commercial loan

10 Tips for getting a Commercial Loan

Beginners look at commercial loans as a means of realising a dream. They long to own their own restaurant, pub or bed-and-breakfast, and look to their friendly local bank manager for help. Cue frustration and disappointment. These days, commercial loans are decided by back-room underwriters, who use cold calculation to decide your credit worthiness. To the seasoned pro, it’s just another day at the office; a handy way of adding to their portfolio. To get the best deal, you need to prepare in advance. Here are a few tips to help you on your way to securing a commercial loan:

  1. Have your business plan, forecasts and projections, financial records and statements, history of the property’s income, and the appraisal when you approach lenders. Make sure these are accurate and up to date. This lets the bank know that you mean business. If you make them think about your application and make their own assumptions, they are more likely to decline the application.
  1. Put your own money down. You’ll need at least a deposit and settlement costs. Lenders want to share the risk, not own it entirely. They will usually not finance more than 75% of the appraised value of the property. Personal guaranties of the principal owners may be necessary for a commercial loan.
  1. Get your own appraisal of the property. This will provide you with an unbiased estimate of what the property is really worth. You’ll then know whether it’s worth the financial risk.
  1. Apply for your commercial loan as soon as you can. Commercial lenders exaggerate their speed. They’ll quote you forty-five days when it’s more likely to be three months!
  1. Never rely on just one commercial lender. Commercial lending is very subjective.
  1. Lenders near the property generally offer better terms. With those farther away, it’s a case of ‘out of sight, out of mind’.
  1. Have a lawyer who specialises in property investment go over everything. You need someone who knows the business and who can be an advocate on your behalf.
  1. Be certain that you can afford to keep your business going and still meet your payments. Properties must show sufficient debt-repayment ability. If the property is to be occupied by a sole tenant, the lender may want to appraise that tenant’s finances.
  1. Check with your local small business administration for any potential grants or low interest commercial loans you might be able to wangle.
  1. Negotiate. You do not have to take the first offer you get. Getting a commercial loan is like buying any other goods. People are sometimes too in awe of banks to haggle. There’s no need to be afraid; they can only say no!

 

Beginners look at commercial loans as a means of realising a dream. They long to own their own restaurant, pub or bed-and-breakfast, and look to their friendly local bank manager for help. Cue frustration and disappointment. These days, commercial loans are decided by back-room underwriters, who use cold calculation to decide your credit worthiness. To…

Commercial Real Estate Misconceptions: You Mean Location, Location, Location Was a Lie?

Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter the market of commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.Many people who hear about commercial real estate, but aren’t necessarily in the business, often use the expression “location, location, location!” Many people associate this expression as the truth, that the three most important attributes about a property are “location, location, location!”

I am here to tell you – this is absolutely not the case! Now, I am not going to say location is not important, but what if you have a beautiful location for a Bushland retreat, complete with hills, a perfect location for a hotel, and beautiful mountain views? What you want to do to the property is improve it as a weekend getaway for romantic couples with a beautiful hotel, resort, luxury type housing, and perhaps some individual cottages overlooking the bushland. Sounds great, right?

The perfect location- you can’t beat it! But, you learn that the zoning for this property is residential. The use is only one single family residence per acre, and no commercial property allowed. What happened to your “location, location, location?” It flew out the window!

The most important aspect of a property is the use. What is it intended for by designation of the council? It does not matter where the property is, if you cannot get the zoning that is in the realm of your intended use.

It is possible to get properties rezoned, especially as cities and towns change and grow. Be sure to consult with the council to determine if these changes are even possible, because you do not want to buy a property that you cannot rezone, and be left with an unprofitable property on your hands.

Most people believe that commercial real estate is complicated and you need a special education or know how to succeed in the business. Many think that commercial real estate is filled with international finance, heavy and complicated math, complicated tax rules, and forms and applications that are just too complicated to understand correctly.

I am happy to tell you this misconception is the worst, because it puts a road block in front of many people’s aspirations to become a commercial real estate insider. Let me put this misconception to rest. There is math involved, and most of it is not at all complicated: simple ratios, adding, subtracting and multiplying. What is even better is you don’t have to do the math. There are others who can do that for you. The same is true with property management, inspecting the property, and doing the end of year taxes. In fact, commercial real estate is less complicated than residential real estate because you can focus your energies on a single deal that will be worth perhaps 10, 20, even 50 residential deals!

Let me put it into perspective for you. If you owned a business (many of you may), would you create strategies, keep the books, manage the many locations, sell on the front floor, and take out the trash after the day was over? I think not! Commercial real estate is made up of many people whom are there to help you with whatever you need. You must position yourself as a real estate insider, which is a leader in the business.

Another misconception is commercial real estate is management intensive, that you must manage every property you own. Let me tell you when you end up owning 10 or more properties, this is almost impossible to do! You do not have to actually manage your properties yourself, so you can concentrate on creating more deals. Hire a company or agent or set a team in place to take care of this “day-to-day” business.

