Private Equity Fund Providing Construction Loans ($20M+)

The traditional commercial lending market has dried up, especially for construction loans. Anyone seeking a commercial construction loan will need to find a private equity fund to accomplish their funding needs. I have discovered just such a fund that is actively lending large commercial construction loans for both domestic and international projects.
The private equity fund has $1B in liquid cash and $2B in stand-by letters of credit from their investors. The fund uses a bond wrap around the note in Germany to recoup their cash and replenish the fund every 60-90 days. This private equity fund for commercial construction loans ($20M+) is very transparent, after NCND agreements are executed with their master broker. They will provide capacity and proof of funds through an attorney affidavit and will also provide title company contact information to verify closings. The bottom line is these guys have money and are funding projects.
This private equity fund will finance 100% of the construction cost (including land acquisition) as long as the appraised completed value is 80% or less of the construction loan amount. Typical rates and terms for a quality domestic construction project is 9.5% interest only, interest reserves until stabilization, 6 points paid out of loan proceeds, 3-5 year term with funding in approximately 60-90 days after Letter of Intent is issued. There are no "upfront" fees, yet the fund requires a 3rd party review fee ranging from $16,000 to $24,000 based on the size of the project after an LOI is issued and the client has received proof of funds. Also, after commitment is issued, the borrower is required to place 1% of the loan amount in a bonded and insured pre-closing escrow account which is used to satisfy closing conditions. The principal's signature is required for all disbursements and any unused balance is credited back to the borrower at closing. Other than that, this is essentially 100% financing for large commercial construction projects.
The documentation required is similar to that of conventional underwriting which includes an appraisal, environmental study, feasibility study, approved permits, corporate tax returns and personal financial statements on all borrowers. For seasoned developers with "ready to break ground" construction projects in excess of $20M, this may be a viable solution until commercial banks decide to return to this market. This construction loan process starts by completing a 2-page Intake Form and speaking with the master broker. Once their NCND agreement is signed, the principal will be in direct contact with the private equity fund and their attorney through closing.

Finance Your Log Home

If you intend to construct a log home, you have to approach it in a systematic manner and follow it up with meticulous planning. Finance is the main consideration in your log home project. You have to ensure that you are adequately covered from the start of your project until completion. Too many log homes have gotten stuck at the end of construction because the money ran out. Therefore, it is advisable to begin preparing for it well in advance and provide for emergencies that may arise during the course of completion.
Ascertain your Financial Condition
The first thing you need to do is take stock of your financial resources. You need to have sufficient funds at your disposal before you get your project underway. Experts advise that you need to earmark funds of at least 40% of the total budget in cash to guarantee that your log home gets completed without a snag. If you run into a crisis, it can seriously hamper the progress of your project if you do not have adequate finance to get you through the rough patches. Moreover, the more your project is delayed, the more it will cost you. So before you apply for finance to banks and private lenders, make sure your own finances are in good shape.
Applying for Finance
It is better to be safe than sorry. Following this principle, it would be better to apply for the maximum amount of finance through a construction loan as is possible. However, every project must have its boundaries. This is because expenses have a way of spinning out of control if they aren't checked. Rather than being conservative and approaching only banks for a loan, you would do well to explore other sources of finance. Consider contacting log lenders for finance. They tend to be less restrictive than banks when it comes to financing. Most of the conservative lenders will finance you only when the materials are on the site. But this can be a problem because log home companies generally demand payment before the logs are dispatched to the site.
However, a log lender will be more co-operative and will understand the process of building a log home. Initially you will have to apply for a construction loan since you are effectively building a home. But once it is complete you can convert it into a mortgage loan spread over a 30 year period or whatever is most feasible for you. Do not make a spot decision but rather consult with many lenders to get the most attractive repayment terms.
Initial Groundwork
Before you apply for a loan it is prudent to get pre-qualified. This involves having a discussion with lenders about your income to debt ratio. You will probably have to supply documentation like proof of income, recent tax returns, and retirement savings accounts. Figure out how much you are eligible to borrow and the kind of terms you can expect. Also, get your credit score from the three credit bureaus: Experian, Equifax and Transunion. The higher your credit score, the lower the mortgage interest rate you will be charged.
Eliminate Wasteful Expenditure
With a little bit of vision and foresight you can get your budget in control by saving on fittings, fixtures, floor panels, doors, windows etc. Use imitation materials instead of the authentic ones. Try to keep the floorspace to less than 1500 square feet. Select a floor plan that is easy to construct, with the bathroom over the kitchen for reduced plumbing costs. If you exert discretion in selecting material and positioning your home, you can eliminate wasteful expenditure and make sure you do not exceed your budget.

