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What Lenders Want to See from Commercial Real Estate Investors

What Lenders Want to See from Commercial Real Estate Investors

Commercial real estate investing can be highly lucrative, but like any investment, it does not come without its fair share of risks. Lenders understand these risks, and they want to be certain that they’re making a wise decision when they lend money to commercial real estate investors. Here are key aspects that lenders look for before they give the green light to your commercial real estate investment.

Financial Stability

First and foremost, lenders want to see evidence of financial stability. This can come in various forms such as evidence of consistent income, a strong credit score, and a solid balance sheet. Lenders want to see that you have a reliable income source that will allow you to make your loan repayments on time. They also want to know that you have the financial reserves necessary to withstand potential adverse events.

Experience

Experience is another significant factor that lenders consider. If you’re a seasoned investor with a proven track record of successful commercial real estate investments, lenders will be more likely to see you as a safe bet. However, if you’re new to the game, don’t despair. Consider partnering with a more experienced investor or hiring an experienced real estate team to bolster your credibility.

Business Plan

Lenders also want to see a well-thought-out, detailed business plan. This business plan should clearly define your investment strategy, projected income, and expenses, as well as your exit strategy. A well-articulated business plan is a clear indicator that you’ve done your homework and are prepared for the journey ahead.

Property Details

Before making a decision, lenders will want to know every detail about the property in question. They’ll want to know the property’s location, its current condition, and any potential issues that could arise. Your ability to provide this information and your willingness to undertake a professional property appraisal will stand in your favor.

Collateral

In many cases, lenders will require some form of collateral as a safety net. This could be the property itself or other assets you own. The more collateral you can offer, the more reassured lenders will feel about the safety of their loans.

In conclusion, while seeking financing for commercial real estate investments can be a complex process, understanding what lenders are looking for can greatly enhance your chances of securing the necessary funds. By demonstrating financial stability, experience, a well-crafted business plan, detailed property information, and offering suitable collateral, you’ll position yourself for success in the eyes of lenders.

If you need financing for commercial real estate, contact the specialists at Kenbry today.

Multifamily Rentals vs. SFRs: Which One Should You Invest In?

Multifamily Rentals vs. SFRs: Which One Should You Invest In?

Investing in real estate is a proven path to long-term wealth, and rental properties can provide a steady income stream. However, the world of real estate investment poses some critical questions: Should you invest in multifamily rentals, or is a single-family rental (SFR) the better option? Let’s delve into the pros and cons of each to help you make an informed decision.

Single-Family Rentals (SFRs)

SFRs are standalone homes with their own plot of land, offering privacy to the tenant and less maintenance for the landlord. Here are some key advantages:

Lower Acquisition Cost:

SFRs typically have lower purchase prices than multifamily properties, making them more accessible to beginner investors.

Market Liquidity:

SFRs tend to have higher market liquidity. It is generally easier to find buyers for single-family homes than for multifamily properties.

Flexibility:

With SFRs, you can sell off one property at a time, which provides more flexibility and doesn’t require you to liquidate your entire investment.

However, some challenges include:

Vacancy Risk:

If a single-family rental becomes vacant, you lose 100% of the rental income until a new tenant is found.

Scalability:

Growing a portfolio of single-family homes can be time-consuming. Each new property requires a separate transaction.

Multifamily Rentals:

Multifamily rentals are properties that have more than one unit, such as duplexes, triplexes, and apartment complexes. Here are some advantages:

Cash Flow:

Multifamily properties often provide more cash flow because you’re collecting rent from multiple tenants.

Economies of Scale:

With multiple units under one roof, you can achieve economies of scale, reducing the cost per unit for maintenance and management.

Lower Vacancy Risk:

If one unit becomes vacant in a multifamily property, you still have income coming in from the other units.

On the downside:

Higher Acquisition Cost:

Multifamily properties tend to have higher purchase prices than single-family homes, which can be a barrier to entry for some investors.

Complex Management:

Managing multifamily properties can be more complicated due to the number of tenants and potential disputes.

