Commercial Loans and Fun Blog

Commercial Loan Freebies From C-Loans

Posted by George Blackburne on Mon, Jul 24, 2017

Wow.pngEverybody gets some wonderful free commercial loan goodies today.  Nobody spends a penny.  The first freebie is our wonderful commercial loan calculator developed by my son, George IV.  Guys, a commercial loan calculator is NOT about computing the monthly payments on a commercial loan.  That's kid's play.  There must be 10,000 commercial loan payment calculators available on the internet.

But sizing a commercial loan is different.  The term of art, sizing a commercial loan, is the process of computing several different financial ratios and then determining the maximum loan size that a lender will permit.  The lender will almost always choose the lowest loan size produced by the debt service coverage ratio, the debt yield ratio, and, in the event of a construction loan, the loan-to-cost ratio.

Our commercial loan calculator instantly computes these ratios for you and tips you off where you are likely to have a fight with your commercial lender.  Forewarned is forearmed.

 

Commercial Loan Size Calculator

 

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Sliding around in your pencil drawer is the business card of a banker who makes commercial real estate loans.  We'll trade you the contents of that one business card for a free regional copy of The Blackburne List, a list of 750 commercial real estate lenders.  Seven-hundred-and fifty for one - not a bad trade.  If you give us three bankers, you can get all three regions, 2,500 for 3.

 

Free Directory of 750+  Commercial Real Estate Lenders

 

Our main commercial mortgage portal, C-Loans.com, is a fabulous free tool.  It takes just four minutes for an investor or a broker to enter his commercial loan request.  Then the site filters out hundreds of unsuitable commercial lenders - based on the loan amount, the loan type, the property location, the property type, etc. - and produces a list of 30 or so commercial lenders who are perfect for your particular commercial loan.

But we here at C-Loans, Inc. have a problem.  We can't get investors and brokers to register on the site.  If we could get them pre-registered on C-Loans.com, investors and brokers could come back later and enter a new commercial loan request in moments.  Geez, guys, we're just talking about filling out your name, address, phone, and email so our lenders can contact you.  We're not asking you to clean out the Augean Stables.  Okay, then we'll BRIBE you to pre-register on C-Loans.com.

 

Enter a Loan Into C-Loans.com.  Get a  Free Commercial Underwriting Manual

 

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When you come back to CommercialMortgage.com ("CMDC"), you are going to note some huge changes.  When your custom-created Commercial Lender List is now created, you will find it divided into three sections.  The top section contains our Recommended Lenders.  These are the commercial banks so hungry to close your commercial deal that they are willing to pay for advertising.

Next you will find the Hungry Lenders section, which are those commercial lenders who have recently taken advantage of our free listing on CMDC for direct lenders servicing (collecting montly payments, folks) on at least $20 million in commercial loans.  Lastly you will find our Other Lenders section; but the point is moot. Our Recommended Lenders and our Hungry Lenders will devour your deal long before you get to the bottom of the list.

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

"George, I'm confused.  What's the difference between CommercialMortgage.com and C-Loans.com?"

C-Loans.com is a portal, where you invest four minutes in creating an online commercial loan application, something that looks good and includes some nice pics, and then shop that single mini-app to scores of different commercial lenders.  CommercialMortgage.com is NOT a portal.  It's just a commercial lender search engine.  It just gives you the contact information of suitable commercial lenders.  You can't submit your deal online through CMDC.  

 

Submit Your Loan to 750 Commercial   Lenders Using C-Loans.com.  It's Free!

 

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Want to learn commercial real estate finance (CREF) for free?  I write at least two CREF training articles every week.

 

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Topics: Commercial loan freebies

Commercial Loan Hypothecations

Posted by George Blackburne on Thu, Jul 20, 2017

Scary Things Can Happen When You Make a Loan Against a Commercial Loan

My mentor - the man who taught me commercial real estate finance years ago - is the wise, old veteran, Bill Owens, of Owens Financial Group. "So, Bill," I asked today, "please tell me some horror stories about hypothecation loans."

