Peter's Real Estate Thoughts

The Sun Will Rise Again

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 24 Feb 2009 13:03:21 -0600

Over at Peter Pays Paul I posted The Sun Will Rise Again. Here is an excerpt:

At the current time we are living in stormy financial times. The stock market is tumbling, companies are filing bankruptcy, unemployment is rising, and fear is on everyone’s minds.

It is easy to forget in times like this that “this too will pass.” The sunny times will return eventually.

Head over to Peter Pays Paul to checkit out.

Adding Value in a Down Market

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 27 Jan 2009 14:28:58 -0600

Over at Peter Pays Paul I posted on how a commercial mortgage lender can add value in the current market.

Here is a snippet of whaty I wrote:

In the current market brokers are having more difficulty providing these items of value. LTVs have decreased, rates have gone up, and many banks are only lending to existing customers.

How does a broker survive and add value in this market?

Questions to Ask a Commercial Lender

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Sat, 17 Jan 2009 13:03:15 -0600

Head over to Peter Pays Paul to read my newest post Nine Questions to Ask a Commercial Lender.

My post details what questions should be asked when trying to understand the lending programs that a commercial lender has.

Commercial mortgage brokers would do well to take 15 minutes to get acquainted with the lenders on their lender list. While a rate sheet and lending matrix can be helpful, nothing beats a phone or face-to-face interview.

Here are nine questions that will allow a commercial broker to focus their efforts and to target properties to the right lenders.

Affect of Vacancy and Rental Rates on Commercial Real Estate Value

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 18 Nov 2008 17:40:26 -0600

Imagine that little retail center near your house.You know the one.

It has your favorite coffee shop, the weird home decor shop, a woman’s clothing boutique, the nail shop, and the national auto parts store.

Over the years you’ve seen the stores change. Different shop owners have come and gone. The coffee shop has been there for a while. The woman’s clothing store is only a year old.

As you drive by you notice a “Going Out of Business” sale going on in the home decor shop. You’ve talked with the owner of the woman’s boutique and she is having a rough time making a profit.

If these two stores close their doors, you wonder who is going to fill this space. What is going to happen to the owner of that little retail center? Where will he find tenants?

The Plight of Retail Stores

Americans are spending less money these days. We built our economy upon the model of consumption and borrowed to fuel that consumption.

With the well of cheap financing depleted, spending has come to a screeching halt. Retailers nationwide are taking a hit. The recent headlines have featured the likes of Circuit City, Mervyn’s, Shoe Pavilion, and Linens ‘n Things.

The Pain on Retail Center Owners

When a retail store closes or “goes dark” the landlord will feel the pain of having a vacant store. (Some leases do have a provision that stores can close but while the tenant continues to pay rent.) This means that she does not have as much rental income to pay the bills she faces for owning the property.

How Vacancy and Rental Rates Affect Value

I shared here the most common method to value income producing property. The most important numbers to determine value are Net Operating Income (NOI) and the Capitalization (Cap) Rate.

Rental rates and the assumed vacancy rate will affect the NOI. NOI is then used to calculate the value of the property based on an expected return to the investor, the Cap Rate.

Slight Changes with Devastating Effects

So how would a 10% decrease in rents, a 5% increase in vacancy, and a 1% increase in Cap Rate affect a properties value?

Notice that the value decreases by 26%.

Also notice that the change in the maximum loan amount decreases by $1.08 million. If the borrower needs to refinance under these new assumptions, the borrower will need to come up with over a $1 million to close the loan. The foreclosure process and bankruptcy are not far away.

The Current Credit Crisis

Currently, some institutional lenders have begun to underwrite retail loans along the lines of this scenario. They are forecasting decreasing rents and higher vacancy rates.

Some lenders are incorporating a higher cap rate as well. (One developer I know said that he hasn’t started a retail project unless it underwrote at a 8% cap rate or higher because of historical cap rates, even during the boom times.)

Unless, a retail property absolutely must be refinanced now, the wise real estate investor would be best served to hold off until cooler heads prevail.

How to Survive the Current Market: Focus on Things You Can Control

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Thu, 16 Oct 2008 14:28:30 -0500

We are living in rare days. The financial turmoil is on the headline news every night. The U.S. government has decided that it is the savior of the markets. Congress fought over “The Bailout”. The market can’t decide which way it wants to go.

The news is very gloomy.

Weathering the Storm

Much if not the majority of the news it outside of our individual control. The “winds of destruction” are swirling around our heads.

We can’t stop the winds from blowing. But we can keep our heads down.

You can do nothing anything about macroeconomic problems. You can’t buy enough plasma televisions to save the economy. You don’t control the price of the stock market. You can’t force banks to begin lending.

If you focus on the global economy, the number of unemployed, or the weather forecast for January, you are distracted from the items that you can do today to improve your bottom line.

Focus on Things You Can Control

Focus your energy and emotions on daily items within your sphere of control to ensure that you survive these times. Wasting time and emotions on things outside of your control is ultimately unprofitable.

Focus on Your Attitude

Stay positive. Do not be preoccupied with all that you don’t have. Thinking about toys/gadgets/money we don’t have leads to grumpiness. No one likes a grumpy person.

Rather than focus on what you are lacking, focus on what you do have. Be thankful for things like family, friends, a job, a home, and food. Remember there are always people less fortunate than us.

Focus on Being Productive

What activities can you do daily that will impact sales? Is it phone calls, emails, or personal visits? Focus on completing these tasks. Focus on meeting people, generating referrals, and results.

When will you do these activities on a daily basis? Plan the activities that are profitable into your calendar. Block time in order to attain the results necessary. Turn off the phone. Don’t check your email. Stay on point and accomplish your goals. (Even as I write this I am being distracted by something.)

How many [blank] do you have to do to generate the income that you want? If you reach 5 people a day will it generate the income you want? Do you need to phone 10 people a day? If you email 200 people a month will it generate the results you need?

Focus on Adding Value

If you constantly seek to add value as an employee, as a salesman, or as a consultant you will be rewarded for the value you add.

Too often we are myopic and only think that the item we sell adds value. However, we can add value by relaying good information, referring a new customer, or by offering insight. All of these can be done at no cost to our clients, yet it endears them to us. Caution: Don’t expect to get something in return immediately.

What value are bringing to your boss/client? You are only worth the value you add!

Get Back to Work!

It is easy to see that in these coming times, work will win the day. Those that work harder and perform at a higher level will be rewarded.

