Loan Types: While there various commercial loan types, most investors often encounter 3 main types of commercial loans:

• Business Administration or SBA loan. This is a government guaranteed loan intended for owner-occupied properties. When you occupy 51% or more of the space in the building (gas station is considered an owner-occupied property), you are qualified for this program. The key benefit is you can borrow up 90% of purchased price.

• Portfolio loan. This is the type of commercial loans the lenders loan to you using their own money. Lenders are often more flexible because it’s their money. For example United Commercial, Citi Bank or Cathay Bank is a portfolio lender.

• Conduit loan. It’s harder to explain to an average consumer or investor what a conduit loan is. It’s easier identifying it by its characteristics or just simply ask the lender.
  • The rate is often lower. It is often around 1.2% over the 5 or 10 year US Treasury rates compared to 1.85-3% over the 5 or 10 year US Treasury rates for portfolio loan. This is the key advantage of conduit loan.
  • Conduit lenders only consider big loan amount, e.g. at least $2M.
  • Lenders require borrower to form a single-asset entity, e.g. Limited Li
    Dealing With Public Service Ads on Your Website
    Many of us start out with websites that we want to generate some income with, so we think that Google is the one and only solution to our desire or even our need to earn some extra money. And, it’s fair to say that a lot of money can be made with the use of Google ads on one’s website, but only if they work correctly. Money is made on these ads when relevant ads are posted on our website so that visitors can click on them and we can be compensated for every click! Unfortunately, a good deal of the time one will visit their website only to find that public service ads have been placed on their website by Google, and these ads don’t pay at all when your visitors click on them.You can report the fact that you have had a lot of public service ads on your website to Google, but generally there is not much that Google can do about it. The public service ads are placed on your website when relevant or targeted ads are unavailable, or when Google is simply unable to obtain information from the page to display relevant ads. This can be frustrating when for one reason or another ads that pay are not posted on your website continually. The reason that this is so frustrating is that you have only aligned yoursel
    Your commercial real estate transaction does not close unless the loan is approved. You can also improve the cash flow if the interest rate for the loan is low. So the more you know about commercial loans the better decision you can make about your commercial real estate investment.

    Loan Qualification: Most of you have applied for a residential loan. You provide to the lender with W2’s and/or tax returns. In general the more income you make the higher loan amount you qualify. You could even borrow 100% of the purchase price if your income or stated income is strong. For commercial loan, the amount of loan the lender will approve is based on the rental income of the property, not your personal income. So the more rental income the property generates, i.e. the higher the CAP rate, the higher loan to value (LTV) the lender approves. If you buy a vacant commercial building, you will have difficult time getting a loan as it does not have any rental income unless you plan to occupy it for your business.

    Loan to Value: Commercial lenders tend to be more conservative about the loan to value. Most commercial lenders loan up 75% of the value of the property. The following is just a rough guideline for LTV based on the CAP rate as the actual calculation is beyond the scope of this article.
    

    CAP ----- LTV
    8% ----- 75%
    7% ----- 67%
    6% ----- 55%
    5% ----- 45%
    

    Lenders will only loan you the amount such that the income after expenses, i.e. net operating income is at least 20-25% more than the annual mortgage payment of the property. Or another words, the loan amount is such that you will have positive cash flow equal to at least 20-25% of the mortgage payment. So if you purchase a property with low CAP rate, you will need more down payment. This is so true for commercial properties in California as the CAP rate is in the 5% range. Commercial real estate is intended for the elite group of investors so there is no such thing as 100% financing.

    Interest Rate: The interest for commercial is dependent on various factors

    1. Loan amount: In residential mortgage if you borrow less money, i.e. a conforming loan, your interest rate will be the lowest. When you borrow more money, i.e. a jumbo or super jumbo loan, your rate will be higher. In commercial mortgage, the reverse is true! If you borrow $200K loan your rate could be 9%. But you borrow $3M, your rate could be only 5.9%! In a sense, it’s like getting lower price when you buy an item in large volume at Costco.

