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…

Seven Steps to Eliminate Credit Card Debt

Here are Seven common sense guidelines to eliminate credit card debt:

1) DO make a budget listing all your fixed expenses. Rent or mortgage, car insurance, car payments, mobile phones, utilities, day care, fixed loans, etc. Then try to estimate a reasonable budget for discretionary items like food, entertainment, clothes, etc.

2) DO make a second list of all your outstanding balances and sort by balance, minimum payment, and interest charges if you have multiple credit card debts.

You may think the wisest thing to do is paying off the credit card with the highest interest rate. However, there are 2 preferred methods to follow.

First, you should reduce the number of credit cards. Pay off the smallest balance first with larger payments until the number of credit cards you have in debt is down to one. Your ultimate goal is zero, or when you can pay your monthly balance in full every month.

The other strategy is to pay the balance on any card exceeding 50 percent of your credit limit because balances above this level may affect your credit score.

3) DO use cash or a debit card linked to your bank account. You can’t spend what you don’t have.

4) DO look for extra income. Most likely your rent or mortgage is your biggest expense, so consider a roommate if possible. If you like your occasional privacy, consider an International student for shorter periods of time.

5) DO look for the little things that add up in your expenses. Maybe change your phone plan if you are constantly going over the monthly minutes? How about that $3.50 latte or cappuccino every work day? That’s almost $1,000 a year!

6) DON’T sign up with a new credit card with a 0% Interest Rate for the first 6 months.

You probably receive a lot of junk mail enticing you to sign up with a new credit card with a 0% Interest Rate for the first 6 months before it jumps to 18% or even higher. Then 6 months later you would transfer your huge balance to another piece of plastic. Unfortunately, the biggest risk is they are simply giving you more credit to spend, and the number of cards and liability increases.

Unless you are extremely disciplined, this doesn’t really work as you end up bigger and deeper in the hole! Reducing the number of credit cards is the goal.

7) DO consider refinancing your home (if you have one) and consolidating all your debts into one

Logically, a 4.50-5.50% home loan is a lot less than 18% on a credit card. You can’t spend what you don’t have. You will be asked to have all your cards cut up (except maybe one with a small credit limit) and you have reduced the number of credit cards. You are now paying back that debt at far lower interest rates – often we find that the overall new monthly mortgage payment incorporating the consolidated debts is lower or at least equal to what you were previously paying out across several loans (credit cards included). Plus – the temptation has now been removed as you no longer have the credit cards!

Melanie Burns

Here are Seven common sense guidelines to eliminate credit card debt: 1) DO make a budget listing all your fixed expenses. Rent or mortgage, car insurance, car payments, mobile phones, utilities, day care, fixed loans, etc. Then try to estimate a reasonable budget for discretionary items like food, entertainment, clothes, etc. 2) DO make a…

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…

10 Things that can derail your mortgage application

Getting finance is tough enough, even without having your application sent back due to errors. Here are ten things to help clear the air.

 1 Not being honest about your financial position

Missing bill payments is the number one reason mortgage applications get knocked back. Missed credit payments can be particularly costly. Your credit history should be squeaky clean if you want a home loan. Generally, a default is listed on your credit file after three months of missed payments on a debt commitment. One simple default, say, on a phone bill, could hinder you from receiving a home loan approval for a good five years or more. The easiest way to avoid this is to pay your bills on time, every time. Take the time to check your credit file prior to making your application through websites such as www.mycreditfile.com.au.

What if you’ve had problems in the past? If you’ve had a default, let your broker know upfront and they can select a lender that is OK with it.

2 Not including all your expenses

Forgetting to mention that emergency credit card is also a common problem, and can derail an application. Make sure you disclose all credit cards and hidden expenses – or even expenses relating to your kids. When a lender gets your bank statements, they will see all the payments to the various credit card companies, childcare expenses and school fee payments. If a lender were to see this, they would likely decline the loan due to non-disclosure. It’s best to be honest upfront and get an approval that will be honoured.

3 Employment woes

Lenders like their borrowers to have a relatively stable recent employment record – at least six to 12 months or more in their job, receiving regular income. If you are looking to change employers at the same time you are looking to buy a property, seriously reconsider. Stay at the same company at least until you have the mortgage. But if you must change jobs, ensure you have enough money saved to cover mortgage repayments and living expenses for a few months or even more, should the job not work out.

4 Paperwork snafus

The paperwork that lenders require can be significant, and it is important to get it right: sending in your application without the documentation required by the lender can result in the loan application going back and forth to the lender a number of times without result. At worst, it can derail purchases altogether.

If you only send in part of the information the bank asks for, you end up getting a conditional approval that has lots of conditions. When you find a property and send in the remaining information, the lender may not like something that they see and then has an opportunity to decline your loan.

Using a mortgage broker to handle the paperwork is probably the quickest and simplest way to ensure you get it right first time. But if you’re going it alone, be sure to read the lender’s instructions very carefully several times. And, if you’re putting in a joint application, you’ll need to provide evidence for each applicant.

Make sure you send in the actual documentation that the lender asks for, not substitutes. Aussie Home Loans often sees clients send in ATO tax assessment notices in place of group certificates, or bank statements showing a borrower’s pay being deposited in place of physical pay-slips.

5 Not knowing your limits

It’s all too easy to get caught up in enthusiastically hunting for property without knowing exactly how much you can borrow. This is even more serious when a buyer has made a successful offer at auction and suddenly can’t come up with the rest of the dollars, because they can lose part or all of their deposit.