How Do I Pay For a Remodel Or Addition

One of the main concerns you may have if you are doing a remodel or addition is how you are going to pay for it. Thankfully, you'll find that there are a variety of different payment options that you can consider when you are trying to complete a remodeling project or you want to do a new addition on to your home. From home equity loans to using your savings, you have many options to choose from. Here is a closer look at the options for payment that you have to consider, as well as the pros and cons for each one.
Home Equity Loans
When it comes to paying for your addition or remodel, one of the best financing options that you have is a home equity loan. This is basically a loan against the equity that is in your home. No, this is not a new mortgage, but it allows you to get money back from the equity that is in your home. When it comes to the pros, you'll find that this type of a loan is usually going to be deductible from your taxes. At the beginning when you get the loan, you can get the entire lump of money that you need. You can get a great deal by getting a variety of quotes. On the negative side, this gives you another loan that you have to pay for. You also have to make sure that you have enough equity in your home to do this.
401K Loans Are Loans Against Your Retirement
Another option that you have for financing your addition or remodeling project is to take out loans against your retirement. On the pro side, you'll find that you get to pay the interest to yourself on this loan that you take out. However, there are some disadvantages as well. The interested that it would be making if invested is lost. Also, if you happen to lose the job that you have, you may have to pay that loan back right away to the bank.
Construction Loans
Construction loans, otherwise known as a construction mortgage, is another option you have when trying to pay for a home addition. If you are going with a remodeling project of addition that is going to be fairly large, this is a great idea. Even if you do not have enough equity in your home to get a home equity loan, usually you can get a construction loan anyway. On the other hand, the interest rates are quite a bit higher than the home equity loans and they are not deductible on your taxes. In many cases you'll find that these loans are only short term as well until the construction has been totally completed.
Home Equity Line of Credit
A home equity line of credit is yet another option to consider. This is a bit different than a home equity loan. With the line of credit, you don't have to take all the money at once, which means that in the beginning, the finance charges that you will have to pay are quite a bit lower. You can also get quotes on these lines of credit to help you save money and get an excellent rate. It can be a negative option though because the repayment period is not as long as a mortgage and you have to pay on another loan other than your home mortgage.
Refinancing and Cashing Out
If you refinance your home for a higher amount and then take the extra cash, this can help you to get the money that is needed for your home addition. Usually when you go with just one loan that is larger, you can get a better interest rate. However, you do have to have enough equity in your home to get a higher amount on the refinance. The entire loan will be charged interest that you'll have to pay as well.
Spending Your Savings
If you actually do have a savings account build up, then you may want to consider using it to help pay for a remodeling job or for a home addition. This is probably one of the best ways that you can pay for this. It is definitely going to be the option that is going to cost you the least. However, if you do decide to go this route, you should never use up everything that you have in your savings account. Some money should be saved in order to take care of an emergency if you happen to have one.
Getting a Loan from the Contractor
Contractors often offer loans as well and they are available to most people who own a home. Beware though, they usually have extremely high interest rates and the terms are not always the best. Also, you may have to work with a certain contractor if you take out this type of a loan, so it is usually not the best option for you.
Using Your Credit Cards
Using your credit cards is another option that you can use to pay for your additions or remodels. Many people who own a home do have a credit card and may be able to use them to pay for some of the costs related to remodeling or adding on to their homes. However, these options are in no way deductible from your taxes and the interest rates are very high as well. So, when you are doing a remodeling job in Minnesota, credit cards are not really the best way for you to go.