    2. Property type: the interest rate for a single tenant night club building will be higher than multi-tenant retail strip because the risk is higher. When the night club building is foreclosed, it’s much harder to sell or rent it compared to the multi-tenant retail strip. The rate for apartment is lower than shopping strip. To the lender, everyone needs a roof over their head no matter what so the rate is lower for apartment.

    3. Age of the property: loan for newer property will have lower rate than dilapidated one. To the lender the risk factor for older properties is higher so the rate is higher.

    4. Area: if the property is located in a growing area like Atlanta metro the rate would be lower than a similar property located in the rural declining area of Arkansas. This is another reason you should study demographic data of the area before you buy the property.

    5. Your credit history: similarly to residential loan, if you have good credit history, your rate is lower.

    6. The lenders you apply the loan with: Each lender has its own rates. There could be significant difference, e.g. over 1%, in the interest rates. So you should work with someone specialized on commercial loans to shop for the lowest rates.

    7. Prepayment flexibility: If you want to have the flexibility to prepay the loan then you will have to pay higher rate. If you agree to keep the loan for the term of the loan, then the rate could be 1% interest lower. See more on conduit loan.

    Prepayment Penalty: In residential loan, prepayment penalty is often an option. If you don’t want it, you pay higher rate. Most commercial loans have prepayment penalty. The prepayment penalty amount is reduced or stepped down every year. For example on a 5 year fixed rate loan, the prepayment penalty for the first year is 5% of the balance. It’s reduced to 4% and then 3%, 2%, 1% for 2nd, 3rd, 4-th and 5-th year respectively.

    Loan Fees: In residential mortgage, lenders may offer you a “no points, no costs” option if you pay a higher rate. Such option is not available in commercial mortgage. You will have to pay between ? to 1 point loan fee, appraisal cost, environment assessment report fee, and processing/underwriting fee. A lender normally issues to the borrower a Letter of Interest (LOI) if it is interested in lending you the money. The LOI states the loan amount, interest rate, loan term and fees. Once the borrower pays all the fees, the lender starts underwriting the loan. If the lender approves the loan and you do not accept it then the lender keeps all the fees.

    Loan Types: While there various commercial loan types, most investors often encounter 3 main types of commercial loans:

    • Business Administration or SBA loan. This is a government guaranteed loan intended for owner-occupied properties. When you occupy 51% or more of the space in the building (gas station is considered an owner-occupied property), you are qualified for this program. The key benefit is you can borrow up 90% of purchased price.

    • Portfolio loan. This is the type of commercial loans the lenders loan to you using their own money. Lenders are often more flexible because it’s their money. For example United Commercial, Citi Bank or Cathay Bank is a portfolio lender.

    • Conduit loan. It’s harder to explain to an average consumer or investor what a conduit loan is. It’s easier identifying it by its characteristics or just simply ask the lender.
      • The rate is often lower. It is often around 1.2% over the 5 or 10 year US Treasury rates compared to 1.85-3% over the 5 or 10 year US Treasury rates for portfolio loan. This is the key advantage of conduit loan.
      • Conduit lenders only consider big loan amount, e.g. at least $2M.
      • Lenders require borrower to form a single-asset entity, e.g. Limited Lia
        It Is All In The Offer
        Credit card offers can fill up your mailbox within days if you don’t check your mail on a daily basis. Pull more than half of your mail to the side and it is likely peppered with offers from leading credit card providers extolling the virtues of their product. Most offers will include points such as these:• Free Balance Transfers and 0% APR for the first 12 months • No Annual Fee • Free Rewards Program • Low APR • Consolidate Your Debt • Instant ApprovalOn and on the offers come and on surface there isn’t a lot that separates one card from the next. However, if you dig a little deeper – by reading the extensive terms and conditions that come with each offer – you will see that wide differences exist, dramatically so. Read on and we’ll take a look at what you should examine when weighing your offers.Balance Transfers – At first glance, this sounds like a terrific offer: transfer all of your balances to the credit card and pay 0% on that balance for 3, 6, even 12 months or a very low fixed rate for the life of the balance. One offer guarantees that you can pay just 2.99% until your loan is paid off, well below the rate of a personal loan and far below the average
        article.
        

