In many instances, borrowers tend to look at commercial lenders as a higher power who controls their destiny when they are seeking a loan. And though the lenders is a critical factor, they should never be viewed as anything but a business partner, ally or service provider. They have a product which you want and need, money, but it is just that, a product. And as with any business partner or supplier, you will want to do your research and find the best solution to fit your needs. In this case service, the ability to cultivate a long term relationship and financial details of the loan will all have an impact on your selection.
The money is the key to this relationship, so your first questions for a lender need to be regarding the terms which they offer. Loan to value (LTV) is the ratio used to compare the amount of the mortgage to the market price of the property. Lenders who offer a highest LTV should be favored over other lenders. The high LTV provides you with greater purchasing power and more options for your purchase. Interest rates are another key term to consider. This is basically how much commercial lenders want to make for the service which they are providing to you. The interest payments can be the majority of the monthly payment which can have a huge impact on your monthly cash flow. Be certain to find a good balance of loan to value and interest to meet both your need for buying power and monthly cash flow. The final fee to factor in is points that you will pay as a lump sum or throughout the loan.
Having a good working relationship with your lender is also crucial. You need to be able to speak openly and ask any questions that you might have. One important question to ask is about any additional fees. Some lenders will add fees such as documentation fees, legal fees or administrative fees. Be certain that you plainly ask about any “additional” fees and factor them into the total cost of the loan.
Timing can be everything when purchasing commercial property. Asking a lender to provide you with realistic timelines for funding will dictate how quickly you can complete any purchase. As a work around, you might want to see if the lenders offer pre-approval. If there is no option for pre-approval then having an accurate time frame for processing documentation and a guaranteed access to funding date is important. Better rates but a slow timeline can kill a great deal.
Selecting the best commercial lenders to work with can be a process which requires a good deal of time and effort. But the work that you invest in creating a strong and lasting relationship will pay off each time you complete another loan with your lending partner. That long term relationship will provide you with a great long term return on your investment.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.