Archive for Commercial Mortgages
Are You Stressed Out By Your Commercial Property Loan?
Posted by: | CommentsIf you are stressed out by your Commercial Property Loan, Commercial loan modifications, tax breaks, and cash flow financing are three ways to help you out of your hectic situation. One or a combination of these solutions may be what you need to get relief from a burdensome commercial property loan payment. It depends on the specifics of your situation.
In 1992, I ran into difficult times with my mortgage loan payments. I purchased a $325 thousand townhouse in Alameda, California, the year before. It was beautiful. Located on the estuary across from Jack London Square in Oakland, it was a 3 bedroom and 2 bath townhouse with cathedral ceilings.
My wife and I had been in this townhouse for a year. We loved it. Our second child was born in April, 1992. Shortly after our daughter was born, we received a notice from our mortgage company that our payments would increase from $2500 to $3500 per month. This was a shock!
You can imagine what it’s like to have two young children and all the expenses that go along with raising kids. You may even know first hand. Now our bank was telling us they were going to raise the payment to cover private mortgage insurance (PMI). We were not aware this was going to happen.
At the same time, I was planning to go to UC Berkeley to get my first degree. The real estate market in northern California was very slow in 1992, which made it impossible to sell. People were looking, but no one was buying.
Let me tell you, I felt so stressed and betrayed because nowhere in the loan process did anyone tell me that my payment would adjust $1000 per month for PMI. At $2500, we could have rented the place with a small negative so I could easily go to school. $3500 per month was just too much to swallow. This sudden increase in our monthly payments on top of falling property values threw a “monkey wrench” into our plans to get my degree.
We had to let it foreclose! It wouldn’t sell. We made the decision to let it go, which I regret to this day. The market turned around in the next three years and the property value more than doubled by year 2000. The tax savings plus the increase in equity was fantastic in retrospect.
Real estate is always a good bet in the United States. We still have the best institutions in the world such as universities, legal systems, and corporate R&D. Population growth and continued migration will bring back strong demand for commercial property in the next few years.
I want to help you keep your commercial property with less worry. I wish I would have had a service like the one I’m going to tell you about to help us keep our townhouse in 1992. Donald Hunter™ Financial created this desperately needed service for business owners and commercial investors to deal with troublesome commercial property loans.
I know you have lots of responsibilities that concern you today.
• Laying off employees
• Shrinking sales
• Falling product and service prices
• Poor cash flow
• Being upside down on your home mortgage
• Being upside down on commercial property
• Shrinking credit lines
• Pestering effects of a down economy
These decisions are on your mind all day long…and certainly create stress.
Avoid foreclosure. Today, I offer you a commercial loan modification service for business and commercial property owners. My program helps to improve your cash flow, lower monthly payments, and take advantage of tax breaks all aimed at helping you to maintain control over your commercial investment. One or a combination of these solutions could be what you need today. No one else in the industry offers this three-pronged approach to helping you.
Bankruptcy isn’t your only option to stop foreclosure. I recommend you look at our simple commercial property loan modification solutions before you decide what to do. A bankruptcy will stay on your record for years and will have a severe and immediate impact on your business and personal credit. I know from experience.
Call me at (866) 323-9123 to discuss how we can help you with lowering your monthly payments and getting you back to running your business. Relief is possible. So give me a call today.
I don’t recommend commercial hard money loans as a wise decision to solve your difficulties with your commercial property loan. It should be a last resort solution when nothing else works. Hard money lending has a number of drawbacks in terms of large upfront fees and it’s a short-term solution. Don’t get sold on hard money, especially when other financial solutions offer you way more benefits!
You can also sign-up for your complimentary commercial loan modification consultation online at a time that’s convenient for you. I will share with you several options that you can choose to improve your cash flow and decrease your monthly commercial property loan payments.
Get your Free “Business Survival” Report by signing up on the form to the right. You may want to read this report prior to our call to learn simple ways to improve your cash flow. I look forward to meeting with you soon.
To let other business owners and commercial property investors know about my services, you can conveniently “Share” or “Tweet” this blog post below.
One trillion dollars of commercial debt is coming due over the next decade and needs to be refinanced!
Borrowers will find themselves in better shape if they realize – before it’s too late – that the usual choices for business refinancing are probably unavailable. Most business owners need to consider both new commercial lending sources and new business financing programs. Donald Hunter™ will list a few such funding sources at the end of this article.
Amid the ominous news we are about to share, we also share valuable information to help you navigate through these hard economic times. After reading this post, you will have real solutions to the current problems facing the market. Let’s first address some of those problems.
The Current Situation for Small Business Borrowers:
- Many are less creditworthy due to the magnitude of the economic down turn.
- Sources of funding, such as credit card borrowing and home equity loans, have dried up because of tightening credit standards.
- The few alternative sources of funds and the SBA program are not large enough to handle the demand.