As you can see, what is passed around in dialogue about commercial real estate is not always true. Before you take everything to heart, be sure to get your facts straight. In fact, many people in this profession speak about commercial real estate as a business in which only the savvy and sophisticated can succeed. They often act this way because they want to keep people out of the market by differentiating themselves. If you were in this position, you would too!

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

 

Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter the market of commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.Many…

Three Character Attributes Every Successful Commercial Real Estate Investor Must Have

Known for his tremendous wealth, ability to put together the largest, most profitable commercial real estate deals, and famous reputation, and whether you love him or loathe him, there is no denying that Donald Trump is the commercial real estate investor icon of our times.

Although we know he has extremely creative financial and investment strategies, and expert legal advice from people such as George Ross, he has more than just the average investor. There are other investors who probably know as much as Donald does, or more. However, they do not have the successful qualities that allow them to create such wealth from commercial real estate and accomplish the goals Donald has.

Donald has three successful qualities that you need to possess to truly create the quality of deals and wealth he is known for. These qualities are his ability to build relationships with everyone he works with, his ability to sell the big picture, and strong, overpowering charisma that takes a room by storm.

Almost any deal can work to your advantage if you work on and develop these skills. You may have strength for one or another. However, in order to have this industry at your fingertips, you must master each one. Success is delivered through the relationship between these characteristics, as one is not as good without the other or by itself.

Being able to build relationships with everyone that you work with is absolutely critical in the commercial real estate industry. You want to rub elbows with the decision makers in your city; those who are in charge of council zoning and planning committees at every level of the city. Get past the gate keepers and speak to the core people asking for their advice and become close acquaintances on a first name basis. These relationships can be implemented before you even think about doing a deal where their influence may be necessary. Relationships will not only get you insider information, but will give way for special favours and a good word to others who may influence your accomplishments.

Charisma is the ability to ignite passion and motivation among all those who are in an ear’s reach of the person. Charisma allows everyone to breakthrough barriers that otherwise would remain standing. Those who are charismatic can make even opposing forces agree on a common goal and move forward ambivalently. Donald can do just this – igniting passion and excitement that lines people up to follow in his direction. He becomes a true leader that others happily follow because they believe in him and his message. This characteristic will let you bring people on board that otherwise wouldn’t even think about working in your favour. It is a very helpful and powerful characteristic to possess.

The final characteristic is selling everyone on the big picture – everyone who is influenced by the value created in the deal. The community, the city, builders, developers, banks and even businesses around the location in which the project is growing all need to understand what is not there currently. As you know, these projects that were once old, dilapidated buildings that did absolutely nothing but bring the city or suburb down, can be turned into multi-million dollar establishments that can change the value of the entire city.

Do you have these qualities? Do you see yourself having the same effect on others as Donald Trump has had on the many people he has worked for? Everyone can master these abilities with a little focus and practice. Study others who are successful and possess these qualities. And remember that they are most effective when working together, not standing alone.

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Known for his tremendous wealth, ability to put together the largest, most profitable commercial real estate deals, and famous reputation, and whether you love him or loathe him, there is no denying that Donald Trump is the commercial real estate investor icon of our times. Although we know he has extremely creative financial and investment…

Demystifying mortgages – 12 myths about lending every first home buyer should know.

Myth #1
You need at least 20% deposit to get a mortgage         
In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans.  Borrowers can often borrow up to 95% of the purchase price which is a tempting offer for any first time home buyer wishing to get into the property market. A low deposit home loan may often attract higher interest rates or more stringent policy restrictions but if you are confident you can afford the repayments then you can achieve the dream of owning your first home with a minimal deposit.

Myth #2
Fixing your rate is safer than a variable rate
When interest rates are high, many are tempted to fix their rate to protect against further hikes.  All is well with the world and as a borrower, you feel incredibly happy that you are not affected by the next huge rate increase.  The problem here is that if rates fall, you end up paying a higher interest rate compared to the variable rate.  Fixed rate home loans do offer some security in an uncertain market, and also allow borrowers to know exactly what their mortgage repayments will be for the next one, three or seven years. Everyone is different and has varying financial requirements so talking through your options with a mortgage broker is recommended.

Myth #3
A bad credit history means you won’t get a home loan
Let’s get one thing clear.  A bad credit history is not good.  Any missed or default payments on credit cards or mobile phones are recorded.  Even if the amount was small or years ago, it affects your credit rating.  However, not all is lost.  Lenders will consult your credit history and feed this into their own credit scoring system.  If it turns out there are issues, the lender may take a closer look and may still approve a home loan if you meet the requirements.  Similarly, non-conforming lenders provide an alternative option for borrowers who have been refused finance by traditional lenders.  Non conforming lenders are an ever expanding avenue and offer in many cases quite competitive products providing opportunities which were once deemed impossible.

Myth #4
I can still get a home loan even though no income, because I have several assets
Yes, you may have a collection of stamps from the 1920’s to be proud of, but it’s not going to convince a bank to lend you $400,000.  Assets aren’t the same as income, and it’s your regular income that lenders get excited about.  Lenders will only lend as much as people can afford to repay, and a first time home loan is a big commitment. The amount of income earning capacity you have will ultimately determine how much you are able to borrow.