So, should you invest in multifamily rentals, or single-family rentals? The answer depends on your investment goals, budget, risk tolerance, and management preference. Consider the pros and cons of each carefully, and perform thorough due diligence before making your investment decision.

Whether you need financing for multifamily rentals or SFRs, contact the team at Kenbry.

Why Short-Term Rentals Are a Great Investment

Why Short-Term Rentals Are a Great Investment

The real estate market has always been a lucrative platform for investors seeking tangible assets that generate both passive income and potential value appreciation. But the traditional approach of buying to let on long-term contracts has been somewhat outdone by a new strategy – short-term rentals.

High Revenue Potential

Short-term rentals, often facilitated by platforms like Airbnb, offer an opportunity for owners to generate significantly higher income. The ability to charge per night often equates to a higher monthly income than a traditional lease, particularly in tourist hotspots or during peak times. By adjusting rates based on demand, owners can maximize their income in a way that just isn’t possible with long-term leases.

Flexibility in Property Usage

Aside from the financial perspective, short-term rentals also provide flexibility. If you want to use the property for personal reasons, you can simply block out the dates you need. This is particularly beneficial for those who own properties in vacation destinations and want to utilize them occasionally.

Better Maintenance and Less Wear and Tear

On the surface, it might seem that short-term rentals would suffer more wear and tear than long-term leases, but that’s not necessarily the case. Because short-term rentals are cleaned and inspected regularly, any issues are likely to be caught and addressed early, preventing minor problems from becoming major repairs.

Diversifying Your Investment

The real estate market fluctuates, and having your investment spread across different types of rentals can help to mitigate risk. If long-term rental demand declines, the short-term market might still be thriving, allowing you to maintain a steady income.

Tax Benefits

Depending on your location, you may also be able to enjoy significant tax benefits from short-term rentals, with the possibility to deduct expenses such as mortgage interest, property taxes, insurance, and maintenance costs.

To wrap up, investing in short-term rentals is a promising avenue offering high potential returns and flexibility. Of course, as with any investment, it is not without its challenges. However, with careful planning, a well-chosen property, and effective management, short-term rentals can be a smart addition to your investment portfolio. Contact Kenbry today to learn more about our financing programs for short-term rentals.

Stated Income Loans vs. Traditional Loans: A Deep Dive

Stated Income Loans vs. Traditional Loans: A Deep Dive

Navigating the landscape of home loans can be a daunting task for any prospective homeowner. Among the multitude of options available, two of the most commonly discussed types are Stated Income Loans and Traditional Loans. To help clear up some of the confusion, we will delve deep into each of these loan types, contrast their features, and aim to provide you with the information needed to make an informed decision.

Traditional Loans

Traditional loans are the most common types of home loans. They usually come in two forms: Fixed-Rate and Adjustable Rate Mortgages. With these loans, lenders require comprehensive documentation, including W-2 forms, tax returns, and bank statements to verify your income and ability to repay the loan.

The primary benefits of traditional loans lie in their relatively low interest rates and fixed payment schedules, making them a predictable option. However, they require a good credit history, a stable income source, and usually a substantial down payment.

Stated Income Loans

On the other hand, Stated Income Loans, also known as “no-doc” or “low-doc” loans, require less documentation. As the name suggests, borrowers simply state their income without needing to provide extensive evidence. These loans were designed for self-employed borrowers, or those with variable incomes, who may have a harder time gathering traditional income documentation.

Stated income loans offer flexibility that can be attractive to some borrowers, but they often come with higher interest rates to offset the perceived risk by the lender. They also require a higher down payment and a good credit score.

Comparison

When comparing the two, Stated Income Loans offer convenience and less documentation, but they come at a cost. Higher interest rates can significantly increase the amount paid over the life of the loan.

In contrast, traditional loans require more paperwork and have stricter qualification criteria, but they typically offer more favorable terms, including lower interest rates.