The “Times of Plenty” are over. Now by the sweat of our brow we will have to generate income.

Don’t let the negativity distract you from production, staying positive, and adding value.

Is it a Development Loan or a Construction Loan?

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Wed, 09 Jul 2008 19:17:36 -0500

Part of my job is to take incoming cold calls. We advertise in a commercial lending industry magazine that generates a good deal of call traffic.

On a regular basis I get requests for “construction” loans. After asking some questions to determine the nature of the loan, I usually find out that the broker/borrower is actually searching for what I would call a “development” loan.

What’s the Difference, Who Cares?

Why does it matter if you call it a construction loan rather than a development loan?

First, it reflects on the broker/borrower. If a lender has to educate the person requesting money, it sets a bad tone for the deal.

Second, some lenders offer construction financing but don’t offer development financing. Asking the right question allows you to get a correct response and save you time.

Finally, loan to value and equity requirements may vary depending on whether the loan is for development or for construction; I know ours do. This information helps the lender determine if the loan is within their parameters.

Construction vs. Development

Construction by definition has the connotation of putting things together. In my mind, moving dirt for roads or infrastructure does not meet this definition (no offense to those in the fields of civil construction).

The definition of the word develop includes the idea of being made usable. This is perfectly suited for the installation of roads, pads, and infrastructure; as the land has now been made usable for a building.

Defining Loans

Consequently, I would recommend that if you are asking lenders for a construction loan, a building should be in place when construction is complete.

Loans to improve land should be titled as development loans.

How to Find Distressed Properties

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 08 Jul 2008 12:20:31 -0500

This the third post in a series I am writing on finding distressed properties. Posts 1 & 2 can be found here.

Marketing

Marketing to owners of distressed property is the third method of finding distressed property.

Marketing Costs

For purposes of this post we will define marketing as the process of informing owners of distressed property, that you are interested in purchasing their property.

Almost all forms of marketing will have an out of pocket cost, before you see a return on the marketing investment. These costs may include printing, postage, design, or mass media expenses.

Marketing Budget

It is important to prepare a marketing budget prior to investment in any system. A budget will help you track marketing effectiveness and control spending.

Consistency is key to any marketing strategy. Most marketing takes time to show results. Dividing your marketing budget over months or weeks, will help to develop consistency and prevent you from “betting the ranch” in one marketing blast.

Market to Your Sphere

Each one of us has a sphere of influence that we touch on a regular basis. Our sphere includes friends, family, neighbors, clients, employees/employer, service providers, etc.

The easiest way of informing your sphere of influence that you are in the market for distressed property is through the use of business cards.

Business cards are an inexpensive way of informing others of who you are and what you want. By including a list of desired property characteristics on the back of the card, you remind the holder of what you are seeking.

Direct Mail

Direct mail consists of mailed advertisements to potential sellers. Direct mail is a proven marketing method, but has in general only a 2% response rate.

Printing and postage costs are both associated with direct mail. If first class postage is used, costs can be in excess of $0.50 per marketing piece. These costs add up very quickly and may limit the number of people you are able to reach.

Direct mail will have a greater efficiency if it can be targeted to individuals that have been pre-screened for relevant criteria. Criteria that may be helpful could include property owners, age of property, length of ownership, and building age. Title companies may be able to provide this information to you.

Signage

Bandit signs, fliers, and other types of signs can be used to garner the attention of would be sellers. This type of advertising is more likely to be utilized for residential properties than for commercial properties.

Fliers with your commercial property description could be distributed to local commercial brokers. This may be a way to inform the brokerage community of what you are searching for.

Classified Ads

The classified ads of your local newspaper may be a cost effective means of advertising your desire to buy distressed property.

Typically, those reading the classified section are in search of something specific. Classified users tend to be in the market.

A classified ad stressing that you buy real estate of all shapes and sizes may draw the attention of someone in need of selling or tired of dealing with tenants.

Mass Media

Mass media includes radio, television, and billboards. Though these methods have a broad reach, not everyone that sees or hears your advertisement will be a suitable customer. Thus, in general they are not a cost-effective means of advertising for distressed properties.

Conclusion

While there are many different marketing channels, you must find the method that works best for your property characteristics and fits within your budget. Once a channel begins to produce results, you should re-invest in that channel in order to produce even greater results.

Marketing takes time and requires consistency. Invest in marketing over the long haul in order to reap the rewards.

Interesting Real Estate Tid-Bits

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Mon, 02 Jun 2008 16:56:15 -0500

While I mostly deal with commercial real estate, I like to know what is going on in the housing market as well. Today's news had two interesting articles that I enjoyed reading.

First, Reuters has an interesting article about the residential real estate market in Stockton, CA. Stockton is about an hour away from beautiful Walnut Creek, CA. As you can read in the article Stockton has been devastated by the bursting of the real estate bubble. The article reports that some agents in Stockton are almost telling home owners not to sell because the market is so poor.

Second, the L.A. Times blog is reporting that developer Michael Crews Development is was offering a buy one get one free special on homes in San Diego County. According to the literature the promo ended May 31, 2008. Of course the L.A. Times reported it on June 1, 2008. (HT: Drudge Report)

Confused about your home's value? Greg Swan of Bloodhound Realty in Phoenix, Arizona posits that the price of your home is worth only the value of the most recent lender-owned property plus the costs of that property's repairs and a small premium.

How to Write an Executive Summary for a Commercial Mortgage

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Mon, 19 May 2008 15:07:35 -0500

When I am reviewing a loan file one of the first things I look at and look for is the executive summary or loan summary. A well written executive summary speaks to the quality of the borrower and the value of the project. The goal of well written loan summary is to give the underwriter enough information to understand the commercial loan and to determine if the loan will fit within the lender’s lending guidelines.

Below are items that should be included in a well written and complete executive summary.

Salient Facts

Lenders want to know the details of the commercial real estate loan. Property location, property type, number of units, lot size, and the square footage are all important in the underwriting process.

Also include the loan amount and property value. I am always amazed when a loan summary is missing the loan amount or the property value. If the property is being acquired, include the purchase price.

You might also include useful ratios such as loan-to-value (LTV), loan-to-cost (LTC), and the debt-service coverage ratio (DSCR). Rounding these ratios to the nearest 5 or 10 integer can appear deceiving. I personally prefer that these ratios be expressed to two decimal places.

Project History

Include a project history for commercial property that is currently owned by the borrower. This should include the date of acquisition, acquisition costs, and any improvements or monies spent on the project.

