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** *Hard Money Loans For the Novice Investor - Commercial and Apartment Property Rehab* By Lloyd Clarke <http://ezinearticles.com/?expert=Lloyd_Clarke> Commercial Hard Asset or Bridge loans can be used for numerous purposes. One of the more common ways that the majority of newcomer commercial investors take a stab at Hard Asset loans are for deserted buildings or rehabs. This could be a double edged sword. While a deal looks good from the proforma numbers that are given, many lenders are playing it safe when it comes to financing a idle building, specifically for the beginner. If the facility is dark how are you going to repay the mortgage? If you want to take on a venture such as the one represented above, you must have either some deep pockets or a partner with a bulging purse. Here is why, if the property is a major rehab venture then, you will have to compute the interest expense into your opportunity costs. Interest expenses on a hard asset loan are anywhere from 11-18% with 4-8 points paid on the front end. You could find typical Loan to Value ratios for commercial hard money between 50-65%. And the payments are typically interest only. The duration of standard hard asset financing are between 6-24 months. To make sense in pursuing, as you could see from the numbers above, there needs to be notable equity in a rehab or hard money deal. If your new to investing in commercial real estate, you must consider that there are several moving pieces to a rehab which include: Directing the major rehabilitation - This necessitates picking experienced project managers and contractors. Also, you must choose the right materials and building systems to upgrade and or replace or you won't force the appreciation nearly as much as you might think. Managing the Contractors - Selecting a crooked could honestly place you in a tight situation and set you back. Handling the lease up - With out tenants, you won't make any money. Nevertheless, choosing the wrong occupant can wind up being worse than not having an occupant at all. Sticking to your time schedule - It is imperative to fall within your initially projected time schedule, both for permitting and financing reasons. Refinancing before your balloon is due- A typical venture must have at least 2 years of positive financial statements before a conventional lender is willing to refinance the building and pay the hard asset loan off. The above stated reasons are some of the things a seasoned commercial investor knows can go wrong in a renovation. Don't get me wrong, I work with several developers that renovate and rehabilitate properties but they have other pieces in place that allow them to move on these types of deals with minimal resistance from lenders. Another way to structure a hard money deal is to acquire a property that is currently occupied, but is under performing. This takes a significant portion of the lenders risk away. With this strategy, there is a considerable piece of the holding time completely removed because there is no renovation process. Consequently, allowing those critical extra months of profitability to successfully secure permanent financing. The next time you look at a commercial renovation deal, keep these issues in mind. Lloyd Clarke provides training and systems to help you succeed in your commercial real estate and financing business. Find out more about hard money and commercial finaincing with this popular webinar training series, available at: => http://www.commercialfinancingtraining101.com --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Real Estate Discussions, etc." group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/realestateadvice -~----------~----~----~----~------~----~------~--~---