        CAP ----- LTV
        8% ----- 75%
        7% ----- 67%
        6% ----- 55%
        5% ----- 45%
        

        Lenders will only loan you the amount such that the income after expenses, i.e. net operating income is at least 20-25% more than the annual mortgage payment of the property. Or another words, the loan amount is such that you will have positive cash flow equal to at least 20-25% of the mortgage payment. So if you purchase a property with low CAP rate, you will need more down payment. This is so true for commercial properties in California as the CAP rate is in the 5% range. Commercial real estate is intended for the elite group of investors so there is no such thing as 100% financing.

        Interest Rate: The interest for commercial is dependent on various factors

        1. Loan amount: In residential mortgage if you borrow less money, i.e. a conforming loan, your interest rate will be the lowest. When you borrow more money, i.e. a jumbo or super jumbo loan, your rate will be higher. In commercial mortgage, the reverse is true! If you borrow $200K loan your rate could be 9%. But you borrow $3M, your rate could be only 5.9%! In a sense, it’s like getting lower price when you buy an item in large volume at Costco.

        2. Property type: the interest rate for a single tenant night club building will be higher than multi-tenant retail strip because the risk is higher. When the night club building is foreclosed, it’s much harder to sell or rent it compared to the multi-tenant retail strip. The rate for apartment is lower than shopping strip. To the lender, everyone needs a roof over their head no matter what so the rate is lower for apartment.

        3. Age of the property: loan for newer property will have lower rate than dilapidated one. To the lender the risk factor for older properties is higher so the rate is higher.

        4. Area: if the property is located in a growing area like Atlanta metro the rate would be lower than a similar property located in the rural declining area of Arkansas. This is another reason you should study demographic data of the area before you buy the property.

        5. Your credit history: similarly to residential loan, if you have good credit history, your rate is lower.

        6. The lenders you apply the loan with: Each lender has its own rates. There could be significant difference, e.g. over 1%, in the interest rates. So you should work with someone specialized on commercial loans to shop for the lowest rates.

        7. Prepayment flexibility: If you want to have the flexibility to prepay the loan then you will have to pay higher rate. If you agree to keep the loan for the term of the loan, then the rate could be 1% interest lower. See more on conduit loan.

        Prepayment Penalty: In residential loan, prepayment penalty is often an option. If you don’t want it, you pay higher rate. Most commercial loans have prepayment penalty. The prepayment penalty amount is reduced or stepped down every year. For example on a 5 year fixed rate loan, the prepayment penalty for the first year is 5% of the balance. It’s reduced to 4% and then 3%, 2%, 1% for 2nd, 3rd, 4-th and 5-th year respectively.

        Loan Fees: In residential mortgage, lenders may offer you a “no points, no costs” option if you pay a higher rate. Such option is not available in commercial mortgage. You will have to pay between ? to 1 point loan fee, appraisal cost, environment assessment report fee, and processing/underwriting fee. A lender normally issues to the borrower a Letter of Interest (LOI) if it is interested in lending you the money. The LOI states the loan amount, interest rate, loan term and fees. Once the borrower pays all the fees, the lender starts underwriting the loan. If the lender approves the loan and you do not accept it then the lender keeps all the fees.

        Loan Types: While there various commercial loan types, most investors often encounter 3 main types of commercial loans:

        • Business Administration or SBA loan. This is a government guaranteed loan intended for owner-occupied properties. When you occupy 51% or more of the space in the building (gas station is considered an owner-occupied property), you are qualified for this program. The key benefit is you can borrow up 90% of purchased price.

        • Portfolio loan. This is the type of commercial loans the lenders loan to you using their own money. Lenders are often more flexible because it’s their money. For example United Commercial, Citi Bank or Cathay Bank is a portfolio lender.