You will recall from my earlier blog article that a hypothecation loan is a loan secured by a mortgage loan. The easiest way to understand what we're talking about here is to imagine a cranky old investor who owns a 36-unit apartment building free and clear. The cranky old investor sells his apartment building for $1 million, and he carries back an $800,000 first mortgage at 7% interest for seven years. It's a good deal for the investor because he couldn't earn 7% on his $800,000 in sales proceeds if he deposited the cash in the bank.

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

Now let's scroll forward three years. The 72-year-old old investor meets 37-year-old Blondie the Bimbo in a bar. Blondie wants a new car, a diamond necklace, and a vacation to the Bahamas. The investor needs cash. So he trots down to Blackburne and Brown and pledges his $800,000 first mortgage receivable to us as collateral for a $600,000 loan. Blackburne & Brown is comfortable with the loan because if the old man doesn't make his payments, we'll simply execute (think of it as a fast foreclosure) on his $800,000 note and mortgage. Our $600,000 investment would then be secured by a $1 million dollar apartment building.

Blackburne and Brown made several hypothecation loans last year, and we are hungry to make more. But I was nervous. I didn't know the pitfalls of hypothecations, so I asked Bill Owens, "Bill, please tell me some horror stories about hypothecation loans."

"Okay, George, try this one. A guy owns an $80,000 first mortgage note against a $100,000 house. You make a $60,000 hypothecation loan against it, evidenced by a promissory note and hypothecation (pledge) agreement against the mortgage. Then the borrower goes bankrupt, and the bankruptcy court rules that because you only had a collateral assignment of the mortgage, rather than a mortgage against the actual real estate, you are an unsecured creditor. Such a ruling, in real life, means that you will be probably completely wiped out by the bankruptcy!"

"So what should I have done, Bill?" I asked.

"You should have a taken an absolute assignment of the mortgage. Now you can still give the borrower a buy-back agreement that says he can buy back the mortgage if he makes all of his loan payments, but it is critical to take an absolute assignment of the mortgage, as opposed to a collateral assignment."

"Please tell me another horror story, Bill."

"Okay, suppose you execute (foreclose) on a $60,000 note and mortgage, secured by a $100,000 house. Then you notify the underlying borrower - the owner of the house - to start making monthly payments to you. He replies that he doesn't owe any payments for another year because he prepaid them to the original mortgage holder, in return for a discount."

"So what should I have done, Bill?"

"You should have gotten a combination Waiver of Offset and Beneficiary Statement, signed by both the mortgage holder and the underlying borrower. (A Waiver of Offset is a statement by the underlying borrower that he doesn't have any claims against the mortgage holder - such as prepaid payments.) These would act as an estoppel against any claim by the underlying borrower that he owes less than what the mortgage holder claims."

I, George, also remember that whenever you make a hypothecation loan that you should take possession of the original note and be sure to record your absolute assignment of the mortgage note.

I spoke again with Bill and he confirmed that I make a hypothecation loan that I should notify the underlying borrower that the mortgage holder has assigned the note to me and inform him that he should make all future payments directly to me.

Topics: discounted note, hypothecation, hypothecation loan, discounted deed of trust

Commercial Loan With an Increasing Exit Fee

Posted by George Blackburne on Thu, Jul 20, 2017

Exit fee-1.jpgYou will recall that an exit fee is just like a prepayment penalty, except that the borrower owes the exit fee whether he pays the loan off early, exactly on time, or late.  

I was reading one of George Smith Partners' tombstones last night, when I ran into this description of a $7.4 million bridge loan that they had just closed:

"The loan is structured with an increasing exit fee in lieu of an upfront lender origination fee to minimize upfront costs and incentivize the Borrower to execute the business plan in a timely manner... After an initial 12 month spread maintenance period, the exit fee is 1.33% for months 13 through 24, increasing to 1.66% for months 25 through 30 and 2.00% for months 31 through 36."

Huh.  I had never heard of an increasing exit fee before.  It makes sense.  It lights a fire under the borrower's tush to hurry up and pay off the loan.

 

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By the way, a tombstone is an annoucement of the successful closing of some financial deal, like the taking a company public or the closing some large loan or bond issue.

