Here at Abbey Mortgage & Investments, we have a team of dedicated experts committed to finding creative, winning solutions for private money loan opportunities. Among the loan types we deal in are commercial real estate loans, hard money loans, short term loans, construction loans, non-recourse account loans, cellular tower sites and leases, Fix and Flip loans, among a host of others. Whichever you are interested in, know that we have an experienced staff with regional knowledge. For example, one of our key strengths is that Robert Kearney, our president and founder, has over a quarter century of experience in Colorado private loans alone. Beyond that, his financial experience reaches out over the last 30 years. Being able to work with someone like Robert means that borrowers are able to find optimized solutions that are much more likely to end in a win-win for both parties.
We are a local mortgage and investment company that understands the subtleties of the Colorado market. We have experience working with borrowers from Wheat Ridge, Berthoud, Denver, Arvada, Golden, Boulder, Fort Collins, Colorado Springs, Greeley, Loveland, Longmont, and pretty much everywhere in between.
Now that’s we’ve gotten some of the formalities out of the way, let’s talk about commercial real estate loans, what they entail, common pitfalls, and frequently asked questions.
What Is Commercial Real Estate?
Commercial real estate is a vast field. Roughly speaking, it means property within a commercial, or business context. This could mean industrial facilities, leasing retail space, agricultural property…you get the idea. Examples of what commercial real estate is not would include, unsurprisingly, residential property that is being occupied by the borrower in question.
What Does A Commercial Real Estate Lender Do?
Commercial real estate lending is how a purchaser of commercial property gets funding to make the buy a reality. If a buyer didn’t have a loan, they would need to have all of the purchase price available. That’s where we come in.
A commercial lender, like us at Abbey Mortgage & Investments, helps someone who would like to invest in a property who chooses to forgo traditional, tedious means of acquiring a bridge loan, or private money loan (roughly speaking), in order to obtain a transitional loan much more efficiently. It’s often the case that national banks have a wild amount of hoops to jumps through, and even if you do get approved, it can take more than 3 months for the funding to come through. The wheel turns slowly over there, and when you compare that to the average of 5-10 days for a private money loan to be approved, you begin to understand why choosing an entity like Abbey Mortgage & Investments is much more attractive for clients who understand the time-sensitive nature of many property-based opportunities.
Why Not Just Go The Traditional Route Of A Bank?
In addition to the reasons described above that have to do with accelerating the process, going with a private commercial loan over an out-of-state loan can be a wise choice for some very practical justifications. Another is that most banks require a considerable amount of cash flow from the borrower to justify the loan. Asset-based lending means the borrower can use presently-owned property as collateral for the loan. Developers are a great example of a category of people who utilize asset based loans within commercial real estate to their advantage. Other reasons include that most banks don’t like if a borrower is self-employed, as it increases the risk of defaulting, in their eyes.
What Is A Capitalization Rate And Why Does It Matter?
Cap rate refers to means the net income over the final sale price of property. It’s usually used in reference to a property’s value, specifically in projecting the rate of return someone needs to viably purchase the property, irrespective of a loan. Essentially, it means that real estate brokers, buyers, sellers, and all parties use a capitalization rate to objectively appraise a property’s worth, taking potential risk into account. You may not even need to go this far down the rabbit hole when getting a commercial hard money loan approved. You might not even need a professional appraisal, if there are comparable properties that we can use for reference. But that depends on the specific nature of the loan sought and the property involved. We will cross that bridge when we come to it.
What Are The Most Common Pitfalls?
While our expert staff works hard to ensure that these scenarios don’t come to fruition, we can only control an extent of all possibilities. Here are just two examples of potential issues that may arise when dealing with commercial real estate lending.
- Lender requirements – While a chief benefit of private money loans is that it requires less cash flow than typical routes, it is still an industry which requires collateral and manageable risk. We take the character of a borrower into account, which can include past financial dealings, but that isn’t the whole picture. Each scenario is unique, and we make a point to be as creative as possible to find a win-win solution for all parties involved.
- Zoning Conflicts – Sometimes a situation arises where land use restrictions and zoning regulations make a property previously deemed suitable untenable. There are plenty of examples throughout the years of small businesses having to essentially give up because they didn’t do their due diligence regarding zoning. Not to be too harsh on such poor folks, the government can change these factors at a drop of a hat. This is an instance where it behooves borrowers to go with a local investment company like Abbey Mortgage & Investments that has their finger on the pulse of the region, as opposed to an out-of-state firm which will likely not have the attention to detail that we will.
Other instances include contractors using a mechanics lien to enforce payment on a property on which they’ve worked, general market fluctuations which make a previously attractive loan less so, and even something as strange as environmental contamination on a property. It’s easy to see why having a seasoned team of professional commercial real estate lenders on your side can make such a big difference, as we leave no stone unturned, while still being time-efficient.
Why Choose Abbey Mortgage & Investments?
It’s a good idea to shop around and do research if you are looking to get a Colorado commercial real estate loan. We walk through the loan process with you every step of the way to make things understandable in order to streamline you getting the requisite liquidity so you can turn around and close on your investment. Whether it is a retail space, an office building, an industrial opportunity like a warehouse, we have experienced and outside-the-box thinkers who will work with you to find a mutually beneficial opportunity. Reach out to us today!