        • Conduit loan. It’s harder to explain to an average consumer or investor what a conduit loan is. It’s easier identifying it by its characteristics or just simply ask the lender.
          • The rate is often lower. It is often around 1.2% over the 5 or 10 year US Treasury rates compared to 1.85-3% over the 5 or 10 year US Treasury rates for portfolio loan. This is the key advantage of conduit loan.
          • Conduit lenders only consider big loan amount, e.g. at least $2M.
          • Lenders require borrower to form a single-asset entity, e.g. Limited Li
            The Butterfly Spread
            The butterfly spread is a conservative strategy with both limited profit potential and limited risk. It is actually a combination of a bull spread and a bear spread. It can be constructed using all calls, all puts, or a combination of each.Three strikes are used: one high, one low, and one in the middle. You buy the upper and lower strikes and sell the middle strike.For example, suppose a stock is selling at 50 and your option pricing model indicates the 50 strike front month options are "rich" and should be sold. Your opinion on the stock is neutral. You sell the 50s and buy the 45 and 55 strikes.Another way of looking at the butterfly spread is selling a straddle and buying a strangle: Selling the 50 strike straddle and buying the 45/55 strangle, in this example.If you took in a net credit of $3.50 per spread, that is your maximum possible profit for selling the spread.The risk is the difference between strikes (5 points) minus the credit received (3.50) or 1.50 points per spread. Not bad.Your profit range, in this example, is the middle strike (50) plus and minus the credit received (3.50): 53.50 - 46.50.The risk is limited should the underlyin
            st rate for a single tenant night club building will be higher than multi-tenant retail strip because the risk is higher. When the night club building is foreclosed, it’s much harder to sell or rent it compared to the multi-tenant retail strip. The rate for apartment is lower than shopping strip. To the lender, everyone needs a roof over their head no matter what so the rate is lower for apartment.

          • Age of the property: loan for newer property will have lower rate than dilapidated one. To the lender the risk factor for older properties is higher so the rate is higher.

          • Area: if the property is located in a growing area like Atlanta metro the rate would be lower than a similar property located in the rural declining area of Arkansas. This is another reason you should study demographic data of the area before you buy the property.

          • Your credit history: similarly to residential loan, if you have good credit history, your rate is lower.

          • The lenders you apply the loan with: Each lender has its own rates. There could be significant difference, e.g. over 1%, in the interest rates. So you should work with someone specialized on commercial loans to shop for the lowest rates.

          • Prepayment flexibility: If you want to have the flexibility to prepay the loan then you will have to pay higher rate. If you agree to keep the loan for the term of the loan, then the rate could be 1% interest lower. See more on conduit loan.

            Prepayment Penalty: In residential loan, prepayment penalty is often an option. If you don’t want it, you pay higher rate. Most commercial loans have prepayment penalty. The prepayment penalty amount is reduced or stepped down every year. For example on a 5 year fixed rate loan, the prepayment penalty for the first year is 5% of the balance. It’s reduced to 4% and then 3%, 2%, 1% for 2nd, 3rd, 4-th and 5-th year respectively.

            Loan Fees: In residential mortgage, lenders may offer you a “no points, no costs” option if you pay a higher rate. Such option is not available in commercial mortgage. You will have to pay between ? to 1 point loan fee, appraisal cost, environment assessment report fee, and processing/underwriting fee. A lender normally issues to the borrower a Letter of Interest (LOI) if it is interested in lending you the money. The LOI states the loan amount, interest rate, loan term and fees. Once the borrower pays all the fees, the lender starts underwriting the loan. If the lender approves the loan and you do not accept it then the lender keeps all the fees.

            Loan Types: While there various commercial loan types, most investors often encounter 3 main types of commercial loans:

            • Business Administration or SBA loan. This is a government guaranteed loan intended for owner-occupied properties. When you occupy 51% or more of the space in the building (gas station is considered an owner-occupied property), you are qualified for this program. The key benefit is you can borrow up 90% of purchased price.

            • Portfolio loan. This is the type of commercial loans the lenders loan to you using their own money. Lenders are often more flexible because it’s their money. For example United Commercial, Citi Bank or Cathay Bank is a portfolio lender.