Exit Strategy

Owens Financial Group is a bridge lender. Consequently, we are looking to see what the borrower’s strategy is to repay our loan at the end of the loan’s term. The exit strategy may be less important to permanent lenders than to short-term sources of capital.

Sponsor Summary

The sponsor or borrower summary should give relevant facts about the sponsor, but should not be their life story. A more detailed description of the borrower or borrowing entity can be include in a borrower’s resume.

A good summary might look like this:

Fictitious Development Company was started in 1989. Since it’s inception it has developed 32 properties with over 1,000,000 square feet of retail space. With combined sales of $120 million.

Or:

Fictitious Properties Group began acquiring multi-family properties in 1993. Fictitious currently owns in excess of 4,000 units in 7 states with rental revenue of in excess of $3,000,000.

Sources and Uses

This section details the utilization of the loan proceeds as well as the source of any other funds needed for the project. A table or spreadsheet format is most helpful and looks cleaner. If you are seeking a construction loan, this section is vital for the underwriting process. Cost information should only be a summary, because this is the executive summary and not the supporting detail, . The detailed costs should be included with the rest of the packet.

Property Financials

Relevant information regarding the current or projected rental income of a building should be included. The value of income property is determined by dividing the property’s net operating income by a capitalization rate suitable for the market location. Gross Income, total expenses, and vacancy are needed to determine net operating income.

Conclusion

Keep an executive summary short, no more than two pages. Include enough detail for the underwriter to understand the deal and to determine if it will fit in the lender’s parameters. Never mislead or lie on an executive summary. A well written commercial loan summary is often a reflection of the professionalism of the commercial mortgage broker submitting the loan.

Locked Up in a Broker Daisy Chain

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 22 Apr 2008 17:59:21 -0500

What is a Daisy Chain?

I field phone calls from commercial loan brokers all day long discussing the different loan scenarios that come across their desks. Our company advertises in the Scotsman Guide and this generates some “cold” incoming calls.

Frequently, we will get a phone call from a Broker A that received a loan file from Broker B. Broker B received the file from Broker C who received it from Broker D who knows the borrower. This is what we call a broker “daisy chain”.

Merriam-Webster defines a “daisy chain” as “1) a string of daisies with stems linked to form a chain, 2) an interlinked series”. One broker linked to another broker linked to the next broker, etc.

Problems with Daisy Chains

Human nature dictates that every broker involved in the transaction feels entitled to a piece of the pie. Each will often demand their own “fee” for services rendered. Often this is a deal breaker. If there are four brokers in the deal each charging a 1% fee the borrower is now paying a fee of 4% just to brokers! As Brian Brady writes , “what value does the agent bring to a transaction” to demand a fee?

If the borrower balks at the fee, Broker A is likely to say to Broker D, “I know the lender, you know the borrower, if we cut out B & C the fee is only two points and the borrower gets his loan closed.” Now Broker D is in an ethical dilemma, because he plays golf with Broker C on Wednesdays. Does he get the loan closed and burn Broker C to earn the commission?

Let’s imagine that this is a perfect world and all of the brokers in the deal lower their fee to an amount acceptable to the borrower. However, they are unwilling to give up their contact in the chain for fear of a future “circumvention”. So every piece of information needs to be passed from the borrower to Broker D to Broker C to Broker B to Broker A to the lender. (Did you ever play the game Telephone as a kid?)

How to Avoid Daisy Chains

Ask if the hard money lender lends their funds. Or you may ask if the hard money lender brokers their deals. Both of these questions should give you a better insight into the lender’s business model and how they make loans. If a “lender” brokers all of their deals, you may get caught in a daisy chain. Ask enough questions to get a straight answer and to understand the lender.

Remedies for a Daisy Chain

The smart broker that finds herself in a daisy chain situation will take control of the situation and work as the main point of contact for both the lender and the borrower. For example the chain of brokers lowers their fee to 2% of the loan amount. Broker D volunteers to coordinate between the lender and the borrower for a larger share of the commission, say 1%, allowing the other three lenders to split the remaining 1% without having to do any additional work.

Cutting out a broker from a deal, because they do not have a “signed agreement”, is a bad idea. This is a quick way to ruin a reputation and to never receive a referral again.

Summary

Daisy chains should be avoided at all costs. However, if you find yourself in the midst of this situation, take control and work to bring the deal to completion. This is an opportunity to gain a reputation as a broker that gets things done in the eyes of the borrower, other brokers, and the lender.

When Hard Money Pays

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Wed, 09 Apr 2008 19:03:48 -0500

It is not often that borrowers enjoy using a hard money lender to finance their projects. However situations do arise that demand the services of a commercial hard money lender. Let me illustrate this point with a story.

A few nights ago, one of the sinks in our house was plugged. Because I am a frugal person ("Cheap Smack" is the technical term) I decided to fix the problem myself. I called a relative to borrow their plumber's snake and clean out the plugged drain. Two hours later, I had unstopped the drain and had a functioning sink. However, had the sink been plugged at 7:30am as I was running out the door to work, I would not have hesitated to call the local plumber to come fix the problem.

The timing of the problem made a world of difference in the price I was willing to pay for the service of a plumber. When I had time to work on the clogged drain, the price of a plumber was not worth it. If I had not had time to repair the drain, a plumber is cheaper than the damage that might be caused if the clog was left in place.

The same is true in commercial real estate lending. If the borrower has a loan scenario that will be approved by a bank or another institutional lender, the bank or institutional lender will likely offer a better rate and fee structure than what a hard money lender can offer. However, when the borrower is short on time, price becomes less of an issue and completing the transaction is more valuable than losing the deal.

If a client is going to lose their deposit money because another lender backed out, the cost of hard money may be cheap. The deal of a lifetime may net your borrower millions, if they can close in 15 days. Closing a 1031 exchange on time can save some clients millions of dollars in taxes. What if financing doesn't come through as planned? Is the price of hard money worth it then?

As real estate professionals we are paid for the expertise we have acquired. Knowing who to call and when can earn you respect and referrals from your clients. We can all use a more of those, can't we?

I Voted!

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 05 Feb 2008 12:04:06 -0600

California this year may actually play a role in the presidential nominations.

A Busy Week

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Fri, 01 Feb 2008 18:59:54 -0600

The week has been a whirlwind. I worked on sending out two applications and worked on sending out a loan closing package.

