Blackburne & Sons recently increased its loan-to-value ratios across the board. Because we are in a recovery, Blackburne & Sons will now regularly make private money (hard money) commercial loans up to 70% LTV. If the deal is a purchase money loan; i.e., the borrower is buying the property, and the buyer is putting 25% down in cash, we will even consider 75% LTV!
One of my loan officers complained, "But it seems like all of my loans are restaurants, and (because the failure rate of restaurants is enormous) we cut our loan-to-value ratios back to 60% to 65%. I'll never get a restaurant loan approved at 70% loan-to-value."
That got me to thinking. Hmmm, would I ever approve a 70% LTV loan on a restaurant?. The answer is, "Yes, if the restaurant was not really a restaurant." Huh? In prime downtown locations, many row commercial buildings are leased out and improved as restaurants; but in reality that are just big empty boxes.
A row commercial building is just a general purpose commercial building where there is a zero lot line on both sides with the neighboring commercial buildings. There is no side yard. The buildings are squished together against each other, just like a townhouse is squished against the homes on either side of it.
So back to our restaurant. If I was being asked to finance a row commercial building that was just currently leased to a restaurant, I would expect my loan officer to argue in Loan Committee, "Hey, this isn't really a restaurant building. It's a garden variety row commercial building. It's just a box. Prior to the restaurant, it was leased out as an office supply store and then later as a dress store."
And now - finally - we get to the point of today's lesson. Let's suppose the restaurant is called, The Sicilian Noodle. Now remember, every commercial loan must have a name. It might be Pine Haven Apartments, Tire City Building, or Charlotte Strip Center; but every commercial loan must have a name. The reason why is because a great many commercial properties are owned by two or more couples or by an LLC. You can't call the deal the Smith loan because the Jones and the Carpenters might also be on title.
Now back to my row commercial building. Should my loan officer label this deal as, "Sicilian Noodle Restaurant Building"? No-no-no!!! My loan officer wants to make clear to Loan Committee that this is not a restaurant building but rather just an empty box. He should call the deal, "Main Street Row Commercial Building." Give your commercial loan a good name!
Let's look at a different scenario. Suppose that Rosewood Boulevard is a long commercial strip that runs west to east through the entire city. By the way, a commercial strip is a busy commercial thoroughfare whose sides are lined with businesses. It is not a gentlemen's club.
Now the eastern stretch of Rosewood Boulevard runs through a middle-class, bustling neighborhood called the Triangle District. Unfortunately the western stretch of Rosewood Boulevard runs through the Porkloin District, and the Porkloin District houses the lowest-income section of town. Many commercial buildings are boarded up, and most of the commercial buildings in the area are protected by bars on the windows and they are covered in gang grafitti. Drug sales are one of the single largest sources of income for the residents. Gun battles are waged nightly, and the Nightly News often starts out their broadcasts with, "Another seven people were gunned down on Rosewood Boulevard last night in the infamous Porkloin District."
Okay, now a test of your understanding. Are you going to name your next commercial loan, "Rosewood Boulevard Liquor Store?" If you answered, "No," then you understood today's training lesson. Does "Triangle District Strip Commercial Building" sound more appealing to a Loan Committee? I think so.
Earlier in today's article I mentioned private money loans from Blackburne & Sons. When does it make sense to use Blackburne & Sons as your commercial lender?
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 look at the borrower's global income - income from salaries, other investments, etc.? 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?
These are all good reasons to apply to Blackburne & Sons.
"George, my commercial loan is a slam-dunk. I just need a great rate. I'm competing on the deal." In that case, you should submit your deal using C-Loans.com. Our hungry life companies, conduits, and commercial banks will eat that A-quality deal right up. You should also use C-Loans.com if the loan is larger than $3 million (too large for Blackburne & Sons) or if it is a construction loan, regardless of the credit. The banks will quickly scarf up that construction loan, and our 150 hard money lenders will dine on that large hard money deal.
Many high-school-educated commercial mortgage brokers make more money than many college- educated professionals because they have the natural ability to sell, great English skills, and some great training in commercial real estate finance. Our 9-hour commercial mortgage brokerage video training course - now coupled at no additional charge with our 6-hour audio training course in Intermediate Commercial Finance - is a cheap way ($549) to change your life.
Don't forget to snag the business card of any banker you meet who makes commercial real estate loans. We'll trade you the contents of that one business card for a free directory of 2,000 commercial real estate lenders. We solicit these guys to refer us their commercial mortgage turndowns.
Many mortgage brokers find C-Loans.com while browsing at night. We want these guys pre-registered so that when they run across their next commercial loan, they can immediately enter it into C-Loans. Registering is just a fancy way of filling out your name and contact information. If you register on C-Loans.com, I'll send you a free Commercial Mortgage Underwriting Manual that I sell separately on C-Loans.com for $199.
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