            • Conduit loan. It’s harder to explain to an average consumer or investor what a conduit loan is. It’s easier identifying it by its characteristics or just simply ask the lender.
              • The rate is often lower. It is often around 1.2% over the 5 or 10 year US Treasury rates compared to 1.85-3% over the 5 or 10 year US Treasury rates for portfolio loan. This is the key advantage of conduit loan.
              • Conduit lenders only consider big loan amount, e.g. at least $2M.
              • Lenders require borrower to form a single-asset entity, e.g. Limited Li
                The Low Down On Local Internet Searches
                When you have a business website, you'll want to learn just how people are searching for your business at the search engines. Make sure that they find you as easily as possible by being ranked high for local Internet searches. Thankfully, this isn't difficult to do when you have the right tools.When you're looking for a certain product or service, you generally type in exactly what you need – i.e. web hosting. Once you get a list of the web hosting providers in the results, you tend to choose the first few results, right?Well when you want your local business to be found on the first page of Google, you need to know what the search engines are looking for. Your site not only needs to be optimized for your trade, but it must also be optimized for your local town, city, or county.Here is a quick list of the things that will make you more popular on local internet searches:- Related keywords and keyword phrases (including your town or county)- Relevant website content- Popularity of your website (your traffic count)- How well connected you are to other websites on the web via linkingWhile this list isn't exhaustive, it does help to create some new way
                ave the flexibility to prepay the loan then you will have to pay higher rate. If you agree to keep the loan for the term of the loan, then the rate could be 1% interest lower. See more on conduit loan.

                Prepayment Penalty: In residential loan, prepayment penalty is often an option. If you don’t want it, you pay higher rate. Most commercial loans have prepayment penalty. The prepayment penalty amount is reduced or stepped down every year. For example on a 5 year fixed rate loan, the prepayment penalty for the first year is 5% of the balance. It’s reduced to 4% and then 3%, 2%, 1% for 2nd, 3rd, 4-th and 5-th year respectively.

                Loan Fees: In residential mortgage, lenders may offer you a “no points, no costs” option if you pay a higher rate. Such option is not available in commercial mortgage. You will have to pay between ? to 1 point loan fee, appraisal cost, environment assessment report fee, and processing/underwriting fee. A lender normally issues to the borrower a Letter of Interest (LOI) if it is interested in lending you the money. The LOI states the loan amount, interest rate, loan term and fees. Once the borrower pays all the fees, the lender starts underwriting the loan. If the lender approves the loan and you do not accept it then the lender keeps all the fees.

                Loan Types: While there various commercial loan types, most investors often encounter 3 main types of commercial loans:

                • Business Administration or SBA loan. This is a government guaranteed loan intended for owner-occupied properties. When you occupy 51% or more of the space in the building (gas station is considered an owner-occupied property), you are qualified for this program. The key benefit is you can borrow up 90% of purchased price.

                • Portfolio loan. This is the type of commercial loans the lenders loan to you using their own money. Lenders are often more flexible because it’s their money. For example United Commercial, Citi Bank or Cathay Bank is a portfolio lender.

                • Conduit loan. It’s harder to explain to an average consumer or investor what a conduit loan is. It’s easier identifying it by its characteristics or just simply ask the lender.
                  • The rate is often lower. It is often around 1.2% over the 5 or 10 year US Treasury rates compared to 1.85-3% over the 5 or 10 year US Treasury rates for portfolio loan. This is the key advantage of conduit loan.
                  • Conduit lenders only consider big loan amount, e.g. at least $2M.
                  • Lenders require borrower to form a single-asset entity, e.g. Limited Li
                    A Few Tips For Buying A Horse Farm
                    A horse farm is probably one of the most beautiful real estate properties there is. As you drive up the drive, you're met with a picturesque view: A red roofed white two story house with a large red barn next to it, surrounded by immaculate board fences and green pastures. Of course, there are several horses staring over the fence at you, their coats gleaming in the sunshine.But aside from its looks, what makes a good horse farm? If you're planning on buying or building a horse farm, here are a few things to keep in mind.The houseIt might seem like an obvious thing, but be certain that if a house is on the farm, that it will fulfill your needs for a house. It wouldn't make sense to buy a farm and have to build a new house.The barnOnce again, make sure that the barn fits your needs. Two main things you should consider are size and convenience. Does it have enough space? Is it convenient to the house, the road or driveway, and the pastures?Water supplyAnther item to consider is water supply. If you have a drought, an ample water supply could be the difference between your farm going under or surviving. Ideally, you should have at least two sources of water – a
                    es.