The process here is streamlined but there are a lot of T's to cross and i's to dot. The loan was very complex with many moving pieces and a somewhat moving target. I am glad that Friday is here.

Have a great Super Bowl Weekend!

Story Lenders: What's your story?

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Thu, 17 Jan 2008 18:28:48 -0600

As a commercial hard money lender I have to be good listener. The reason is that everyone has a story to tell about their need for money. Some stories are better than others.

What should you include in your story?

Introduction

A good literary story introduces you to the characters, the setting, and any history relevant to understand the narrative going forward. A good lending story will include some of the same attributes. Most of this information should be included in a easy to read executive summary.

Who are the main characters? This includes the loan sponsors, and any borrowing entity that may be involved.
What is the setting? The setting would include the property location and property type. Details are important in this section and should include: unit mix, income details, and tenant information. This would also include the loan amount and the current property value.
What is the property’s history? This should include the property’s acquisition date, acquisition cost, repairs or construction, current liens, and any other items that set the stage going forward.

Body

The “body” of a commercial loan story should contain all the details that support the loan amount and property value. Not all hard money lenders will lend on the “appraised” value alone. Unfortunately, an appraisal is an opinion of value and not necessarily the price that the market will bear. Hard money lenders desire to protect their investment capital and want to be assured that the property can sell for more than their loan amount.

Property information and borrower information is very important in this section. The lender may ask for tax returns, income statements, balance sheets, rent rolls, leases, appraisals, operating statements, and other relevant facts to justify the loan. It is best to have these times beforehand from the borrower and be ready to provide them to the lender when they ask for it. Hard money lenders require different documents depending on their underwriting criteria.

Conclusion

When I review a deal, I want to have all the facts that are relevant to the deal. Market surveys, comps, and demographics are helpful to understand the project. The conclusion of your story should be the reason that they are searching for hard money. Is time a problem? Is the credit poor? Do they have unseasoned funds? Are there vacancy issues that will be corrected? Are they short on capital?

How to tell your story?

First, if you are a commercial broker don’t pass on a loan file that you received from someone else without reviewing it. This is the epitome of laziness and a lack of professionalism. It is frustrating to call a broker with questions, after reviewing a loan file, only to find out that the broker has no idea what the deal is because they just glanced at the package and passed it along.

Second, organize the data. Sorting through pages of data is frustrating and may mean that the borrower is trying to hide something. It is like an episode of “Law & Order” where the defendant sends over 15 boxes of documents in order to hide the document containing incriminating evidence.

Third, be as brief as possible. You may be very eloquent, but time is money. Also, a pig in a dress is still a pig. An ugly property with pretty words is still an ugly property. The executive summary should be a summary, not a life history.

Fundamentals are Still Fundamental

What do I mean? The value of a property is largely going to be based on income and cap rate. A lender is going to base their loan on the value of the property. The value may be today’s value or it may be a future value, but it will be based on a reasonable expectation of the property’s value. Property doesn’t generally appreciate at 400% or even 100% per year so take this into mind when you “estimate” your property’s value.

What Association(s) are you a member of for propecting/business development?

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Wed, 02 Jan 2008 18:53:42 -0600

Just curious to know what groups you visit frequently to prospect clients. Do you attend the Urban Land Institute? Building Owners and Managers Association? NAIOP? ICSC? Local Chamber of Commerce? Toastmaster's? Lion's Club?Rotary club?

Which do you find most valuable for meeting clients or gaining referrals? I am looking to meet commercial mortgage brokers and want to be where they are to meet them. Please comment below.

Commercial Hard Money Construction Loans

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Wed, 02 Jan 2008 18:15:17 -0600

I get at least one phone call a day requesting construction financing. (Owens Financial Group does fund commercial construction projects on a limited basis.) Underwriting a construction loan is handled differently than a typical commercial loan.

Lenders desire to know that a developer has enough money invested in the project to motivate the developer to overcome the headaches and hassles that are bound to arise during development. A developer with too little invested, is likely to cut their losses and run, if construction problems arise, permits are not obtained, or weather is not favorable. Many lenders will underwrite a construction loan on a Loan-to-Cost (LTC) basis, as well as a Loan-to-Value (LTV) basis.

Loan-to-Cost

LTC is a ratio of the loan amount to the total project cost. Included in total project cost are all of the costs from the time of acquisition to the close of escrow.

Cost Categories

Costs can be divided into two general categories Pre-Development and Development costs. Pre-development costs are those costs incurred before any actual construction work has begun on the property. This includes architectural fees, engineering, survey, legal, entitlement, and permit fees. The property acquisition price, site work, and utility installation may also be included in this cost section. Development costs are those incurred during the actual development of the property. Development costs include site work, material costs, labor costs, overhead, loan fees and interest, landscaping, insurance, and taxes.

Sources and Use of Funds

Many lenders will ask for a spreadsheet or report that details where money was spent and the source of that money, borrower’s funds or loan proceeds. Again, this is used to determine the developer’s investment in the project.

The Devil is in the Details

Different developers account for costs differently and lenders might view developer “costs” differently. Commonly this occurs when a developer has little actual cash left in the project. The developer is trying to appear more invested in the project.

Below are some common cost “red flags” for underwriters:
Interest during the pre-development period. This is indeed an expense, however it has not added value to the land or property. Interest has no value to a future buyer, while entitlements, site work, or utility installation may.
Property acquisition price vs. property “value”. Borrowers on construction loans will often state the property cost based on a current market value. Asking when the property was purchased and the initial purchase price is a key to unraveling this knot. Value can be attributed if the borrower has taken the property through entitlement or assembled multiple parcels of land and is developing a larger project.
Management or supervision fees during development. Most lenders expect the developer to get paid upon completion and sale of the project, not before the construction lender’s risk is paid off.
Single builder/developer projects. If the developer is also acting as the builder, the cost figures might be lower than market costs for similar construction. Should the developer be unable to complete construction, the lender is going to incur a higher construction cost to bring the project to completion.

The Wrap Up

Lenders are always trying to mitigate their exposure to risk. A well capitalized developer, that is invested in the project is more likely to bring the project to completion and to mitigate the lender’s exposure to risk.

Funding construction projects requires gathering the proper detail from the borrower. It also takes an understanding of lender requirements. Different lenders will ask for different documents and schedules. Knowing in advance what they require and acquiring that information from the borrower will speed your loan approval process.

Happy New Year and Success in 2008!

