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| | Commercial Real
Estate Loans - Continued...
Commercial real estate loans come in a variety
of securities offerings:
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Development & Construction Loans.
Loans for the construction and development of income-producing
properties. Generally, these loans require personal recourse because
lenders still do not understand construction risk mitigation (and probably
never will become sophisticated enough to even bother to try) and provide
between 60% to 80% of the total development budget requirements. |
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Acquisition Loans. Loans for the
acquisition or income-producing properties. Generally, these are
credit-based loans that require hefty equity investment to obtain and are
the most competitively priced loans in the commercial real estate market. |
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Acquisition & Rehab Loans. Loans
that provide funds for both the acquisition of an existing income-producing
property and the construction and rehabilitation operations associated with
upgrading the property. Generally, these loans require personal
recourse during construction (HUD insured loans being the exception), and
provide between 65% to 80% of total development costs (including acquisition
of the existing property). |
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Mezzanine
Loans. Generally, loans
that are subordinated to construction loans and provide working capital
and/or other forms of capitalization gap financing. These loans
typically require an equity slice or option be granted to the lender, but
are usually well worth it if there is a defined exit strategy for paying off
the loan during the term of construction. Interest rates are typically
double the going rate of construction money. |
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Hard Money Loans. Loans that provide
for property acquisition and/or construction based upon your ability to pay
hefty fees and provide personal recourse in the event the program doesn't
work out. Hard money lenders fill the void associated with underwriting
time - commitments are produced quickly (usually a few days) and loans close
very quickly (usually 15 days or less). This is quasi-equity in that
the exit fees and yield maintenance fees are stiff, but you end up with no
long-term capital partners when you put the deal together properly. Be
prepared: there are many shady hard money lenders out there who have no
problem in using the law to take full advantage of you. |
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Escrow
Loans. Loans provided for the sole purpose of gaining site control
of a property while feasibility period inspections are undertaken. The
escrow lender never places capital "at-risk" and the value of
these loans are incalculable to the developer who is highly leveraged and is
seeking to capitalize on their vision by "borrowing" against the
future so they gain the time necessary to obtain the balance of the required
capital funding so the project can move forward. |
To learn more about these financings, you should contact Rainmaker's offices today. | |
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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