Do you need a commercial loan?  Banks offer the best rates on commercial real estate loans.

 

Banks Have The Best Commercial Loan Rates

 

Do you work as a commercial real estate loan officer for a bank or credit union?  You can now list your bank on CommercialMortgage.com ("CMDC") and enjoy three to five commercial loan leads every week at no cost.  CMDC is truly free to banks, with no strings attached.  We make our dough by working the commercial loan leads generated by this new commercial lender search engine.

 

Free Commercial Leads  For Banks and CU's

 

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Get a free list of 750 commercial lenders.

 

Free Directory of 750+  Commercial Real Estate Lenders

 

Are you a mortgage broker?  Been cheated out of a big loan fee recently?  I'm not just talking about a borrower closing a deal and not paying you.  I am talking about a borrower totally lying to you about his qualifications.  For example, "Sure, the second mortgage lender will subordinate."  After you have worked 20 hours on the loan, the truth comes out.

 

Fee Agreement and Fee Collection Course. Just $199.

 

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Do you own a real estate website?  C-Loans, Inc. once paid a $21,250 referral fee to Alan Dunn of Spydercube.com for placing a link, "Commercial Loans", on his web site that pointed to C-Loans.com.  That's it.  Create a link on your website that says, "Commercial Mortgages" and point it to C-Loans.com.  Our software captures the fact that the lead came from you.

 

Put a Link on Your Site To Earn Huge Referral Fees

 

Topics: Exit fee

Commercial Mortgage Referral Fees

Posted by George Blackburne on Tue, Jul 18, 2017

Is it legal to pay referral fees for commercial mortgage referrals?

Yes!  Even in states where a license is required to broker commercial loans (California, Florida, Nevada, Arizona, etc.), you can legally pay a referral fee on a commercial mortgage loan, as long as the referring source does nothing more than to call you with a name and number of a prospective borrower.

 

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Input Your Commercial Referral Here

 

 However, if the referral source - say, a commercial real estate broker - starts to negotiate terms (rate, points, term, etc.), at that point he is working as a commercial mortgage broker.  In those states requiring a license to broker commercial loans, the referral source is now breaking the law. 

Therefore, don't let your referral sources try to gather documents for you or to issue loan quotes.  As long as he merely gives you the name and number of someone seeking a commercial loan, it is perfectly legal to pay him a referral fee.

When is it illegal to pay a referral fee for a mortgage borrower?  Under RESPA, it is illegal to pay a referral fee (called a kickback) on a residential loan.  A residential loan is a mortgage loan on a house, condo, townhouse, duplex, triplex, or fourplex.  In the parlance of the Federal government, such loans are called loans on a one-to-four family dwellings.

Is it legal to pay a banker a referral fee for a commercial mortgage referral?

Never be the first to suggest a referral fee to a banker!  Most bankers consider referral fees - even on commercial loans - to be kickbacks.  A kickback is an illegal and immoral payment to a real estate broker to steer his trusting buyers to a particular lender. 

Therefore, if you offer a referral fee to a banker, 90% of them will be horrified.  They will look at you as a leper and probably cut you off.

Most banks also forbid their loan officers from receiving referral fees.  The reason why is because of the potential liability.  Lots of banks have been sued for referring customers to mortgage companies.  If the mortgage company is negligent and the borrower loses a large purchase deposit, such borrowers have been known to sue the bank for a negligent recommendation.

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

So while it is NOT illegal to pay a banker a referral fee on a commercial mortgage referral, the loan officer can still get in trouble because it is against the policy of most banks for their loan officers to receive referral fees.

That being said, if the banker asks for a referral fee, you should gladly pay it.  There is nothing sweeter than a banker sending you one or two referrals every business day.

How large should the referral fee be?

It's whatever you negotiate, but the standard commercial mortgage referral fee is 20% of your company's gross commission.  Ten percent is also common.

My own hard money commercial mortgage company, Blackburne & Sons, will gladly pay you a referral fee of 20% of our gross loan fee for commercial mortgage referrals.  Please call Tom Blackburne at 574-210-6686 or email him at tommy@blackburne.com.

