender’s inventory

Selling a property at pre foreclosure stage also benefits the lender dramatically. This is because the foreclosed properties they have acquired accrue property tax that they need to pay. The lender also has to allocate budget for marketing and maintenance of these properties in order to fetch good prices. These concerns can all be avoided with the sale of pre foreclosed homes. And the lender will have lesser loans that will go on default.

Now you know the advantages of purchasing pre foreclosed homes, go ahead and search for them in foreclosure listings, which typically features this type of property.