                    Loan Types: While there various commercial loan types, most investors often encounter 3 main types of commercial loans:

                    • Business Administration or SBA loan. This is a government guaranteed loan intended for owner-occupied properties. When you occupy 51% or more of the space in the building (gas station is considered an owner-occupied property), you are qualified for this program. The key benefit is you can borrow up 90% of purchased price.

                    • Portfolio loan. This is the type of commercial loans the lenders loan to you using their own money. Lenders are often more flexible because it’s their money. For example United Commercial, Citi Bank or Cathay Bank is a portfolio lender.

                    • Conduit loan. It’s harder to explain to an average consumer or investor what a conduit loan is. It’s easier identifying it by its characteristics or just simply ask the lender.
                      • The rate is often lower. It is often around 1.2% over the 5 or 10 year US Treasury rates compared to 1.85-3% over the 5 or 10 year US Treasury rates for portfolio loan. This is the key advantage of conduit loan.
                      • Conduit lenders only consider big loan amount, e.g. at least $2M.
                      • Lenders require borrower to form a single-asset entity, e.g. Limited Liability Company (LLC) to take title to the property. This is intended to shield the property from other the borrower’s liabilities.
                      • If the borrower later wants to sell the property before the lock out period expires, the new buyer must assume the loan as the seller can not pay off the loan. This makes it harder to sell the property because the buyer needs to come up with a significant amount of cash for the difference between the purchase price and loan balance. Furthermore, the lender could reject the loan assumption application for various reasons as there are no incentives for it to do so. If you are a 1031-exchange buyer, you may want to think twice about buying a property in which you must assume the loan. Should the lender reject your loan assumption application, you may end up not qualifying for the 1031 exchange and have to send to Uncle Sam a big capital gain check. This is the hidden cost of conduit loan.

                      • Even when you are allowed to prepay the loan, it costs an arm and a leg if you want to prepay the loan. The prepayment penalty is often called Yield Maintenance or Defeasance. Basically you have to pay the difference in interest between the note rate of your loan and the current US Treasury rate for the remaining years of the loan! This amount is often so high that the seller normally requires the buyer to assume the loan. You can compute the defeasance from www.defeasewithease.com website. Besides the defeasance, you also have to pay a hefty processing fee which is in the $50-60K range! These are another hidden cost of conduit loan. Conduit loan may be the loan for you if you intend to keep the loan for the life of the loan that you agree to at the beginning. Otherwise it could be very costly due to its payoff inflexibility.

                    Lenders Coverage Area: commercial lenders would do business in areas they are familiar with. For example while Green Point Commercial does business in Northern California, it does not cover Fresno or Sacramento County. United Commercial Bank will only consider properties in California. Provident Bank does business in Arizona, California and Nevada. Silver Hill Financial covers all 50 states but has a one million dollar loan limit. Kennedy Funding does business almost anywhere but the rate is pretty high as it is a hard-money lender. GE Commercial Financing will only consider transaction with at least $5M loan.

                    Lenders Coverage Property Types: Most commercial lenders would only consider a certain types of properties that they are familiar with. For example Washington Mutual would do apartments and office buildings but not retail properties or gas stations. Citibank would not consider loans for single tenant retail properties. Westford Financial specializes on church financing. Comerica concentrates on owner-occupied properties.

                    Conclusion: Commercial loans are a lot more complex than residential loans. As an investor, you should employ a professional commercial loan broker to assist you with your commercial loan need. Chances are that you will end up paying lower interest rates, avoiding potential pitfalls and having a better chance to get the loan approved.