Make your Business Happen with a Commercial Lender

If your home business is starting to overflow from the office into other parts of the house, it may be time to consider finding a building large enough to handle your startup’s rapid growth. However, most businesses are unable to generate enough revenue at this phase of growth to allow for the outright purchase of a new facility. In fact, businesses of all sizes commonly go through a commercial lender when acquiring new real estate.

There are literally hundreds of commercial lenders waiting to provide new businesses with growth capital. You’ve probably seen their advertisements pop up on your browser offering the lowest rates and best service. With so many lenders to choose from, how can you get past the gimmicks to find the one that will fill your needs?

Let’s start with the type of business you want to open. Are you thinking of a manufacturing, retail, agricultural, or service business? There are many different types of business, all with their own unique facility requirements. However, not every commercial lender will finance every property type. Here’s a brief list of the different types of property that a lender may (or may not) finance:

· Agricultural (Ranches, Farms)
· Automotive (Gas Stations, Car Washes)
· Hospitality (Hotels, Motels)
· Industrial (Heavy/Light Manufacturing)
· Leisure (Golf Course, Amusement Parks)
· Mobile Home Parks
· Office Buildings/Complexes
· Parking Lots
· Retail (Shopping Centers, Strip Malls)
· Tenant Buildings (Apartments, etc.)

Besides finding a commercial lender who will finance the type of property best suited for your business needs, you also need to consider what kind of loan options will be best for you. Some lenders are fairly flexible in their loan offerings; non-recourse, mezzanine, and bridge loans may all be useful options depending on your individual requirements and circumstances. In addition, many commercial lenders also provide construction financing for borrowers who would prefer a custom facility. Renovation and repair financing is also a common offering by many lenders.

Before you borrow from any commercial lender, first make sure that your anticipated loan amount falls comfortably within the dollar range that the lender is willing to provide. Most lender’s have a minimum loan amount of 100k to 300k although you will find the occasional institution willing to make loans as low as 25k. While the majority of lenders have a loan ceiling reaching $10 million, a few of the largest have no limit.

Some commercial lenders also provide opportunities to refinance property that you’ve previously purchased. While the a .5% decrease in interest may not seem like a big deal on a $25,000 loan, it can save you a substantial amount of money on your $50 million loan. A flexible lender may even give you the option of borrowing to avoid foreclosure. While this should always be the option of last resort, it may buy you enough time to make your business profitable enough to survive a sudden cash flow crisis.

Whether you plan to purchase an apartment complex, industrial facility, or retail outlet, there are few people you’ll work more closely with than your commercial lender. When it comes to starting or expanding a business, make sure that your lender is as vitally concerned with your success as you are. It’s important to find a commercial lender who is small enough to give you the personal attention you will need, but large enough to support your largest commercial real estate acquisitions while giving you options and interest rates that will allow your business to take off.

Here at ICON Commercial Lending we hope you will give us a change to be that for you.

Things to Consider Before Buying Property

The frequently talked about phenomenon of real estate bubble refers to the condition under which the values of residential or commercial or both types of properties rise very fast. This causes the market to be over-priced where the buyers buy the properties at a price much higher than the normal value even though they are afraid of the fact that the bubble may burst and the prices may fall even faster than they soared. It is risky for those buyers who are unable to bear the loss of their investment to purchase properties in such a market.

There is the risk of getting into unwanted financial condition for the people who purchase properties under the situation of real estate bubble, especially if their equity for the property is very less. Equity refers to the share of the property the buyer own against the share of the lender or the bank. If the bubble bursts while the buyer still has a huge amount to pay back, the buyer will have to pay back the debt amount for the property that does not have a higher or even similar value of the debt any more. It goes without saying that this kind of loss is in theory and may happen only if you sell the house in reality.

However, if the buyer possesses a higher equity of the property or has the financial capacity to sustain a loss, the situation is comparatively much better. Under such a circumstance, if the bubble bursts, it's more of an irritation as opposed to a monetary disaster.

If you plan to buy any property located in some area that is experiencing the conditions of real estate bubble, and you have an average earning, get enough information before you actually make the purchase. Weigh the probable odds against the goods and be prepared for the possible financial loss before making any progress with your purchase decision. You need to do some homework before you actually make the purchase. You should track the market fluctuations for that area for few months, follow the trends of sale and pay heed to what the experts opine about the place, even though they may have conflicting opinions. You should then use the entire information that you have gathered to weigh the pros and cons of the purchase.

Take these things into consideration, when making the investment that you are. This just an example of what positive and professional direction ICON Commercial Lending can provide. Contact us with any further questions.

Rental Management for your properties? Do you Hire or Do it yourself?

Rental management fees vary around the country, and according to the property type. They can be as low as 4% of the gross rents for large properties, to as high as 12% for single family homes. Managing your rental properties yourself can theoretically save you a lot of money, especially if you own a collection of single family rental homes.

Should you do it yourself, then? That depends on the property, and on your own long term goals. Let's look at some of the advantages and disadvantages.

Rental Management - Do It Yourself

The obvious advantage is that you save the property management fees. On a fourplex renting for $700 per unit, the fee might be as much as 10%, or $280 per month. That might be all of your cash flow or more. You could save $3360 per year by doing it yourself.

Even if you have sufficient cash flow, that $3360 makes it a safer investment, doesn't it? If the roof needs repairing, or some other surprise comes up, you would be more prepared. So there is a safety factor in doing it yourself and saving the money.

Additionally, the personal involvement means you can find cheaper ways to do things. A rental management company will just call a plumber, for example, if a toilet is clogged. You might save $80 for a minute of plunging.