Blackburne & Sons is looking for commercial first mortgages nationwide of $1.5 million or less on standing commercial properties.  Sorry, no construction loans, no land loans, and no land development loans.

 

Nine-Hour Video Training Course  How to Broker Commercial Loans

 

Free List of 200   Commercial Lenders

 

Topics: referral fees

Commercial Loans and Probable Maximum Loss

Posted by George Blackburne on Mon, Jul 17, 2017

Collapse.jpgAs you get into the very large commercial loans, especially in California, the issue of earthquake risk looms large.  When lending on large commercial properties constructed prior to 1980, commercial lenders will sometimes require a PML Report.

A PML Report is an earthquake damage report completed by a civil engineer. The report asks the question, “How badly damaged would this building be if there was a really big earthquake?” Is the building going to completely collapse, like those unreinforced masonry buildings in San Francisco did in 1989 during the Loma Prieta earthquake?

My old friend, Mike Thurman, was actually at Candlestick Park for game three of the World Series when the Loma Prieta earthquake hit. Fortunately the stadium was well-designed to absorb earthquake shock, and everyone was able to calmly leave the stadium to drive home.

 

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Unfortunately those driving home to the East Bay discovered that the central strand of the Oakland Bay Bridge had collapsed, hurtling several passengers and their cars to their death hundreds of feet below. Interesting note: When a section of the upper-deck freeway in Oakland collapsed onto a lower deck, sadly crushing and killing 60 drivers below, among the victims was a car thief attempting to make his getaway.

More specifically a PML Report seeks to quantify the Probable Maximum Loss. The Probable Maximum Loss (PML) is a tool used to evaluate the seismic risk of a building and identify assets with high seismic risk. The Probable Maximum Loss report identifies the PML value, expressed as a percentage of the building's replacement cost and estimates the potential damage during a 475-year earthquake - the lower the percentage, the lower the expected damage. The PML value can be expressed either as the Scenario Expected Loss (SEL) or the Scenario Upper Loss (SUL). They mean the same thing.

 

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If the Maximum Probable Loss is too high – let’s say greater than 45% - a lender making a large commercial loan might require earthquake insurance. Earthquake insurance is phenomenally expensive, on the order of 2% to 3% of the value of the building annually!

To make matter worse, the earthquake insurance deductibles are huge – on the order of 15% to 20% of the value of the property.

Example:

Let’s suppose you own a $15 million commercial building in Los Angeles. The land is worth is worth $5 million, so you only insure the $10 million building. Suddenly an 8.2 earthquake hits L.A., the building collapses, and the loss is total. Even if you had the entire building insured, your insurance company might only pay you $8.5 million, rather than your entire $10 million loss.

And to make matters worse, the insurance company probably wouldn’t survive to pay the claim anyway.

Need a commercial real estate loan?  Try our commercial mortgage lender search engine:

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

Are you a loan officer working for a commercial bank or a credit union?  Do you want to meet more high-net-worth investors and close more commercial loans?  You can add your bank to CommercialMortgage.com at absolutely no cost to you or the bank.  It really is completely free.  My hard money shop pays for the site by working the commercial loan leads it generates.

 

Banks and Credit Unions Get Listed For Free

 

 

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Are you ready to finally learn commercial real estate finance? It’s funny. People pay $100,000 for a liberal arts college education and then seldom get a starting job in their field. Using this nine hour video program, an intelligent, articulate, and sales-oriented high school graduate can learn a better-paying profession in one long weekend for just $549.

 

Nine-Hour Video Training Course  How to Broker Commercial Loans

 

For just $79.95 you can buy a copy of The Blackburne List, a list of over 2,500 commercial lenders nationwide.  Is money tight?  For just $39.95 you can buy the Regional Blackburne List for the area in which the subject property is located.