Avoid disappointment by seeking out a loan pre-approval before looking for property. These are usually valid for three to six months. For pre-approvals dating from last year, you should check it is still valid, as new credit industry regulations came in at the beginning of 2011.

6 Not knowing lending criteria

Lenders and the mortgage insurers behind them work to a wide range of criteria when deciding whether to approve a home loan. They often have restrictions around property sizes, postcodes, high density buildings and other aspects. For example, many lenders put restrictions on the maximum amount they will lend on properties in regional towns, so you may need to come up with a larger deposit. Make sure you know the rules before heading out on the hunt – otherwise you could find extra conditions on your loan or your application denied altogether.

The simplest way to do this is to seek out a pre-approval before looking for property. However, not all pre-approvals are created equal. You should ensure you get a ‘fully assessed’ pre-approval. Some lenders issue an automated pre-approval without any assessment; this usually has a page of disclaimers and is pretty worthless.

7 Not shopping around

Simply not considering all your options in the first place could derail your application. Different lenders offer vastly different loan amounts. Don’t just take the largest loan you can get, either. Don’t be tempted to go with the lender that will lend you the most, as you may quickly find that you are stretched beyond your limits, particularly if interest rates rise, and need to sell up. Once you know what you can honestly afford, extend your search beyond just one or two lenders.

8 Not getting the right loan structure

A mistake many people make is they look for the lender with the cheapest interest rate and then try and change their position to fit that lender’s policy. That’s like going to the $2 shop to buy a suit and then trying to tailor it to look and fit you better.

It’s much wiser to map out your desired loan structure and features first, then start shopping around for lenders who will approve the loan structure at a low rate. Getting the right loan in the first place is particularly important for investors, who often need to make use of loan features like offset accounts and redraw facilities – and can save you from costly interest payments and refinances further down the track.

9 Dinky deposits

Three years ago, it was possible to buy a house without having to put any money down. However, the days of 100% home loans are gone, and almost all lenders require a home loan applicant to have a genuine savings deposit of at least 5%. While some investors will be able to leverage equity in their existing home, it can present problems for first-timers pulling together cash for an investment – especially when you factor in extra purchase costs.

The answer? Do your homework. Get a handle on how much you really need before committing to a purchase – and then add a buffer of at least 5%.

10 Purchase cost pain

As mentioned above, there are a wide range of purchase costs in addition to your deposit, including (but not restricted to): lenders mortgage insurance, stamp duties, legal costs, application fees, solicitor fees and inspection fees. It’s easy to forget all the fees that mount up, and they can easily derail your cash flow projections.

You don’t want to find out on the day of settlement that you are $30,000 short. Do a cash flow summary well before you exchange on a property to ensure that you have enough cash to fund the purchase and associated costs.

Experienced friends, family, mortgage brokers and real estate agents can advise you about the costs you’ll need to pay. They can also give you an insight into ongoing costs, such as land rates, strata management costs, maintenance, insurance and property management.

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Getting finance is tough enough, even without having your application sent back due to errors. Here are ten things to help clear the air.  1 Not being honest about your financial position Missing bill payments is the number one reason mortgage applications get knocked back. Missed credit payments can be particularly costly. Your credit history…

investment property

Investment Property – 5 ways to sniff out secret sales

Investment Property - 5 ways to sniff out secret sales


Wouldn’t it be great if you could find an investment property before it went onto the market? We reveal how you can find secret property sales.

If you are a buying property for yourself and want to get access to unlisted properties you need to get clever.

1. Become better friends with your local real estate agent
As the key contact between sellers and buyers, agents are the first to be aware of properties for sale – yet so many people are shy about handing over their mobile number at open inspections.
How are you ever going to be made aware of deals or changes in a vendor’s expectations unless you make contact with the agent? You need to persuade the agent that you are very serious about buying an investment property.

Make sure they know you are pre-approved for finance, are serious about buying and can make a quick decision followed by a signed, unconditional contract.

People are often scared about telling an agent what their budget is, as they think the agent will make them pay more. I always say that I can buy up to any amount if it is the right deal, but I am only prepared to pay what it’s worth – and I will get an independent valuation to double check the figure.

2. Letterbox drops
Do what the agents do and letterbox drop in the areas you want to buy.

If you are a serious buyer for the right investment property, the vendor can save time and money by going directly to you. It takes more personal effort and will cost you some money, but spending a few hundred or even a few thousand dollars could get you a great property at a great price.

A lot of vendors always think their property is the best in the street and want a fortune for it, but some do not keep up with the market and want something more realistic.

3. Get organised
Make sure you are ready when the right deal comes along. Get pre-approved for finance and have your valuer, building inspector and strata inspector all in place so they can check you are buying the right property at the right price.

You are never 100% guaranteed of any deal when it happens, so at some point you have got to make a decision and jump in. The more organised you are, the more likely that decision will become easier.

4. Tell friends, family and colleagues you are looking to buy
Often those close to you will know of someone else looking to sell, so spread the word. People love talking about property, so if you mention you are looking every time you talk to someone it won’t be long until you make the right connection.

5. Pay a professional
If you buy an investment property once every few years and a buyers’ agent does it every day and has all the industry contacts, who do you think will buy better? Sometimes you’ve got to spend a dollar to make two.

To discuss this article or anything to do with your finances, please call our office today and we will be happy to assist you 0434 087 735 e: [email protected]