Commercial Mortgage Loans What Hard Money Lenders Look For
With conventional lenders caught up in the credit crisis and unable to make loans commercial real estate investors and developers are turning to private often called “hard money” commercial mortgage loans. But even private lenders have tightened their underwriting criteria and hard money is more difficult to get than it used to be.
Anyone considering applying for a privately funded commercial mortgage should understand just what hard money lenders look for in a deal.
Equity Private lenders are equity lenders. Their lending decisions are not credit driven but are based mainly on the amount of equity in the building or project being financed. Generally a hard money lender will not lend more than about 50 of the value of unimproved land 60 of the value of an underperforming building and 65 of the value of a stabilized income producing building. These low LTV loantovalue ratios mean that borrowers must have exceptional properties or be prepared to inject plenty of cash into a deal.
Experience Hard money lenders are sophisticated real estate professionals who prefer to work with other pros. They look for borrowers or project sponsors that have a track record of success and a wealth of experience. In today’s economy few private lenders are willing to fund first time developers or new investors.
Cash Virtually no 100 financing is taking place today. All borrowers are now required to make significant cash investment in every deal. Hard money lenders have a reputation for being flexible but they won’t make a loan to someone with no “skininthegame”.
Exit Plan Private loans tend to be short term loans with maturities rarely exceeding 36 months. Before a deal is approved for funding it must have a viable exit plan. Inotherwords the lender must be convinced the loan can be paid back when it comes due.
The commercial real estate industry runs on borrowed money; without the free flow of capital the industry would shut down. Private lenders are fulfilling a very important role in our economy right now. They are filling the lending void that has been created by this credit crunch. Thanks to hard money lenders experienced investors with quality deals will find the funding they need.
MasterPlan Capital LLC; Commercial Real Estate Investment Bankers More than 125MM in Private Commercial Mortgage Lending Capacity Equity Financing Asset Management Simple 1 Page Commercial Mortgage Application; Online Quick Answers Fast Closings Professional Service
About the writer:nbsp;nbsp;Glenn Fydenkevez is President of MasterPlan Capital LLC a dynamic privately held commercial real estate investment bank active nationwide in commercial real estate finance and investment.
Mr. Fydenkevez is a 20 year veteran of Wall Street and has served as an office at one of the worlds largest investment banks.
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