 

List of Commercial Lenders  2,500 For Just $79.95

 

 

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For forty years accredited investors residing in California have been able to earn 8% to 12% interest by investing in first trust deeds.  Unfortunately out-of-state investors could not legally participate.  A recent law change - the JOBS Act - now allows a resident of Illinois, for example, to invest in fractionalized first mortgage; i.e., he can take a $20,000 piece of a $400,000 loan on an apartment building in Chicago.  Blackburne & Sons has been doing this now for 37 years.  Sorry, but you must be very accredited to be suitable.

 

Earn 7% to 12%  Interest

 

Do you need a commercial lender who will actually lend up to 75% loan-to-value on the purchase of a commercial building?

 

 

Do you need a lender who will allow the seller to carry back a second mortgage? Does your client have a balloon payment coming due on his commercial property? Has your bank offered him a discounted pay-off? Does your borrower have less-than-stellar credit? Is your client's company losing money? Is your borrower a foreign national?

Do you need a non-recourse loan? Do you need a commercial loan with no prepayment penalty? Is your client's commercial property partially vacant? Do all of your commercial leases run out in the next 18 months? Do you need a lender who will allow a negative cash flow? Do you need a lender who will also look at the borrower's global income - income from salaries, other investments, etc.? Do you need a loan against a portfolio of single family homes?

 

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Commercial Real Estate Poised for a Comeback?

Posted by George Blackburne on Mon, Jul 17, 2017

Commercial Real Estate Investors Are Close to Capitulation, Which is a Bullish Sign

I work as the Controller of Blackburne & Sons Realty Capital Corporation, one of the oldest private money (hard money) commercial lenders in the country.

Daily, trust deed investors call our office to inquire about the status of one of their particular investments, to question the amount of a disbursement, or to simply check-in on their overall portfolio. A couple years ago, the substance of the calls consisted of simple accounting questions or a request for a brief update.

For the past three years, given the deteriorated condition of the commercial real estate market, unfortunately many of the calls received today entail a scared or panicked investor, wondering how their investment(s) will survive.  While each investor’s concern is voiced differently, the underlying emotions associated with those concerns tend be to be similar relevant to market conditions. I’ve facilitated investor calls five days a week, eight hours a day for the past 4 ½ years; but only after a seminar with Tony Woods, author of “The Commercial Real Estate Tsunami”, was I able to identify the investor emotions exposed in those conversations.
 
Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

A chart provided in Woods’ book, courtesy of Westcore Funds of Denver, Colorado entitled “The Cycle of Market Emotions,” is a fabulous tool to understand the underlying emotional cycle. Examples of emotions are euphoria (the best feeling possible), down to fear, panic, capitulation and finally despondency.

Present day, I believe the majority of investors’ emotions seem to be in the area of panic or capitulation, based on the substance of calls and reactions to updates.  However, just recently more and more investors are becoming submissive (i.e. despondency). These particular investors still call for updates, but the information provided is no longer a shock or disappointment; rather considered par for the current market conditions.

It’s always darkest before dawn… so I remain optimistic for our loyal trust deed investors that again (hopefully sooner than later) the feeling of hope and relief in trust deed investing will be restored.

Angela Gimenez is the Vice President and Controller of Blackburne & Sons Realty Capital Corporation.  The opinions expressed are her own.  She can be reached at 916-338-3232.

Topics: commercial real estate

Multifamily Loans and Tuck Under Parking

Posted by George Blackburne on Mon, Jul 17, 2017

Fannie Mae and Freddie Mac Will Not Lend on Apartments with Tuck-Under Parking

The conduits are making are making CMBS loans again, and the most preferred product is multifamily loans.  The problem is that the agencies - Fannie Mae and Freddie Mac - have better rates and terms for apartment loans than the conduits.  The agencies will also go higher in terms of loan-to-value.

The conduits are therefore looking for scratch and dent apartment loans that don't quite qualify for the agencies.  One reason an apartment building might not qualify is that it cannot satisfy the 90/90 Rule.  Fannie and Freddie will not finance an apartment building that has not been at least 90% occupied for ninety days.

Another fatal flaw for Fannie and Freddie is tuck-under parking.  Tuck-under parking is basically carports underneath the building.  The concern is that the building could collapse in an earthquake. 