Hard Money Hints

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Thu, 27 Dec 2007 18:13:23 -0600

Not many mortgage brokers live consistently in the world of hard money. It is a subject despised by some and feared by others. When I call on brokers for the first time, many of them report, “We don’t do that here.”

I believe commercial mortgage brokers, often times, don’t understand the role hard money lenders can play in serving their clients. Anything new can be intimidating. Especially, something that if not handled carefully can injure your business. Hard money is like a sword: wielded by an experienced broker it is a valuable tool. Wielded recklessly by an amateur, the user is likely to lose a limb or a valuable client.

Below are some hard money hints to help you avoid cutting off a limb.

Beware of application fees. Most hard money lenders will require a good faith deposit or an application fee. This when used properly protects you the broker and the lender from a “window shopping” borrower. A good lender will refund this deposit if the loan is not funded, less any expenses incurred by the lender for legal fees, travel, appraisal, etc. However, there are some unscrupulous lenders that collect application fees as a source of revenue with no intention of refunding the fee. Others charge a due diligence fee to even review the loan scenario and underwrite the loan.

Beware of hard money brokers. Some hard money “lenders” are really hard money brokers. By this I mean that they do not personally or corporately directly lend the money. They have a list of investors that they broker deals for. These investors may have anywhere from $25,000 to millions to invest in trust deeds or mortgages secured by real estate. Each of the investors has a different appetite for property types and individual lending ability. The “lender” matches the loan request with the proper investor or investors. Sometimes a loan is too big for one of the investor and multiple investors must be sought.

This may cause problems on larger deals or when time is of the essence. It takes time to match borrowers to investors. Investors may want to review the underwriting themselves. This can delay the loan process until the contract has expired and your client has lost their deal. You may have lost the client.

Beware of staged construction funding. “Staged” funding occurs when the “lender” cannot raise enough capital initially to fund the entire cost of the construction loan. The lender is betting that as construction is completed they can raise the additional capital to fund the balance of the construction loan. This tends to happen more frequently with hard money brokers described above. The danger arises when a “lender” cannot raise the additional capital required to complete construction. Your borrower is left with a half-finished project and no money to pay for the remaining construction.

Often whatever the total amount of funds initially obtained by the “lender” is deposited into an account accruing interest at the borrower’s expense. The borrower has not used the funds, but the borrower is already paying interest on those funds. This is because the “lender” has promised a return to the investor and must start charging interest to maintain that return. Most banks and some hard money lenders only charge interest on the amount of funds used, not on the total loan amount.

Cheaper is not always better. I had a boss that consistently told me “Peter, you get what you pay for. You pay for quality, you get quality. You pay less, you get less quality.” This axiom, though not always true, is often true. Though, you may get the loan for a lower price or lower rate, what is being sacrificed to achieve a lower rate? Can the lender perform on time? What is the hard money lender’s reputation? Can they guarantee the funds will be there? Will they be true to their word when it comes to the closing table?

Make friends with a hard money lender. You never know when one of your clients is going to need money in a hurry or have a problem with their credit. If you can’t get the deal done for them, your client will look for someone that can. You may not need a hard money lender more than once a year, but it will be nice to know who to call. It never hurts to close one more deal a year.

Don’t charge an exorbitant fee, because it is “hard money”. Lenders have underwriting criteria and a risk tolerance level. If a client is willing to pay a broker 10 points to place a hard money deal, something might be wrong with the deal. We tend to raise our eyebrows a little. Please understand that in know way do lenders begrudge you making a commission. Understand that from the lender’s perspective you are not undertaking risk warranting 10 percent of the loan amount. You provide a valuable service and should get paid, just don’t be miffed if lender’s are turned off by a large broker fee.

Avoid daisy chain loans. A deal comes across your desk from another broker, who got it from another broker, who got it from another broker, so on and so forth. Usually, every commercial broker in the chain wants a fee and the borrower or lender gets cold feet. These deals can be extremely frustrating because there is a lack of control. If you are the last broker on the chain, you get whipped back and forth by the other end. It will save you a lot of stress and time to avoid the majority of these deals.

This list is by no means exhaustive. It is meant to be a useful tool to get you on the right track to using hard money wisely. I hope that it does.

Commercial Income Property Valuation

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 30 Oct 2007 14:57:17 -0500

Commercial real estate is a great addition to the savvy real estate investor’s portfolio. One of my previous employers said that he would only invest in commercial real estate and not in residential. He reasoned that commercial real estate that housed a business would always be better maintained than a leased residential unit. “A business must keep up its workplace or their customer’s will stop patronizing the business.”

Commercial real estate is financed more stringently than residential real estate. Often more capital is required to invest in a commercial property than in a residential property. Most banks and institutions require a minimum of 20% of the purchase price as a down payment. This can be a hefty price with the value of many commercial properties.

Commercial income producing real estate is also valued differently. Residential real estate is valued by the price the market will bear. A home is much more of a commodity than it is unique (though this contradicts much teaching in real estate textbooks). Not many people are willing to pay $50,000 more for a house, if the exact same house with the same features is available next door for less. Hence, the value of a home is much more a product of the supply of like homes, and the demand for those same homes.

Unlike homes, commercial real estate (CRE) is often valued by the income it produces. CRE, for the most part, is viewed as an investment. Owners want a return on the money that they invest in the project. The value of CRE is derived from the rental income from tenants.

Often a capitalization rate (cap rate) is used to value the property. The cap rate is a measure of the return on the purchase price of the asset. Capitalization rates vary from geographic area to geographic area and are directly related to the amount of perceived risk. Areas with high vacancies or other problems command a higher capitalization rate. More stabilized rentals with fewer problems often are capitalized at a lower rate. In many parts of the country a cap rate from 6-8% is used. Currently, in San Francisco a cap rate in the 4-5% range is common, due to high home prices and a high demand for rental units.

The cap rate is calculated by dividing the properties net income (not gross see note below) by the value or cost of the property. So, a property that costs $125,000 and generates $10,000 in net income would have a cap rate of 8%.

Net Income	/	Cost	=	Cap Rate
$ 10,000	/	$ 125,000	=	8.00%

By reversing the formula above, knowing the appropriate cap rate, you can determine the value of an income producing property based on the net income the property produces. This is done by dividing the current net income by the cap rate. For instance a property that generates $10,000 in net income divided by a cap rate of 8% produces a value of $125,000.

Net Income	/	Cap Rate	=	Value
$ 10,000	/	8.00%	=	$ 125,000

By changing the formula again we can determine the assumed net income for a property based on the asking price.

