How to find loans in the Atlanta commercial real estate market.

Lending Climate:

Considering the state of the economy today, it is relatively easy to understand why lenders have tightened their wallets.  Before the market took a turn, it was rather simple for the average buyer to get approved for an 85-95% LTV ratio.  Given that the buyer had strong credit, and descent income, the lender would not resist giving the transaction some strong consideration.  The borrower would be met with competitive interest rates that would make the income-producing property they were seeking seem that much more intriguing.  Today, lenders are singing a different tune.  Some lenders will give a cold shoulder to deals they would have welcomed with open arms just 24 months ago.  However, on a more positive note, buyers can still find lenders that will cooperate if they can show the lender that the property can support itself.  Keep in mind that the capability of the buyer will still be a strong basis for determination. 

Types of Loans:

Without going into too much detail that would bore the average reader, I want to provide a few examples of the types of loans that are readily available to potential buyers.  HUD loans can easily provide 90-95% LTV ratios for acquisition and construction loans, but can take up to 6 months before reaching the closing table.  Bridge loans on the other hand can close very quickly, but are rather expensive and are not recommended to be held for more than 1 to 3 years.  Similar to Hard Money, Bridge loans can act as interim financing until the next stage of financing can be obtained.  SBA loans are becoming more popular as they will provide 90% LTV ratios.  The one drawback is that the property must be at least 50% owner occupied.  Finally, traditional mortgages for both residential and commercial properties are being offered by private lenders nowadays more so than banks.  Buyers who know where to look will be pleasantly surprised to find that private lenders are willing to offer very competitive interest rates.  With a strong financial background, good credit history, sufficient collateral, and/or enough liquid assets, buyers will acquire income producing properties with ease.  LTV ratios for properties under 3 million will range from 65-80%, where as properties in excess of 3 million will range from 80-90% LTV; depending on the type of property, location, performance, etc.

Potential Scams:

You can find plenty of honest private lenders out there that are happy to help, but unfortunately there are a few out there who are imposters. They claim they can get the deal done for you quickly and at a great interest rate, and all you have to is pay some upfront fees before you’re on your way to closing.  Unless you are familiar with the lender, do some checking first.  You can even ask for references.  There are a lot of brokers claiming to be lenders that make a living off of upfront fees.  Some will charge you as much as 5-10K for “processing.”  I’ve seen as much as 50K for multi-million dollar loans.  These, most of the time, are junk fees that don’t guarantee you anything and are not put towards your loan.  Also, you can bet your bottom dollar that there will be more fees down the road before closing.  Do not fall victim to these scams, there are lots of honest lenders that will process your application and put a signed pre-approval letter in your hand without charging a dime.  Buyers will find brokers/Funding Specialist like me who might charge a small retainer for their services.  This is understandable considering they are being asked to put in time and effort without a guarantee of results.  Plus, the buyer gets the benefit of using that Funding Specialist as a portal to various lending institutions, without putting in the much needed footwork themselves.  However, as I stated above, ask for references, if they cannot provide at least one there is something wrong with that picture.

In Conclusion:

No matter how bad the economy gets, there will always be companies that are willing to lend if the numbers tell a good story.  Right now is the absolute best time to acquire real estate.  When the market takes a turn for the better, the individuals who bought today will come out on top with very attractive ROIs.

Written by
Omar Bramwell
Funding Solutions Ltd.

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