Tag Archives: commercial
Obtaining an Office Building Commercial Loans
Office buildings are a huge part of the community fabric. They create jobs, promote more business to come into the area and generate revenue for the entire community through their businesses. Office buildings, specifically ones with multiple tenants or very strong credit rated tenants, can be eligible for extremely favorable terms.
Property ownership of an office building can transfer many times over several decades, with new investors coming in and reworking the building, its tenants and its general look. Of course, the investment process for office buildings varies from that of other property types. Office buildings are often driven through the location, management skill and quality of their tenants.
Financing for an office building depends on a number of different considerations that go beyond the ability of the borrower to pay back the loan. Some things that have to be considered are the loan to value and debt coverage ratio. Typically, excluding SBA financing, an office building will need a loan to cover 80-90 percent of the purchase price, with the investor putting a 10-20 percent down payment on the building. Also, the debt coverage ratio should not be less than 1.2, which would require the borrower to generate a net cash flow that is 120 percent of the debt service amount.
Other factors need to be looked at with an office building commercial loan, including how many tenants have come into the building and left in the past ten or so years, and how many tenants are currently in a lease agreement, at that moment. If most of the tenants are in their fourth year of a ten year lease, then it is possible, after looking at rollover and renewal scenarios, that the debt coverage ratio will not be enough for the borrower to pay off.
Location for the office building should be considered, as well as its design and workmanship. Physical factors, such as these, will affect whether businesses move into the area, and into that building. Commercial lenders will look at the market-wide statistics of the building, including whether or not there is a high vacancy rate in the community, economic vitality of the area and the development activity.
For a good quality office building, the typical interest rate varies between 6.5 percent and 7.5 percent over a ten year term with a 25-30 year amortization period. Since office buildings are so dependent on the market, local economy, location and other characteristics, it can be difficult for a borrower to secure a commercial loan in softer markets. If there is a high vacancy in the building, then financing most likely will not be approved. However, on that note, if the building has a good history of constant tenants, and is in a good location, then there is a good chance the loan will be approved by the commercial lender.
Any borrower should have an excellent business plan before approaching a lender. Understanding the market and viability of the area the office building is in will help determine if a loan is approved or not. Be sure to do the research before approaching a lender. Get more information
Bridging Loans – Taking You to Prosperity
Before I start writing the article I would like to make your mind clear about the precise definition of bridging loans, what it is actually and how it will take you to prosperity.
“Bridging loans are a short-term loan used as a way to endow with funding for the purchase of a new property while the borrower expects the sale of an on hand property”.
Off-course it seems risky and it is said that unless all the stars are not in perfect alignment, it can turn a bad luck. But very frankly saying selling of property is not a big deal and if you have property than taking loan on its part is not a big deal. The only thing demanded by bridging loans is that you need to be tricky in co-ordination and purchase and sell of new property and if transaction occurs simultaneously than no words to describe your stars.
A Bridging Loans also known as commercial bridging finance makes these types of transaction easy and possible. It not only helps you with instant money but also helps you keeping away from getting stuck by financial crisis. By taking this loan borrower need not to pay for two mortgages and the best part of these loans is that you can take it for commercial purpose and also for personal purposes.
Features of these loans
These loans are short term in nature
The application process for borrowing these loans are more or less similar as of the other loans.
When you are planning to have bridging commercial loans it is preferred that you should opt for private lender than commercial banks. The reasons are many, bridging loans are short term loans so it is better to have someone who charges least interest, secondly lender can easily give you loans with minimal paper work. The need for commercial bridging loans start or can be guessed little early so it is suggested that you should go for pre approval of these loans.
Bridging Loans get paid back in the form of only interest. This means you get the entire amount from the lender, keep on paying the monthly interest until your backed property is not sold out. Once the transaction is complete, give away the handy principal amount back to the lender. So, in the case of repayment option in bridging loans principal payment is one time lump sum payment.
These loans are good for both the parties as in the case lenders also need not to worry about defaulter because the money seeker is obligatory to put up security or guarantee to secure the loan. This is normally in the form of an additional part of property.
But on the part of borrower, I want to make the point clear that the lender will still systematically evaluate your credit history. And I think it is genuine on its part also because any one will undergo the same procedure because of the level of risk he/she is taking. But not to worry poor credit is not an obstacle.