Cost	X	Cap Rate	=	Net Income
$ 125,000	X	8.00%	=	$ 10,000

Other factors like property condition, location, and tenant characteristics may increase or decrease the cap rate. All these factors should be taken into consideration when determining the appropriate cap rate to use for a given geographic area. I recommend using a knowledgeable, experienced, and local commercial broker to help you determine appropriate cap rates and property values.

Commercial income property is a solid investment for the long term. Commercial real estate should generate consistent income over the life of the asset. Many savvy investors use commercial income properties to generate income during their retirement years. Investment in this type of property requires due diligence and capital. However, for the savvy investor with the right investment team it can be a powerful wealth builder.

Note: It is very important to base these calculations on the net income of the property and not the gross income. It is also important to verify the net income figures through the use of a rent roll, copies of the leases, and the previous two years’ expenses. Unfortunately, unscrupulous persons have been known to increase actual rental income and to decrease actual expenses to increase the net income in order to command a higher property value.

Underwriting a Commercial Loan

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 23 Oct 2007 14:00:05 -0500

How Commercial Mortgages are Underwritten

Commercial mortgages are underwritten differently than residential loans, hence the loan package needs to be assembled in a different fashion. When dealing with improved commercial real estate the property's net income is the most important factor in underwriting the loan.

Debt Service Ratio

The property's net income determines its ability to pay the monthly mortgage payment. This is commonly referred to as the debt service coverage ratio (DSCR) or the debt service ratio (DSR). For this reason a borrower's income is less important than the commercial property's net income. Some lenders will take into account the borrower's income and apply it as a global debt service coverage ratio.

Common Mistakes

Commercial mortgage brokers do themselves a disservice when they fail to acquaint themselves with the loan they are submitting. Often a mortgage broker will call saying that they have a construction loan on a piece of property. When the lender reviews the documents, they see that the loan is actually a development loan on a piece of raw land. This casts a bad light on the broker, lenders are busy people and see many deals in a day. If a lender is only making construction loans, yet they are submitted a development deal it is often a waste of their time. Broker's that don't understand the deals they submit are perceived as lazy, unintelligent, after a quick buck, or some combination of these elements.

Required Documents

Individual commercial lenders will give different weight to different elements of the loan package. It is best to assemble a complete package before submitting a loan to a lender. Knowing in advance what documents and information a lender will want is also helpful.

Executive Summary

Writing an executive summary is always helpful. A complete package may include hundreds of pages of data. It can be difficult to extrapolate the loan amount and the purpose of the loan from all that data. The executive summary should include a description of the property including square footage, number of units, location, and the lot size. The loan amount, property value, and purpose of the loan should also be stated. An income summary should also be included in the executive summary of the commercial loan.

Standard Documents

These documents should be included in all submitted packages:

Loan Application
Borrower's Financial Statements
Borrower's Resume
Borrower's Tax Return for 2 years
Borrower's Credit Report
Preliminary Title Report
Property's Operating History for 2 Years
Property's Rent Roll
Property's Tax Return (if not included on borrower's)
Purchase Contract (if a purchase money loan>
Current Appraisal - Before paying for an appraisal you should determine if the lender only accepts appraisals from "approved" appraisers.

Useful Information

When seeking commercial loan refinancing it is also useful to know:

Current Loan Amount
Original Purchase Price & Date
Use of Additional Funds (if a cash-out refinance)
Justification of Value - If the property value has increased dramatically, why is that? Better tenants? Capital improvements? Appreciation?

Summary

Commercial lenders want proof that they should make the loan. The property's income or future value should justify the loan amount requested. Commercial lenders are not allowed to make loans based on a broker's enthusiasm or the borrower's need for the loan. The numbers don't lie and often tell the true story of the loan. As Joe Friday says, "The facts ma'am, just the facts."

Commercial Hard Money Loans an Explanation

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Fri, 19 Oct 2007 18:36:52 -0500

Most commercial real estate agents don't consider the need to have a source for hard money. Owners and investors in commercial real estate are often well capitalized and have a bank relationship that allows them to finance commercial property with ease. Because of this,commercial REALTORS® do not have a consistent need to provide there client with a referral. For experienced commercial agents this is rarely something they need.

Use of Commercial Hard Money Lenders

Where do hard money lenders, like Owens Financial Group - California hard money lender, come into play?

Speed

A commercial hard money lender is best used when time is of the essence. Most institutional lenders take 60 days or longer to underwrite and finance a deal. A good hard money lender can do it in 10 business days or less. A deal that needs to close by the end of the month can still be done. The borrower will pay for this convenience, but they still have a deal and they may have saved their deposit. The rates charged by hard money lenders are often higher than banks and their fees are generally steep.

Value Added Properties

Commercial hard money is also useful when an under-performing asset is purchased to be repositioned. A sample deal could be a 60% occupied office building, that is being purchased by an experienced owner to be leased up and then refinanced or sold at a profit. A hard money lender may evaluate the project differently and provide more capital to complete the project than an institutional lender.

Bridge Loans

Commercial hard money lenders are best utilized as a bridge loan. Shorter term loans used until more permanent financing can be arranged are often called bridge loans. Due to the higher interest rate, it is often in the best interests of the borrower to refinance and takeout the hard money lender.

Types of Hard Money Lenders - Brokers & Direct Lenders

There are various types of hard money lenders. Direct lenders invest their own funds in mortgages and deeds of trust. Hard money brokers have a list of investors that would like to invest in deeds of trust or mortgages. These individuals act as a private lender and supply the necessary funds on deals. Sometimes a hard money broker will have difficulty arranging the funding from a private investor.

Hard Money Standards

The underwriting standards of hard money lenders vary from company to company. Most will lend a maximum of 75% of value on improved commercial property. Some hard money lenders during the upswing of the market in the past few year have loosened their standards and have lent at a higher loan-to-value ratio. Unfortunately, some of those lenders are falling on harder times as delinquencies increase and inflated property values deflate.

A quality hard money lender can be a valuable tool in the kit of the smart commercial real estate agent or commercial lender. Hard money lenders appreciate knowledgeable professionals that understand what they do and how they do it.

Using an IRA to Invest in Real Estate

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Thu, 30 Aug 2007 13:11:49 -0500

Disclaimer: The opinions on this blog are for informational purposes only and should not be construed as tax advice. Please contact your professional tax advisor or investment professional before making a decision based on the opinions of this blog. As always, it is the role of the investor to perform their own “due diligence” before choosing an investment.

