As a commercial mortgage broker, I interact with prospective commercial builders regularly. I am often amazed by their lack of information about what is required to build a commercial project to secure financing. This article will outline what needs to be included in a well-designed loan submission package for commercial development projects.
The final thing you would like to be able to do to your financing application is to see it fall at the lowest of the pile on the desk of a bank loan officer. Each loan application for commercial construction projects must contain the following components, or else it could be discarded or refused.
The most important element of a successful commercial construction loan includes executive summation. The executive summary summarizes what the loan will cost in paragraph format and outlines the project's location, scope, and the general strength of the deal.
The other essential element to an effective loan package is comprehensive resumes of the principal of the project and the general contractor if they are not currently a principal. The resume must include an exhaustive list of the actual projects that have been completed. Particular experience is an essential part of the loan application.
Proforma projections of the project, as well as the net income anticipated, are needed. A complete breakdown of costs and analysis must also be provided. Information on the property demographics, absorption studies, marketing, and management plans, etc., should all be included. The more specific the information, the more accurate.
A personal financial statement of all partners, including the general contractor and all business partners during the past three years, is required.
It is essential to provide information regarding all pre-sales and documentation of the sales. The banks and lenders want to have at minimum 50 percent of the project sold.
The three primary elements in commercial development loans are cash experience, knowledge, and pre-sales. It is essential to have two of these three to be eligible for an opportunity. All 3 are required for a good chance of success.
The majority of these deals go on the financials as well as the pre-sales. When you dig deeper, usually the lack of experience is evident too. The minimum requirement to receive an estimate is an executive summary and the Pro-forma. The rest of the information is required to be submitted.
If you're new to investing in commercial apartment buildings, I recommend you go through my e-course "Buy "Your First Apartment Building E-Course". This course is not just a way to give you the comprehensive information you need to buy your first apartment, but it also provides all the forms you'll need to calculate how much cash you will need and your expenditures. The course will show you how to figure out whether your apartment can be a lucrative investment. In addition, you'll have details of the addresses and telephone addresses of 25 banks across the country that specialize in commercial loans for apartments.
Ted Karsch is now offering Commercial Construction Loan on distressed commercial properties nationwide. Owners of commercial properties with apartments, shopping malls, retail strip malls, and office structures have all benefited from his service.
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