Final Thoughts

In summary, the choice between a Stated Income Loan and a Traditional Loan depends largely on your personal circumstances, including your income structure, credit score, and your ability to provide documentation. Before making any decision, it’s always best to consult with a mortgage professional who can guide you based on your unique financial situation.

Remember, the key to successful homeownership is not just getting a loan, but getting the loan that’s right for you. Contact Kenbry today to learn more about our stated income loans for commercial real estate.

Why SBA Loans Are Great for Commercial Real Estate

Why SBA Loans Are Great for Commercial Real Estate

When it comes to financing commercial real estate, Small Business Administration (SBA) loans hold a prominent position. These loans, designed by the U.S. government, aim to support small businesses by providing them with capital at favorable terms. Here’s why SBA loans could be an excellent choice for your commercial real estate ventures.

Lower Down Payments

One of the primary advantages of SBA loans for commercial real estate is their lower down payment requirement. Traditional loans often require a down payment ranging between 20% to 30% of the property’s value. In contrast, SBA loans allow down payments as low as 10%, making it easier for small businesses to acquire commercial properties without draining their cash reserves.

Longer Repayment Terms

Another significant advantage of SBA loans is the extended repayment terms they offer. With traditional commercial loans, typical repayment periods range from 5 to 20 years. SBA loans, on the other hand, can have repayment terms of up to 25 years for real estate loans. Longer repayment periods mean lower monthly payments, improving cash flow and financial stability for businesses.

Competitive Interest Rates

SBA loans offer competitive interest rates, often lower than those of conventional commercial loans. The rates are usually based on the prime rate plus a markup rate. The government caps the rates, ensuring that they remain affordable for small businesses.

Flexible Use of Funds

Unlike some traditional loans where you might be restricted in how you use the funds, SBA loans offer more flexibility. Funds from an SBA loan can be used for a variety of purposes, including purchasing land or buildings, construction or renovation costs, or even refinancing existing debt.

Greater Accessibility

Lastly, SBA loans provide greater accessibility to small businesses. For businesses that might not qualify for a conventional loan due to a limited track record or lack of collateral, SBA loans can be a viable alternative. The government guarantees a portion of the loan, thereby reducing the risk for lenders and increasing the likelihood of approval for small businesses.

In conclusion, SBA loans are a powerful tool for financing commercial real estate, offering lower down payments, longer repayment terms, competitive interest rates, flexible use of funds, and greater accessibility. If you’re considering purchasing, building, or renovating a commercial property, it’s worth exploring the benefits an SBA loan from Kenbry.

The Advantages of Using a Private Lender for CRE Financing

The Advantages of Using a Private Lender for CRE Financing

Commercial real estate (CRE) financing is a critical aspect of any business venture. Traditionally, businesses have leaned towards banks and other institutional lenders for financing. However, the rigid structure and stringent requirements of these traditional lending institutions may not be suitable for every business. That’s where private lenders step in, offering flexible, fast, and personalized financial solutions.

Quick Financing

One of the standout advantages of using a private lender is the speed at which they operate. Traditional lenders have to follow a lengthy underwriting process that includes several levels of bureaucracy. Private lenders, on the other hand, have the flexibility to make swift decisions, thereby accelerating the loan approval process. This speed can be particularly advantageous in a competitive real estate market where securing a property rapidly is crucial.

Flexibility

Private lenders provide a higher degree of flexibility compared to traditional lending institutions. They generally function on a case-by-case basis, considering the unique needs and circumstances of each borrower. This flexibility extends to loan terms and repayment options, allowing borrowers to tailor the loan structure to their specific needs.

Less Stringent Criteria

Private lenders often have less stringent eligibility criteria than their traditional counterparts. Where banks may decline applications due to poor credit scores or lack of sufficient collateral, private lenders may still consider the viability of the project itself, offering loans based on the potential profitability of the property.

Personalized Service

Private lenders often provide a more personalized service than traditional lenders. They take the time to understand the borrower’s needs, goals, and plans. This personalized service can be beneficial, particularly for complex or unconventional financing needs that traditional lenders may not understand or accommodate.