When people think of investing in an IRA (Individual Retirement Arrangement), most people think of stocks, bonds, or mutual funds. Through the use of a self-directed IRA you can use the funds in the IRA to buy real estate for investment purposes.

IRAs

Traditional IRAs are a means of deferring taxes to a later date. This can be beneficial for those that will be taxed at a lower rate in retirement than while working. This may be the case if you make only 60% of your current salary in retirement.

This vehicle allows for taxes on assets inside the IRA account to be deferred or postponed until the money is withdrawn from the IRA account. Hopefully, this generates a higher return for the investor because they are not giving money to Uncle Sam on all of their investments. For instance current income from bonds is not taxed now, allowing it to be reinvested for a higher return. Realized appreciation or capital gains tax is deferred until the money is withdrawn from the IRA allowing you to invest what you would have paid in taxes to generate a higher return.

Self-Directed IRAS

What is a self-directed IRA? A self-directed IRA allows you to use the expertise you have to improve your investment return. This is a great means for real estate investors to capitalize on the knowledge that they have. Taxes on appreciation and rental income can be deferred until a later date, thus allowing an investor’s portfolio to grow at a faster rate.

Most brokerages will tell you that their IRA is self-directed; by this they mean that you personally can choose the stocks, bonds, or mutual funds that you invest in. However, if you ask them if you can invest in a single real estate property they will probably tell you “No”.

A few trust companies have set up their IRAs so that you are allowed to invest in a single property. Equity Trust Company of Ohio and Pensco Trust Company of San Francisco are two such companies that allow the purchase of real estate in an IRA. You can buy property, invest in real estate secured loans, or even fund someone else’s mortgage from your account.

Prohibited Transactions

There are some specific rules regarding what is allowed and what is not allowed inside of an IRA. IRS Publication 590 outlines the rules and regulations regarding IRAs. These types of transactions cause the account to lose IRA status as of the first of that year and all the assets will be distributed to the owner. Taxes are due on any amounts above the basis in the account.

The IRS defines a prohibited transaction on page 45 of IRS Publication 590 as follows:

Generally, a prohibited transaction is any improper use your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant and any spouse of a lineal descendant).

The following are examples of prohibited transactions with a traditional IRA:

Borrowing money from it.
Selling property to it.
Receiving unreasonable compensation for managing it.
Using it as security for a loan.
Buying property for personal use (present or future) with IRA funds.

So you cannot use your IRA to buy a vacation home or a house for a child. You also cannot sell your current house to your IRA. For safety’s sake, it also means that you should not serve as manager of a rental property held inside your IRA. You cannot do repairs or rehab on a property yourself. The IRS will likely treat this as a contribution because you personally are “adding value” to your IRA.

Who Should Use a Self-Directed IRA?

A self-directed IRA is good for someone in the accumulation phase of wealth building. This phase is prior to actual retirement when an investor is accumulating assets to use as income during retirement. IRAs are not the best option for those in retirement because distributions from the account are taxable as income.

It is also a good choice if you have an existing IRA or a 401(k) from a previous employer. Frequently, these existing accounts can be rolled-over into an IRA without affecting their tax status. The IRS limits traditional IRA contributions to the lesser of $4,000 ($5,000 if you are over 50) for 2006 or your taxable compensation for the year. It would take a few years’ worth of contributions to accumulate enough wealth to invest in real estate. (SEP and SIMPLE IRAs allow self-employed owners to contribute more to their IRAs. You should talk to your tax advisor about the benefits of these accounts.)

These accounts are useful for people that have an existing IRA, but are unsatisfied with the current returns produced by conventional investments. By investing in high quality real estate, the IRA owner can use their specific knowledge to improve the return on their retirement assets.

A Great Market to Buy

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Sat, 16 Jun 2007 17:32:55 -0500

This current market is a great market to buy investment property or a first-time home.

Why? In many markets, including the East Bay Area of California, the market has returned to a more normal status. The insanity of the seller's market during 2004 and 2005 has shifted to a buyer's market. In some areas of the country there has been a price correction for homes.

The buyer's market is a simple product of supply and demand. Currently, there are more homes on the market than buyers. This creates a surplus of homes. In Concord, California there was roughly a 12 month supply of single-family homes available, according to my calculations.

Two things can resolve the current surplus of homes. 1) More home buyers enter the real estate market. This is the more unlikely solution. Mortgage lenders have tightened their qualifications for loans. Eligible home buyers must have better credit scores and a stable financial situation to qualify for loans. Also, interest rates have increased in the past few weeks, decreasing the amount home buyers qualify to purchase. The combination of these two factors make this solution less likely than the other.

2) Home owners decrease their home prices. Sellers will need to make their home more attractive to the available home buyers in the market. One of the ways will be a reduction in listing price. This can be evidenced through buyer incentives (credits toward closing costs) or by lowering the asking price. Home sellers are forced to compete on price to entice buyers into the home.

Home sellers cannot immediately increase the number of home buyers as a result of their actions. However, a home owner can lower the price of their home to increase the home's attractiveness to the available buyers. If you can buy more house for less money, why wouldn't you?

This makes it a great market to buy a home for investment or personal use. I say that with a caveat: The holding period should be greater than two (2) years. I make this caveat because I think that we are near the bottom of the current real estate market correction. I am not sure that we have reached the absolute bottom yet. A two year holding period allows for the real estate market to reach bottom and begin to rise again.

My advice to buyers and investors: Call your agent today and get in the market! This in my opinion is a great time to buy for the long haul.

My advice to sellers: Do not expect to set the terms of the deal. You are no longer in the driver's seat of the real estate market and need to make concessions to home buyers.

Walnut Creek Open House Sunday 1-4pm

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Sat, 16 Jun 2007 13:08:27 -0500

Spectacular, Mediterranean-Style Villa in South Walnut Creek

Location: Walnut Heights Area

Open House Sunday June 16th, 1-4pm

This magnificent new home sits on almost an acre of land in South Walnut Creek. It's convenient location provides easy access to schools, shopping at Broadway Plaza, Shell Ridge Open Space, and freeways all in less than 10 minutes.

The house is ideal for entertaining guests. The gourmet kitchen features Thermador appliances, including a 6-burner range, two ovens, a warming oven, a large refrigerator, TWO dishwashers, and microwave. The kitchen counters are honed marble and the flooring throughout the first floor is hickory.

