Comercial Loan News Blog

How to Start Investing in Commercial Real Estate

There are many people from all walks of life that are commercial real estate investors—small business owners, corporate executives, professional service providers, entrepreneurs, and professional investors. With the right preparation and understanding, commercial real estate (CRE) is the perfect asset for an investor to earn passive income while owning an appreciating asset. However, commercial real estate is not without its risks, so it’s important that any potential investor understands what they’re getting themselves into. Here are 5 steps to follow in order to jump into the commercial real estate investment game safely:It’s important to set an affordable budget for the property (...

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5 Steps to Invest in an Opportunity Zone

In order to avoid paying Uncle Sam on the profit you made on that stock portfolio, property, or other investment that would have usually triggered the capital gains tax (currently up to 20%), you can re-invest that money into an investment property in a designated Opportunity Zone in order to defer, decrease, or even eliminate it (depending on how long you hold the property). Created by the Tax Cuts and Jobs Act in 2017 and officially designated in 2018, Opportunity Zones are areas that have been identified as “economically distressed” and in need fresh investment money in order to breathe new life into the community. They are designed to spur economic development by providing tax benefi...

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What is a Treasury Swap Rate?

The US Treasury Swaps work just like any other interest rate swap, but are pegged to the US Treasuries rather than another index (i. e. LIBOR). The Treasury contract would be an agreement between two separate parties to exchange one stream of payments (i. e. treasury bill) for another over a set period of time. The parties to a typical swap contract are 1) a business, financial institution or investor on one side and 2) an investment or commercial bank on the other side. Interest rate swaps, including treasury swaps, can be used for many disparate purposes. Businesses can convert their debt on floating interest rates to fixed interest rates or investors may speculate on the long-term interes...

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What is a Treasury Rate (Yield)?

The US Treasury Yield (also referred to as the Treasury Yield Curve Rates, Constant Maturity Treasury Rates, or CMTs) are calculated by the US Department of the Treasury from the daily yield curve. These  rates are essentially the return an investor would receive from the purchase of a US government debt obligation (i. e. a bill, note or bond); it is the interest rate that the government pays to the investors in order to borrow money for different lengths of time (i. e. 30 days, 60 days, 90 days, 6 months for short terms and 1, 2, 3, 5, 7, 10, 20, and 30 years for longer terms). [Insert Current Treasury Rates Here]The treasury rate curve is plotted on an x and y axis and shows several yield...

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Interest Rate Swaps & How to Use Them

A bank may suggest that a borrower use an interest rate swap (IRS) in conjunction with an adjustable-rate mortgage (ARM) instead of a traditional ARM or fixed-rate commercial real estate loan product when interest rates are low but expected to rise in the future. This hedges future interest rate risk and can have certain advantages over typical fixed rate mortgage products. Typically borrowers will choose a swap rather than a typical ARM or fixed rate portfolio loan for the following reasons:To get a lower all-in interest rate and paymentsTo protect against future interest rate increasesTo lessen or eliminate potential prepayment penalties A swap is a type of interest rate derivative (IRD) t...

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Fannie Mae Apartment Loans

For those of you who are getting familiar with Fannie Mae Loans, this program offers federally guaranteed mortgages and is one of the largest multi-family loan programs in the country. There are both fixed and variable products available for all property types and are offered nationwide. Properties that fall under the Fannie Mae category are apartments, affordable housing, senior housing, student housing and manufactured housing. There are two major Fannie Mae loan programs in which the majority of products fall under. These loan products are called The Standard DUS Mortgage Product and the Small Loan Programs. The Standard DUS Mortgage Program is best used for the purchase or refinance of e...

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FHA Apartment Loans

FHA stands for the Federal Housing Administration. It is a federally guaranteed mortgage program under the Government’s Department of Housing and Urban Development, also known as HUD.  FHA loans can be used for the purchase, refinance, construction or substantial rehabilitation of either multifamily or healthcare properties. There are 3 major FHA programs available for the Borrower to choose from. These 3 programs are the Multi-Family Program, Healthcare Program and Special Needs Program. Property types eligible for FHA financing are–Affordable Housing, Apartments, Hospitals and Senior Housing or Skilled Nursing Facilities. FHA’s Multi-family program has a wide array of products avail...

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CMBS Commercial Loans

CMBS loans can be used for the purchase or refinance for Commercial Real Estate properties, including Hotels, Industrial, Office, Multi-family, Medical, Mixed-Use, Retail, and Self-StorageLike all the other loans we offer at CLD, this type of loan is secured by a first-position mortgage on a commercial real estate property and is particularly popular among commercial real estate investors seeking non-recourse loans. Although conduit lenders have reverted back more prudent credit decisions that mitigate risk of default, CMBS loans have more flexible underwriting guidelines than conventional or agency loans. This means that Commercial Real Estate Investors that cannot meet the more stringent c...

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Conventional Commercial Loans

Commercial loans can take 2 different forms – owner-occupied mortgages and investment mortgages. When the collateral is owner-occupied, the property’s sponsor(s) use over 50% of the building’s useable square footage for their personal businesses. Any other use makes the collateral investment property. It is important to note that in order to securitize a commercial loan properly Commercial properties must be zoned appropriately. Conventional commercial loans are mortgages backed by commercial real estate that are provided by a lending institution such as banks, credit unions, savings and thrift institutions, life insurance companies, hedge funds, pension funds, private financial instit...

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Bridge Loans

Bridge financing gives owners the flexibility they need to reposition and stabilize commercial real estate properties. It is important to note that Bridge loans usually call for a clear exit strategy upon the loan’s term completion. Property types that fall under the Bridge Loan Program are as follows: apartments, industrial, medical, mixed use, office, retail, as well as self-storage. Max LTV can go up to 90%. Term length ranges from 12-36 months. Amortization is interest only, self-amortizing or a combination of the two. Debt Service Coverage Ratio requirements vary widely depending on the program and can usually range from sub 1 to 1. 6 times. Bridge loans are can be recourse and non-re...

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