Tuck Under Parking
Image of tuck-under parking

Although the agencies won't finance properties with tuck-under parking, CMBS lenders will gladly make these loans.  If your apartment building is also struggling to maintain 90% occupancy, you should consider a conduit loan.

Do you need a conduit loan right now?  You can apply to several dozen conduit lenders in just four minutes using C-Loans.com.  And C-Loans is free!

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria


You can also write to me, George Blackburne, at george@blackburne.com.  Simply insert the words, Conduit Apartment Loan Request, in the subject line of your email.

Topics: apartment loans, multifamily loans

Underwriting Commercial Construction Loans

Posted by George Blackburne on Mon, Jul 17, 2017

Under_constructionToday we are going to teach you how to underwrite a $50 million commercial construction loan.

C-Loans.com recently closed an $18.5 million commercial construction loan on a mixed-use project in Wisconsin.  The lucky broker who brought that deal to C-Loans earned a whopping $92,500 loan fee.  Wow.  I'll betcha that fee paid some bills.  Note to self:  Submit my commercial construction loans through C-Loans.com.

I recently wrote in one of my newsletters that for the past six years commercial banks have had a zero appetite for conventional commercial construction loans.  By conventional I mean a non-SBA, non-USDA, non-EB-5 loan.  In fact I described conventional commercial construction loan requests as being about as welcome as a male stripper at a (hetereosexual) bachelor party.  Ha-ha!

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

As a result, there has been very little commercial construction in the U.S. for the past six years.  In the meantime, many vacant and neglected commercial buildings have had their water pipes burst during a cold winter, making them essentially now almost worthless.  Other vacant commercial buildings have been vandalized and stripped of their copper wiring.  The roofs of other vacant commercial buildings have leaked, leading to dangerous black mold.  A great many productive commercial buildings are now unusable.

At the same time, the population of the U.S. has grown.  Workers are finally getting back to work.  The auto industry in America is booming again, leading to the return of many manufacturing jobs in the Midwest.  Shale oil discoveries have caused a significant migration of workers to North Dakota, Wyoming, Texas, and other oil-patch states.  All of these areas need new commercial buildings.

Therefore the hot new commercial loan product for the end of 2014 and for 2015 will be conventional commercial construction loans.  And where do you find hundreds of commercial banks hungry to make conventional commercial construction loans?  C-Loans.com.

But how do you know if the commercial construction loan lead in your hand is a hottie or a complete waste of your time?  You need to know how to underwrite commercial construction loans.  This article will serve as a primer.

Conventional commercial construction loans are underwritten using six financial ratios.  The most important of these ratios is the loan-to-cost ratio.  The loan-to-cost ratio must not be confused with the loan-to-value ratio.

The loan-to-cost ratio is the construction loan amount divided by the total cost of the project.  Traditionally this ratio should not exceed 80%.  In other words, the developer is responsible for contributing at least 20% of the total cost of the project - usually in the form of free-and-clear and entitled land, with most of the architectural and engineering costs prepaid for by the developer.  Since many commercial banks are still licking their wounds from the Great Recession, many banks are limiting their loan-to-cost ratios to just 70% to 75%.  This means that the developer must modernly cover 25% to 30% of the total cost of the project.

The next ratio is the loan-to-value ratio.  The loan-to-value ratio on a commercial construction loan request is computed by taking the construction loan amount and dividing it by value of the commercial property, when it is completed and fully-leased.  The bank's appraiser will compute this value for you.  The loan-to-value ratio on a commercial construction loan request should not exceed today around 70%.

The third ratio is look at when underwriting a commercial construction loan is the debt service coverage ratio.  The debt service coverage ratio is the property's Net Operating Income (NOI), upon completion and leasing, divided by the annual debt service (P&I payments) on the proposed takeout loan.  A takeout loan is just a permanent loan used to pay off a construction loan.  This ratio should exceed 1.25.  The good news is that with interest rates so low today, most commercial properties easily pass this test.