Myth #5
Get the lowest rate possible
Be cautious with low interest rates.  A cheap rate is attractive, especially to first home buyers, but take note because these low rates often come with less features on the home loan, reduced flexibility and higher fees. They may only be an introductory rate and once that honeymoon period is over you could find yourself paying a much higher rate.  Often a loan with a slightly higher rate but more features will save you money over the life of the loan.

Myth #6
Credit cards are okay if I pay them off.
When it comes to credit cards it’s not all about the balance on your card, or cards, it’s the total available credit that counts. Having a large range of credit does not necessarily equate to a good credit history.  Often it’s the credit card limit, not the balance that counts.  So even if you pay off all your credit card debts, if you still have a high limit this can affect your servicing and chances of approval.

Myth #7
I can roll my personal debts into my mortgage
So you have a car loan and credit card debts, and you want to roll all of these into your home loan?  Makes sense, as the interest rate on your mortgage will be lower than your current rate.  But, first home buyers are not usually able to just throw all their debts together like this.  Usually you have to build up equity in the property and then use this equity to service the additional debt.

Myth #8
A low-deposit home loan means you don’t need any savings.
This one is most certainly not true.  First home buyers get excited and tend to think that a 95% per cent loan means that they do not have to pay much money upfront.  But, a 95 per cent home loan only covers most of the cost of the property, and not all the purchase costs such as stamp duty, legal fees, property inspection fees and lenders mortgage insurance (LMI).  You will still need some savings to cover these costs as well as the 5% deposit.

Myth #9
Start by paying just the minimum amount
Many first home owners pay only the minimum monthly repayment, as they adjust to the new financial commitment.  However, at the start of the loan you are really only paying interest so by paying more than the minimum, you quickly reduce the amount of interest and principle on the loan.  As interest is calculated daily, repaying twice a month instead of once per month can also save you thousands in interest.

Myth #10
Mortgage insurance protects the borrower
Lenders Mortgage Insurance (LMI) protects the lender, not the borrower.  Borrowers who can put down a 20% deposit should not need to pay LMI but borrowers with any less than this will pay LMI to the lender.  The less deposit you have, the higher the premium.

Myth #11
Offset accounts save you money
Home loan offset accounts are a great idea, but only for those borrowers who are responsible with their money and have a regular income. If you have a shoe addiction or tend to buy all your mates extra rounds at the pub, you may want to think twice about offset accounts.  Your income goes straight into your home loan account, pays your mortgage repayment and then you can use the extra funds for other expenses.  However, if you have bad spending habits you could end up spending more.  Be careful not to end up in negative equity because you didn’t monitor your spending.

Myth #12
Refinancing saves you money
Perhaps you have just bought your first home, and you are enjoying all the benefits of your own home.  Your first time mortgage is going well, but perhaps you fixed your rate six months ago and now rates are coming down, or maybe you want to switch to a different lender.  Refinancing sometimes costs money. In the way of exit fees for existing home loans, and settlement fees for the new loan.  However, the market is quite competitive currently and some lenders are giving all the power to the home owner.  Shopping around and refinancing your home loan can save you thousands over the life of you loan, but can also end up costing you more, so talk your possible choices through with a mortgage broker before making your decision.

Author: Melanie Burns

To discuss this article or anything to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Myth #1 You need at least 20% deposit to get a mortgage          In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans. …

Unleash your Equity!

Unless you’re thinking of selling your home, chances are, you don’t know what it’s worth any more.

If you purchased your home a while ago, you’ve probably built up some equity – either by repaying some of your loan, an increase in the value of your property, or a combination of both.

You may be able to use this increased level of equity for a variety of purposes. In today’s market, many home owners are using the equity in their homes to either renovate or fund the deposit on an investment property.

The good thing about equity is you aren’t limited to using it in the property market. If you always wanted a boat or a pool, you need a new car, or maybe you’d just like to take a holiday, you can use the equity in your home.

A loan that helps you tap into your equity can make a big difference to your future plans. To discuss your equity options, or the loan that is in your best interest, contact me today by phone 0434 087 735 or email [email protected]

We can even provide you with a comprehensive property report to give you a better understanding as to the current value of your home or investment property – to request a report for a low fee of $60 click here [email protected]

Self-Employed Borrowers

As a business owner, do you often find it difficult securing a home loan just to buy a home, let alone for investment purposes?

Good news! Home loans needn’t be hard work just because you’re self-employed, even if you are unable to provide the financial documentation required to support a traditional loan application.

At Sherlock Holmes Lending Solutions we have access to a range of lenders and home loans, including special products which may make the loan process much easier for you.

And we’re not just talking about home loans. We can help you with:

  • Investment loans
  • Car Loans
  • Asset Finance
  • Commercial Loans
  • Refinancing
  • Debt consolidation

To discuss your home and investment finance options, or to find the home loan that is in your best interest, contact me today on [email protected]

Unless you’re thinking of selling your home, chances are, you don’t know what it’s worth any more. If you purchased your home a while ago, you’ve probably built up some equity – either by repaying some of your loan, an increase in the value of your property, or a combination of both. You may be…