New York Real Estate Journal featured an article by Chris Mavros, managing director, principal & CFO. Below is an excerpt:
Before a commercial real estate borrower engages a traditional or other lending institution, he or she needs to be aware of the ground rules. The basics can be boiled down to a set of what I call the “top 10” rules. Investors that ignore them could, at the very least, throw away some hard-earned money and delay their project. At the other end of the spectrum, they may get badly burned and jeopardize their entire investment.
1. Get a handle on your borrowing power. A bank or other traditional lender will qualify you, or not, based on your creditworthiness. This includes but is not limited to your FICO score and other personal lending track records. Important issues also include the collateral you are offering, and the cash flow associated with it. Once you, and your financial or other advisor, analyze your circumstances, you will be in a better position to gauge your borrowing limit, and whether you should approach a bank.
You may also wish to consider an asset-based loan, which may be available from a private, or hard-money or another secondary market source. An asset-based lender will not focus as much on your financial history and personal creditworthiness. Instead, they give more weight to the value of the asset, since it may be seized in case of default.
2. Define the purpose of your loan, and how fast you need the funds. Determining your creditworthiness is the first step in the borrowing process but answering the why and when will also help steer you to the right funding source. The type of property you are looking at, as well as your status as a small business owner may qualify you for a loan from the Small Business Association (SBA), but if you need cash in a hurry, the SBA may not be able to meet your deadline. In that case, you could consider a bridge loan from a hard money lender, although additional fees may be involved. Either way, as you decide, consider the dynamics and the urgency of the loan you are seeking.
3. Get your documentation together. If your real estate collateral generates income, you will be expected to provide copies of any leases, rent rolls, and agreements with contractors. The lender will likely also request documentation showing that the real estate collateral has all necessary environmental clearances.
4. Mind the details. Be prepared to provide a survey of any land that is part of your collateral. A lender will want to know about any easements or encroachments, evidence of use by other parties, and whether the property is accessible by existing roads. They will also want to be aware of any zoning or other approvals that are needed to conform with the planned use of the property. Click here to read more.
A northern N.J.-based commercial real estate investment firm, Case concentrates on transactions in the $2.5 million to $50 million range for transitional properties in the New York metro area and south Florida, as well as the Northeast and Mid-Atlantic regions. Case is active as a high-yield private lender; a financier of transitional properties; a purchaser of performing, sub- and non-performing debt; and a mezzanine and equity investor. Funds can be deployed as real estate debt purchases, bridge and acquisition loans or rescue and restructure capital. Case is one of the leading bridge lenders in New Jersey, New York and Florida.