The next ratio to look at when underwriting a commercial construction loan is the profit ratio.  The profit ratio is the difference between the fair market value of the property, upon completion and leasing, and the total cost of the project, all divided by the total cost of the project.  What we are trying to determine here is whether the developer stands to earn any profit by building this commercial building.  If not, he might be tempted to just walk away at the first appearance of a cost overrun.  The profit ratio should exceed 20% to 22%.  In other words, the commercial property should be worth at least 20% to 22% more than it costs to build.

The next ratio to look at when underwriting a commercial construction loan is the net-worth-to-loan-size ratio.  The developer's net worth should be at least as large as the construction loan he is requesting.  A guy with a $1.5 million net worth should not be requesting a $6 million commercial construction loan.  This ratio needs to be at least 1.0.

The last ratio to look at when underwriting a commercial construction loan is the debt yield ratio.  The debt yield ratio is a brand new ratio developed after the huge losses in commercial mortgage-backed securities suffered by CMBS bond investors during the Great Recession.  The debt yield ratio is computed by taking the property's net operating income (NOI) and dividing it by the construction loan amount.  This ratio should not be less than 8.5% to 9% today.

Please note that the debt yield ratio is different from the debt service coverage ratio.  It does not look at today's low commercial mortgage interest rates at all.  In fact, this ratio was invented to rein in the excessive leverage that can occur in commercial mortgage finance when interest rates and cap rates are low.

Do you need a commercial construction loan or any other type of commercial real estate loan?  If so, please click the maroon button below.

Submit Your Loan to 750 Commercial   Lenders Using C-Loans.com.  It's Free!

In addition to the 750 hungry commercial lenders you'll find on C-Loans, we also give away a free list of 2,000 commercial lenders.  The lenders on The Blackburne List are different from the 750 commercial lenders you'll find on C-Loans.

Free Directory of 750+  Commercial Real Estate Lenders

Commercial Loans, Cannabis, and Civil War

Posted by George Blackburne on Thu, Jul 13, 2017

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On Friday, March 17, 2087, the Federal government in Washington, D.C. will order the State of California to levy a duty on the import of sophisticated android robots from Mexico.  California will simply ignore this order, and by this act the de facto succession of the former Southwestern States from the U.S. will have been finalized.

The states of California, Arizona, and New Mexico had long since developed closer ties to Mexico City than to Washington, D.C.  By the year 2040, Spanish had become the official language of the Southwestern States.  Just a decade later, trade with Mexico exceeded the trade between the Southwest and the rest of the union.

Restrained by a birthrate far less than replacement, innovation and the economic vibrancy of the United States had at first waned and then plummeted.

 

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Mexico, a Catholic country, had long enjoyed a birthrate that was more than twice that of the United States. By the 2050's Mexico was turning out far more young, hungry engineers, mathematicians, computer programmers, and scientists than the U.S.  By 2075 Mexico even surpassed China - itself a country suffering from a declining birthrate - as the world's economic engine and the largest producer of the world's most sophisticated computers and androids.

Fanciful you say?  These are not my original ideas.  I recommend to you the landmark 2010 book, The Next 100 Years: A Forecast For the 21st Century, by George Friedman.  Many of his earlier predictions have already come true.

What the heck does Mexico have to do with commercial loans on cannabis facilities?  If the Southwest ever does secede from the U.S. and join Mexico, according to George Friedman, there will probably be no civil war.  The three states may simply stop listening to Washington.

 

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Hmmm, hasn't this already been happening recently?  Sanctuary cities?  Governor Brown of California refusing to cooperate with INS?  States permitting medicinal marijuana?  Now more and more states are legalizing pot.

Hellooo?  Marijuana is illegal under Federal law, and the Federal govermnent cannot allow the states to continue to flaunt Federal law (see paragraph one above).  President Trump made a brief comment at the end of a press conference in February, "Marijuana is still illegal under Federal law."  What worries me was his tone, which seemed to imply that he was just waiting for a good time to lower the boom.

To those of us in the hard money business making loans on cannabis facilities:  Its still illegal.  If Trump decides to fight this war, some decent people may be imprisoned to serve as an example.

 

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Topics: Cannabis loans