In conclusion, private lenders for CRE financing provide an efficient and flexible alternative to traditional lending institutions. They can respond quickly to financing needs, offer significantly more flexibility, have less stringent criteria, and offer a more personalized service. While each financing option has its pros and cons, it’s clear that private lenders fill an important gap in the market and are an option worth considering for commercial real estate investments.

Kenbry is a private lending firm, committed to providing tailored solutions to meet the needs of property investors. If you need CRE financing, contact Kenbry today.

Why Property Flippers Prefer Bridge Loans

Why Property Flippers Prefer Bridge Loans

In the realm of real estate investment, timing is everything. Property flippers, those who buy homes to renovate and sell for profit, often operate in a high-paced environment where access to funds can make or break a deal. It’s in these circumstances where bridge loans prove their worth.

A bridge loan, as the name suggests, serves as a temporary “bridge” that enables investors to secure a property swiftly, even before they’ve sold their current holdings. But why do property flippers often prefer this type of financing?

Quick Access to Funds

The ability to move quickly is a significant advantage in the competitive real estate market. Bridge loans offer the promise of rapid access to funds, often within a week or less. This speed gives property flippers an edge when multiple buyers express interest in a property.

Flexibility

Bridge loans are designed to be short-term, allowing flippers to borrow for specific renovation projects and repay the loan after selling the refurbished property. This flexibility allows investors to use the loan for a variety of purposes, ranging from property acquisition to renovation costs.

No Prepayment Penalties

Unlike traditional loans, bridge loans usually have no prepayment penalties. This feature means that if a flipper finishes their project and sells the property quicker than anticipated, they can pay off their loan early without incurring extra costs.

Less Reliance on Credit History

While credit scores and history are important, bridge loan lenders are primarily interested in the property’s value and the investor’s potential profit. This focus allows flippers with less than stellar credit to still secure funding, provided they demonstrate a sound investment strategy.

Looser Requirements

Bridge loan lenders often have looser requirements compared to traditional banks. This leniency allows for a wider range of flippers to access funding and encourages entrepreneurial spirit within the property flipping industry.

While bridge loans are not without their risks – including higher interest rates and the potential for default if the property doesn’t sell – they offer a unique and valuable financial tool for property flippers. By offering quick access to funds, flexibility, no prepayment penalties, less reliance on credit history, and looser requirements, they allow flippers to seize opportunities and turn them into profits. Contact Kenbry today to get the financing you need for your fix and flip projects.

5 Reasons to Diversify Your Portfolio with Rental Properties

5 Reasons to Diversify Your Portfolio with Rental Properties

When it comes to investment diversification, rental properties stand out as an appealing option deserving serious consideration. Here are five compelling reasons why rental properties should form part of your investment portfolio.

1. Consistent Cash Flow

With rental properties, you can secure a steady stream of income through rent, which can act as a safety net during market volatility. This income is often sufficient to cover your property-related expenses while providing additional cash flow.

2. Appreciation Potential

Over time, real estate has consistently proven to appreciate in value. While the market can fluctuate in the short term, the long-term trend has always been upward. This appreciation can be a significant wealth-building tool.

3. Tax Advantages

Owning rental property comes with several tax benefits. For example, you can deduct rental expenses like mortgage interest, property tax, operating expenses, depreciation, and repairs. These deductions can offset your rental income, thereby reducing your overall tax liability.

4. Inflation Hedge

Inflation erodes the purchasing power of money over time. However, real estate often acts as an effective hedge against inflation. As the cost of living rises, so too can rent prices, enabling property owners to maintain their purchasing power.

5. Control Over Your Investment

Rental properties offer a level of control not always available with other investment types. As the property owner, you can make decisions about property management, rent pricing, and when to buy or sell. This ability to directly influence your investment’s performance can be empowering.

In conclusion, diversifying your investment portfolio with rental properties can provide consistent income, potential appreciation, tax advantages, an inflation hedge, and control over your investment. As with any investment, it’s crucial to do your research and consider your financial goals and risk tolerance before diving in. If you need tailored funding solutions to help you diversify your portfolio, contact the team at Kenbry today.

