Published on April 28, 2008
Slide1: Business Building Seminar Our Objective: Help You Become…: Our Objective: Help You Become… Who is The Money source?: Who is The Money source? National lender - small commercial and income producing properties Unique programs - meet the needs of small business owners and investors Equity lender/credit lender Commercial real estate secured loans only Why Brokers Don’t do Commercial Deals:: Why Brokers Don’t do Commercial Deals: Too complex - Fear Too time consuming Spend the time but don’t get paid Don’t know the money sources Not familiar w/ needs of commercial clients Too busy with residential business Why Small Commercial Loans?: Why Small Commercial Loans? Less competition Less interest rate driven Fewer regulations Constant need for financing Few states require a license New revenue stream $$$ Why Small Commercial (Cont.): Why Small Commercial (Cont.) FACT: $100,000 - $1,000,000 commercial property types represent ROUGHLY 70% of the TOTAL American economy. Why The Money Source Loan?: Why The Money Source Loan? Less complex transactions Abundance of small commercial properties Need for “creative financing” Close faster - 45 day target Shorter learning curve Growth opportunity Commercial Money Sources: Commercial Money Sources Small Loans Banks SBA Lenders Thrifts Mortgage Bankers Investment Bankers Hard Money/Private Money Traditional Lenders: Traditional Lenders Business License Corporate Documentation Personal History Insurance Information Business Financial Info Purchase Agreement Environmental Studies Survey Cross Collateralization High Fees DNA sample Personal Financial Statement Lease Agreement Bank Credit Application Landlord Waiver Green Card Affilliate tax returns FORM 4506 Rent Roll Operating Statement Background Information Schedule of Business Debt Debt Service Coverage Ratio: Property’s Total Annual Income less Property’s Total Annual Expenses = NOI – Annual Net Operating Income Annual NOI Annual P&I payments Debt Service Coverage Ratio = DSCR Hard Money: Hard Money Very High Interest Rates Low LTVs Fast Closings All Credit Considered Minimal Documents All Property Types High Commitment Fees Temporary Solution Why do you think we call it “hard money”? THE MONEY SOURCE: Money Source Loan THE MONEY SOURCE TRADITIONAL LENDERS PRIVATE/HARD MONEY Who Needs an Money Source Loan?: Who Needs an Money Source Loan? Clients underserved by traditional lenders: Difficulty providing documentation Faster service Under bank’s minimum loan amount Significant cash out Need subordinate debt – 90% CLTV Balloon notes due Property type Who Needs an Money Source Loan?: Who Needs an Money Source Loan? Alternative to hard/private money sources: Needs higher LTV Wants lower fees Wants/Needs benefit of lower interest Needs longer loan term Improved credit Poor Credit is Not the Reason: Poor Credit is Not the Reason Loans in 2006: 84% had a 640 or better Average Credit Score: 688 Borrower’s Credit Grades The Money Source Loan: The Money Source Loan Loan Amounts $100,000 - $1,000,000 Property Types • Multi-Family • Mixed Use • Office • Industrial/ Warehouse • Retail • Hospitality • Automotive/Gas • Special Purpose Ineligible Properties: Ineligible Properties Traditional Churches (no alt. use) Raw Land and Farms Construction, Development, Rehab Adult Entertainment Facilities The Money Source Loan: The Money Source Loan Easy 1-2-3 submission process Loan Request 1003 Tri-merge credit report No App Fee/No Commitment Fee Common Sense Underwriting Stated Income/Stated Asset Appraisal is the Key to the Process Underwriting Philosophy: Underwriting Philosophy Stated income/stated asset Common sense Flexible guidelines/outside guidelines Capacity & motivation to repay the loan Process built for efficiency Slide21: The Matrix . . . Matrix – Property Tiers : Matrix – Property Tiers Matrix – Credit Grading: Matrix – Credit Grading A+ Gold: Reduce rates 50 BPS! Matrix – Pricing Alternatives: Matrix – Pricing Alternatives Matrix – Amortization Alternatives: Matrix – Amortization Alternatives 20-Year . . . NO INCREASE! 25 Year . . . Add .25% 30-Year . . . Add .25% Tier 1 and 2, A- or better credit YSP: 50 BPS = 1 Pt. (2 Pts max) 4 pts YSP available on 5/7/10 OneRate .25% per point above 102 Matrix – Select Program Notes: Matrix – Select Program Notes 5-year, 5% prepayment penalty 2-year “Interest Guarantee” Trust, LLC, corporate entity OK personal guarantee Environmental due diligence Dry closings No Seasoning Program 7 minute – Break : 7 minute – Break Still to come: Appraisal Process Preview: Sales and Marketing Seminar Real Deals The Money Source Appraisal Approach: The Money Source Appraisal Approach Common goals Background The Money Source philosophy Quality counts Remember: The Appraisal is the Key to the Process. Appraisal Differences: Appraisal Differences Effective Appraisal Process: In-house real estate department Effective Appraisal Process “Mercury Real Estate Services” Appraisal Ingredients: Appraisal Ingredients Up-front appraisal processing fee $1,500 and up Appraiser Selection Engagement letter - appraiser’s blueprint Documentation for appraiser: Agreement of sale Rent roll Commercial leases Property description & photos (if available) Importance of Pictures: Importance of Pictures Slide33: Good on deals submitted before October 31, 2007 Key to Efficient Processing: Key to Efficient Processing Submit Conditions BEFORE Appraisal Due Date for Efficient Closings Tips to Increase Results: Tips to Increase Results Don’t apply residential mindset to commercial deal Don’t chase only the BIG deals Align the right borrower with the right lender Sell the solution/benefit Deal View . . . (California): Deal View . . . (California) Bar/Liquor Store – $416,000 LTV: 80% (part of strip mall) Broker found canvassing Business sold separately Closed in 29 days Commission: $8,770 1 pt. Origination 1 pt. YSP Processing Fee: $450 Deal View . . . (New Jersey): Deal View . . . (New Jersey) Mixed Use – $360,000 LTV 80% A+ credit Refi – debt consolidation Closed in 55 days Referral from CPA Commission: $10,800 2 pts Origination 1 pt. YSP Deal View . . . (California): Deal View . . . (California) Industrial – $600,000 Refinance – improvements Old resi. file = new loan LTV: 60% Environmental issues Deal closed in 72 days Commission: $10,750 Flat Fee: $10,000 Processing fee: $750 Deal View . . . (Colorado): Deal View . . . (Colorado) Auto Repair – $350,000 LTV = 77% A credit, owner occupied Purchase – 13% seller 2nd Ad in newsletter Deal closed in 52 days Commission: $11,130 2 pts origination 1 pt. YSP Processing fee: $630 Deal View . . . (Tennessee): Deal View . . . (Tennessee) Motel – $475,000 A+ Borrower Purchase Non-seasoned Post card LTV 70% Closed in 50 days Commission: $9,500 1pt origination 1pt YSP Deal View . . . (Michigan): Deal View . . . (Michigan) Restaurant – $345,000 Refi: new equipment LTV 60% Credit A-, cash business Closed in 49 days Lead from former client Commission: $13,800 2.5% Origination 1.5% YSP Your Opportunity . . . : Your Opportunity . . . Average Loan Size $313,000* Average Broker Commission $12,116* (3.9 pts) One Loan a Month for 6 months: $75,000 in Potential Income *Statistics from Loans Closed in 2006 Next Steps: Next Steps Committ to an action plan: Put it in WRITING Give yourself a DEADLINE See sample action plan in booklet THANK YOU!: THANK YOU!