Rental Management - Hire It Out

Property management companies have prospective renters coming to them weekly, so they can rent that vacant apartment out quickly. For this reason, the fee may not cost you as much as it seems. If an apartment is vacant for an extra two weeks, because you are too inexperienced and busy to get it rented quickly, that can cost you hundreds of dollars.

It may be true that doing your own rental management is safer, and you can control costs more. A job is safer too, though, and that is what you end up with. Time spent showing units, collecting rents, and plunging toilets takes away time from finding other good investments. Saving hundreds can cost you thousands in lost opportunities.

Property management companies have experience in dealing with late rent, making tenants pay for clogged drains that they caused, getting apartments ready to rent, and every aspect of the process of running a rental property. Do you? Even if you do, you have to ask yourself whether you want to invest in properties or work in them.

Buy properties that have sufficient income to cover all expenses. Include a property manager as one of those expenses when analyzing an investment. Then, when you make your investment, pay for rental management, so you can get back to investing.

ICON Commercial Lending

Commercial Real Estate Heats up on U.S. Coasts

Source: RealEstateJournal

Many multifamily real-estate investment trusts have been ramping up their development pipelines, but increasingly are building in only a handful of U.S. cities along the coasts.

About 96% of the new apartments being built by REITs at the end of the fourth quarter were concentrated along the East and West coasts, according to a Feb. 28 report by Morgan Stanley. That compares with about 87% in the fourth quarter of 2004.

Archstone-Smith Trust, for instance, had about $1.3 billion in apartment projects under construction at the end of the fourth quarter -- more than double the amount it spent on projects under construction three years ago -- with nearly all of it concentrated in a few coastal cities.

Part of Archstone-Smith's strategy is to target areas such as Boston, New York and Southern California, where there is a high cost of homeownership and barriers to competition, such as a shortage of developable land and an often-lengthy permitting process. "It's hard to find those characteristics in a market that isn't coastal," says R. Scot Sellers, chief executive of the Colorado-based REIT.

Bryce Blair, chief executive of Alexandria, Va.-based AvalonBay Communities Inc., says the apartment REIT started expanding its development pipeline about three years ago, when the national apartment market was relatively weak and there was less competition for developable land. At the end of last year, AvalonBay had about $1 billion in apartments under construction -- most of them on the coast.

"It's been a big part of our strategy forever," Mr. Blair says of concentrating on the coasts. "It is becoming more in vogue today."

View the full article.

Commercial Lending - The 3 Ratios that determine the Commercial Lending

Getting money for your commercial real estate project can be quite a challenge if you do not know how to analyze and present the property properly to a commercial real estate lender. Before presenting your property to a potential lender it is important to determine the most probable ratios that the lender is going to use in making a decision to lend you the money.

There is an increased risk with commercial real estate loans because of the size of the loans. Hundreds of thousands to millions of dollars are loaned on commercial properties and projects. A commercial lender wants to make sure that he or she will get their money back from the generated income of the property.

Most lenders will use the following three ratios to determine if they will loan the money on a project.

The first ratio is the debt coverage ratio or DCR. The DCR applies to the property itself and how much income it is producing compared to the debt service, or how much money is paid out towards the mortgage on a monthly basis. It is expressed by the net operating income divided by the total debt service.

The net operating income is the total income left over from the property after paying all the operating expenses. The debt service is determined by the mortgage terms, such as interest rate, length of the loan, and how often a payment is made. The higher the DCR, the more ability the property will have to cover the debt service. Many lenders require a DCR above 1.2 in order to consider it a relatively safe investment. Anything below that indicates that the property is either barely breaking even, or losing money. A lender does not want to loan money on a project that is not able to cover its debt service.

The second ratio is the loan-to-value ratio. This is expressed by the total loan balances (sum of all mortgages) divided by the market value. When you apply for a commercial loan, as you do for a residential loan, you must determine how much value of the property you are actually borrowing versus what will remain as equity. If you can acquire a loan-to-value ratio of 75%, then that is generally a good number.

If you can get more than 75% of the value loaned to you, then consider that a bonus. Lender's rules and guidelines may differ greatly depending on how much they are willing to risk on the project.

The third ratio is the debt ratio. For smaller commercial projects commercial lenders may require that you submit personal information to back the loan. This includes your personal income and debt on a monthly basis. The debt ratio is expressed by dividing monthly housing expenses by gross monthly income.

The results show how much debt stands in relation to income. Many commercial lenders will not accept a debt ratio greater than 25%. However, some commercial lenders have been known to go up to 28% or even 36%. A debt ratio greater than 25% stands a good chance of having budget problems.

The lower debt ratio you have, the more likely you will be able to get funding for your smaller commercial project.

Before approaching any lender, it is really important to analyze these ratios on your own. They pertain to your specific deal for which you want to get financing. By performing the ratio analysis on your own, you can better determine if financing will be easy or difficult to obtain, depending on the nature of the project and its level of risk.

It may be a good idea to contact several potential lenders and ask them their basic criteria and guidelines that they follow in evaluating properties. You may find that some lenders are far more conservative than others.

By understanding your property, you can better fit a lender to your specific needs. Also remember that private lenders can be extremely helpful with those risky deals that public lenders will not even consider. Be sure that you are well equipped with the proper information and supporting documentation no matter what lender you approach.

ICON Commercial Lending Launches its BLOG!

ICON Commercial Lending Inc is excited to announce the launching of our new blog!

ICON Commercial Lending has over 30+ years experience in commercial lending. We are so confident with our services we offer a 100% No Risk Guarantee.

We will frequently be posting and updating you on the latest commercial real estate news and other updates in the industry. We look forward to helping you in your commercial real estate needs.