Mezzanine Financing

What is mezzanine financing? Here is the text book definition:
Mezzanine financing is similar to a second mortgage; the main difference is that mezzanine loans are secured by a fraction of ownership of the project, as opposed to the real estate. If the principle defaults, the mezzanine lender can foreclose on the stock in a matter of a few weeks. If you own the company that owns the property, you control the property. So a mezzanine loan is secured by the stock of a company, which is personal property and can be seized much faster. Mezzanine loans depend on cash flow for repayment.
How do mezzanine loans work? They're written in such a way where the lender has ownership in the property or project. They are similar to second mortgages, but make it far easier for the owner to maintain ownership of the property without actually losing holistic ownership of it to the lender in the case of default. Since the property that was financed produces income, it is incredibly simple to use a portion of this cash flow to repay the mezzanine lender. Mezzanine lending for this reason is a popular option for landlords, gas station owners, and virtually any other type of commercial property owner.
Mezzanine financing allows you to have a loan default and keep your business too. Defaulting on the original agreement to pay back the original short-term loan is then extended to be paid off over time via the businesses already existing cash flow. This mechanism of the mezzanine loan operates as a fail safe against a foreclosure on the actual property.
Mezzanine finance is the best solution in almost all commercial lending scenarios. It is possible that a hard money loan, bridge loan, commercial mortgage, or some other commercial financing product is better suited to you. Mezzanine finance is part of a portfolio of commercial financing services than can be obtained through a good commercial financing broker. If you do not already have a commercial financing service firm working on your behalf, it might be time to find one.

Construction Loansl

These loans provide all the money needed for purchasing the property and then undertaking the major remodeling project that requires additional funds.
There are many options for those who want to do some major remodeling on an existing property. These loans provide a wide range of benefits to ease the demanding financial needs of a remodeling project. There are even constructions loans that do not require payments all the way through the construction phase so you can concentrate on optimizing the construction works.
Financing The Purchase And Remodeling Of A Property
You can obtain high loan amounts so as to pay for the purchase price of the property plus the costs of construction. Varied loan amounts are available that can reach up to $3,000,000. This can be done because the loans are based on the projected value of the finished property rather than on the purchase price of the existing property.
There is however a loan to cost limitation which is usually 95%. This means that the amount of money you will be able to get won't exceed 95% of the overall costs including the purchasing of the property and its remodeling. Therefore, you'll need the equivalent of 5% of the overall costs of the project in cash prior to starting the major remodeling project.
Financing The Remodeling Of An Already Owned Property
It is also possible to obtain a construction loan to remodel a property that you already own. You can also use the money to construct on the same land, either another property or an add-on to the existing one. And all of the costs of such enhancements can be obtained from a construction loan. This is especially great for those who don't have enough equity on their property to resort to equity loans or mortgage loans.
However, loan to cost limitations still apply to these loans since the loan is still based on the value of a property that doesn't exist yet. Thus, you'll need reserves in order to finance the whole project. However, if you have owned the property for at least a year (some lenders require two), you'll be able to obtain 100% financing without difficulties.
Expenses That Can Be Included
There are a lot of different costs that can be included in these loans: The purchase of the land or an existing property, project plans, architect fees, accountant fees, authorization fees, real estate fees, loan expenses like closing costs and administrative fees, etc. Also, the actual costs of the construction: the purchase of the materials, the costs of the material work like wages and contractor fees, etc.
The loan to cost ratio will depend on the loan amount and on the applicant's credit score and history. It usually can reach up to 95% of the overall costs of the project but sometimes this limit can be bypassed. This limit includes the reserves for interest and contingency that protect both the lender and the taker during the construction phase of unexpected expenses which on these projects, always occur.