7 Reasons to Consider Investing in Multifamily Properties

7 Reasons to Consider Investing in Multifamily Properties

Investing in multifamily properties can be an excellent way to generate a steady stream of income and diversify your investment portfolio. Here are seven compelling reasons to consider this investment strategy:

1. Stable Cash Flow

Multifamily properties, such as apartment buildings, are designed to generate income. With multiple units for rent, these properties can provide a more consistent cash flow compared to single-family homes. Even with a few vacancies, you’re still likely to earn revenue from other occupied units.

2. Economies of Scale

Owning and operating multifamily properties can be more cost-efficient than managing multiple single-family homes. You can save on maintenance, renovations, and property management costs by having all units in a single location.

3. Lower Risk

The risk of income loss is lower in multifamily properties because the income doesn’t rely on a single tenant. If a single-family rental unit is vacant, you lose 100% of the rental income for that property. In contrast, a few vacancies in a multifamily property won’t significantly impact your overall rental income.

4. High Demand

With the increasing costs of homeownership, more people are opting to rent, driving up the demand for rental properties. This trend is particularly true for millennials and the elderly who value the convenience and flexibility of renting.

5. Tax Advantages

Investing in multifamily properties comes with several tax benefits. IRS allows investors to deduct expenses related to property ownership, management, and depreciation. Consult with a tax professional for detailed advice.

6. Appreciation Potential

Over time, multifamily properties can appreciate in value, especially if they’re in a growing market. This appreciation can lead to significant wealth growth down the line.

7. Control Over Value

Unlike stocks or bonds, real estate investors have more control over their investments. They can add value to their properties through renovations, adding amenities, or increasing rents.

In conclusion, investing in multifamily properties can be a smart move due to the potential for stable cash flow, lower risk, economies of scale, high demand, tax advantages, appreciation potential, and the ability to add value. If you need financing for multifamily investments, contact Kenbry today.

How Change Orders Can Impact Your Construction Budget

How Change Orders Can Impact Your Construction Budget

In the complex world of construction, change orders are practically inevitable. They are modifications to the original contract that can occur due to unforeseen circumstances, alterations in design, or changes to the scope of work. While change is a natural part of progression, it’s important to understand how change orders can significantly impact your construction budget.

The Impact of Change Orders

Change orders often lead to an increase in project costs. The reasons for this can range from the need for additional materials, labor, or equipment, to extensions in project timeframes that escalate overhead costs. Occasionally, change orders can lead to a decrease in costs, but this is generally the exception rather than the rule.

Managing Change Orders

Understanding how to manage change orders effectively can limit their impact on the overall budget. This starts with careful planning during the pre-construction phase and continues throughout the project lifecycle. Having a robust change management process in place can help ensure that any changes are addressed promptly and efficiently.

Planning

During the planning phase, it’s crucial to anticipate potential changes and account for them in your budget. This involves understanding the project’s scope and identifying any areas that might be prone to alterations. For example, if you are renovating an old building, it’s prudent to account for potential issues that might arise once the work starts, such as the need for additional structural support.

Implementation

Once construction is underway, it’s critical to have a process in place for handling change orders. This involves understanding what triggers a change order, who can authorize it, and how it will be documented. Having a clear process helps manage expectations and prevent disagreements or misunderstandings.

Re-evaluation

After a change order has been implemented, it’s crucial to re-evaluate the project’s budget and timeline. This involves updating your cost and schedule estimates to reflect the changes. It’s also important to communicate these changes to all stakeholders to ensure everyone is on the same page.

In conclusion, while change orders are often a necessary part of construction, understanding their potential impact on your budget and managing them effectively can help ensure your project stays on track. By taking the time to plan, implement, and re-evaluate, you can navigate the change process successfully and maintain control over your construction budget. If you need ongoing or permanent financing for your construction project, contact the team at Kenbry today.