The Timeline:
Now that you have a clearer understanding of the magnitude of the problem, let’s discuss a couple of opportunities for buyers and sellers. Obviously there are opportunities from distressed properties to foreclosures. Then, there are extraordinary deals that if negotiated well could be a a win-win situation for the buyer and the seller. If you currently lease your property that you operate your business from, then now would be an excellent time to think about purchasing that building.
Donald Hunter™’s message is not for all owners to give-up on keeping your commercial property. If your business is one that has tremendous opportunity for growth as we pull ourselves out of this recession, you probably want to look at financial options to secure your position.
On the other hand, don’t fool yourself by thinking you can hold on when the odds are heavily weighed against you. Save your business first, the thing that’s creating income for you. It could be an excellent time for you to lock in a long-term lease at very favorable rates.
• In the next three years an estimated $530 billion of commercial mortgages will come due for refinancing — with about $160 billion due this year, according to Foresight Analytics.
• Commercial real estate, valued at $3.5 trillion in the U.S., has experienced a 39% decline in prices from the peak only two years ago, according to the MIT Center for Real Estate.
• Real Capital Analytics reports that over $2 trillion in commercial properties bought or refinanced in the past five years are upside down on their loans, having fallen below the finance or purchase price.
• CB Richard Ellis said that vacancy rates are up by 15% and they expect to see this rate further increase by the end of the year.
The commercial real estate industry is under tremendous pressure. Capitalization rates (cap rates), which are the ratio of income to appraised value, sharply climbed since the peak in 2007. Appraisers use the income approach to value commercial properties, while incomes and values for commercial real estate are falling dramatically.
At the peak in 2007, cap rates for the best properties were around 5%; which means that buyers were willing to pay $20 for a $1 of income. Cap rates have now climbed to around 8%. Which means that the same buyer would only be willing to pay $12.50 for the same dollar of income. This means that if income was fixed, the value of properties would have fallen by 37.5%.
Whoa, I didn’t mean to get technical here; you can throw out the cap rate techno babble above. When you buy a commercial property, you are buying an income stream and the cap rate measures the risk of the income stream. Cap rates attempt to price out the risk in the market. If you divide the net operating income of the property by the cap rate, you get the value of the property. We’ll go into more about how to value income properties in a later post.
You can see here if the cap rate goes up in your area, the value of the property is definitely going to go down. Cap rates are different in each area or city. Even in a city like San Francisco, you may see multiple cap rates that appraisers and investors use to value commercial properties.
Property Types Most Affected:
- As the unemployment rate rises, the demand for office space has declined.
- As retail sales have weakened, the demand for retail property has fallen.
- Because of a reduction in discretionary travel (elective or optional), hotel occupancy rates and room prices have gone down.
Risks:
The decline in commercial real estate property values represents a huge “rollover risk” for existing lenders now that commercial real estate loans and mortgages need to be refinanced in a down economy. Loan-to-value ratios (LTVs) have risen to very high levels. High LTVs cause lenders to be nervous about extending new credit, even when these loans cash flow.
New Sources of Funds for Commercial Loans
• Bank financing (limited)
• Seller financing
• SBA (as well as other government programs)
• Private lenders (what used to be called hard money lenders)
• Investment groups (angel financing)
You can see that lenders who hold commercial debt are in a precarious situation. As we said at the beginning, In the next three years an estimated $530 billion of commercial mortgages will come due for refinancing — with about $160 billion due this year, according to Foresight Analytics.
As is on the residential side of this crisis, lenders are willing to allow short sales and loan modifications. Donald Hunter™ can help you further understand these options both from the buyer and seller perspectives through our free webinar, “Wealth In Commercial Niches.”
“Wealth In Commercial Niches” is a seminar via conference call offered by Donald Hunter™ Financial to help business owners and investors understand how to access new sources of funds. Here we spend a considerable amount of time discussing refinancing your commercial property:
• Solutions to your refinance situations
• How to access new sources of funding
• Seller financing (you may need to sell)
• Negotiating a great deal!
We also spend time helping people who want to purchase commercial property understand their options and the most lucrative deals in their local markets. It is very useful for new purchasers and people who want to refinance to come together to hear the same message from Donald Hunter™.
It is our hope that all of you who participate in these conference calls will find synergy in helping each other succeed in tough times, whether you are in the market to purchase or refinance. You may be a timely source of funds for people who need help purchasing or refinancing a commercial property.
I want to make investing in commercial niches simple for you. To get more involved in what’s happening right now with commercial real estate and how to profit from “HOT” business niches, you should sign-up for our free webinar on “Wealth In Commercial Niches ASAP”.
OH! BTW guys if you haven’t signed up for a free consultation it’s time to take advantage of it now because I don’t know how long it’s going to be available. So go ahead and signup now before it’s gone.
Also get my Business Survival Report it’s absolutely FREE! There’s no catch whatsoever this is just a way for me to give back and help small businesses in these tough times. Here’s the link to my Free Business Survival Report again.