The kitchen and great room flow together creating an ideal space for dinner parties. The great room is accented by vaulted ceilings and a fireplace. Large windows and French doors bring a sense of the outdoors inside the home.

The master suite is highlighted by incredible views of Mt. Diablo and has its own fireplace for romantic evenings. The master bathroom has a glass shower with separate tub. The walk-in closet includes shelving units and storage.

Wake up to the smell of freshly brewed coffee coming from the master suite's in room coffee bar. Take your freshly brewed pot of coffee to the private balcony to enjoy your morning paper and start the day right in your new home.

Information

Contact Information

Peter Maclennan

(925) 324-8626

Peter.Maclennan@prurealty...

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Pricing

Asking Price: $2,395,000.00

Flexibility: Negotiable

Property Location

100 Black Oak Knolls
Walnut Creek, CA 94596
View Map

Links

Virtual Tour

http://www.PeterMaclennan.com

Features

Bedrooms: 5

Bathrooms: 4.5

Parking: Yes

Year Built: 2006

Lot Size: 0.92 Acres

Garage Size: 3 Car

Square Footage: 4,000+

Agent Name: Peter Maclennan

Broker: Prudential California Realty

Attributes

Appliances

Range/Oven

Full Refrigerator

Washer/Dryer

Dishwasher

Sink Disposal

Microwave

Wine Refrigerator

Interior Amenities

Fireplace

Hardwood Floors

Security System

Kitchen Island

Vaulted Ceilings

Exterior Amenities

Patio

Fenced Yard

Grass Lawn

Secluded setting

Private Balcony

Photo Gallery

View as Slideshow View Photo Gallery (8 Photos)

Equal Housing Opportunity

VFLYER ID: 1098000

Shell Ridge Open Space

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 12 Jun 2007 18:54:08 -0500

The Shell Ridge Open Space is the largest open space within the bounds of Walnut Creek. Shell Ridge is a great place to ride your bike, go for a hike, or take your dog for a walk.

Just being in nature is one of the best parts of the Shell Ridge Open Space. Walking along the trails it is not uncommon to see squirrels, reptiles, and other wild creatures. In the midst of the Open Space is an extreme sense of calm from experiencing the beauty around you.

Here is a map of the Shell Ridge Open Space.

Walnut Boulevard NOT Walnut Avenue!

Peter Maclennan - Commercial Hard Money Lender (Owens Financial Group) — Tue, 01 May 2007 17:05:46 -0500

One of the most confusing things for people I know is my description of where I live. I tell most people that we live off of Walnut Boulevard. Most of the replies I receive say, "I know where that is. Doesn't that connect with Bancroft Avenue?" To which I have to respond, "No." So you don't really know where it is. (Map of Area)

When I was growing up, I never even realized that there was a Walnut Avenue. Why? Because living in the Wild Oak area of Walnut Creek limited our exposure to most things east of Homestead on Ygnacio Valley Road. From the house here we could just cruise down the hill to Nordstrom's and Safeway. We could take a different route and end up on Newell Avenue by Caspar's Hotdogs. We had little or no need to head east on Ygnacio Valley Road.

The Meadow Creek, Wild Oak, and Walnut Heights areas are very desirable because of their close proximity to almost everything. It takes less than 10 minutes to reach downtown Walnut Creek by car on a bad day. The freeway is less than 10 minutes away. They are near to Las Lomas High School, Walnut Heights Elementary and Walnut Creek Intermediate School. Also within walking distance is Howe Homestead Park and the Shell Ridge Open Space.

Most of the homes were built in the 1950's and 60's. The homes have an individual character and some have been tastefully remodeled. Most of the lots are large enough that homes can be expanded. Many homes in the area also have pools. Much of the area consists of gently rolling hills and gullies. Some homes even have a view of Mt. Diablo.

Once off the main roads, many of the cul-de-sacs are quiet and great for kids to play with neighbors. Recently many younger families with children have moved into the area. This is the ideal place for a young family, who wants their kids to attend quality schools and live in a great neighborhood.

Walnut Creek is a great place to live, raise a family, and work. It is also a wonderful place to live if you work in San Francisco, San Jose, or Oakland. And the neighborhoods of Meadow Creek, Walnut Heights, and Wild Oak are ideal locations in Walnut Creek to buy a home.

Peter's Real Estate Thoughts

The Sun Will Rise Again

Adding Value in a Down Market

Questions to Ask a Commercial Lender

Affect of Vacancy and Rental Rates on Commercial Real Estate Value

The Plight of Retail Stores

The Pain on Retail Center Owners

How Vacancy and Rental Rates Affect Value

Slight Changes with Devastating Effects

The Current Credit Crisis

How to Survive the Current Market: Focus on Things You Can Control

Weathering the Storm

Focus on Things You Can Control

Focus on Your Attitude

Focus on Being Productive

Focus on Adding Value

Get Back to Work!

Is it a Development Loan or a Construction Loan?

What’s the Difference, Who Cares?

Construction vs. Development

Defining Loans

How to Find Distressed Properties

Marketing

Marketing Costs

Marketing Budget

Market to Your Sphere

Direct Mail

Signage

Classified Ads

Mass Media

Conclusion

Interesting Real Estate Tid-Bits

How to Write an Executive Summary for a Commercial Mortgage

Salient Facts

Project History

Exit Strategy

Sponsor Summary

Sources and Uses

Property Financials

Conclusion

Locked Up in a Broker Daisy Chain

What is a Daisy Chain?

Problems with Daisy Chains

How to Avoid Daisy Chains

Remedies for a Daisy Chain

Summary

When Hard Money Pays

I Voted!

A Busy Week

Story Lenders: What's your story?

What should you include in your story?

Introduction

Body

Conclusion

How to tell your story?

Fundamentals are Still Fundamental

What Association(s) are you a member of for propecting/business development?

Commercial Hard Money Construction Loans

Loan-to-Cost

Cost Categories

Sources and Use of Funds

The Devil is in the Details

The Wrap Up

Hard Money Hints

Commercial Income Property Valuation

Underwriting a Commercial Loan

How Commercial Mortgages are Underwritten

Debt Service Ratio

Common Mistakes

Required Documents

Executive Summary

Standard Documents

Other Documents

Useful Information

Summary

Commercial Hard Money Loans an Explanation

Use of Commercial Hard Money Lenders

Speed

Value Added Properties

Bridge Loans