After years in the real estate business, Charles Flanagan thought he knew all the ins and outs of the borrowing game. The upstate New York-based investor had experience with traditional lenders as well as using bridge loans for building up his portfolio of shopping centers and other projects.
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Banks may be saying ‘fold’ on raw land deals but that’s doesn’t mean they’re completely off the table. Many banks in the current financial climate consider land deals too risky. After all, raw land isn’t known for producing cash flow.
According to the American Monetary Institute, borrowing money is though to be as old as the idea of money itself. The practice dates back at least to 300 B.C. But many ideas about commercial real…
Time, as the saying goes, is money. To commercial real estate investors, every day where a project sits idle can mean thousands of dollars down the drain. It’s times like these when the real value of a direct lender can be seen clearly.
The comedian Bob Hope once joked that “a bank is a place that will only lend you money if you can prove you don’t need it.” Today’s risk-averse banking environment means many real estate investors in need of a quick infusion of capital face a choice: keep a project in a holding pattern or try to land a partner or other investors.
When it comes to borrowing for commercial real estate, the school of hard knocks may offer better lessons than the Ivy League.
“The fact is, there are many more options than traditional bank financing out there.” Kevin Wolfer, CEO/President of the Englewood Cliffs, NJ-based direct private lender, Kennedy Funding Financial says getting creative isn’t in most bankers’ DNA. “Bridge loans aren’t for every situation, but they can be a great tool in commercial real estate investors’ tool box.”
Why does land make so many bankers head for the hills?
Land, after all, seems like pretty straightforward. It’s the part of a property that wasn’t designed by architects or created by a team of builders. But when it comes to commercial real estate loans, land is anything but simple.
The developer of a strip mall had a $10 million problem. If he couldn’t get a loan to cover the unexpected costs of repairing asphalt damaged during construction he would never reap the rewards from years of hard work. The bank which supplied the funding wouldn’t come through with any more loans. Taking on a partner would wipe out all of his profit and potentially take months to negotiate and finalize. What’s a developer to do?
They say what happens in Vegas stays in Vegas but when it comes to retail real estate there’s a lot more to the story.
The fact is most people come to Vegas to have a great time, and with all the entertainment offerings that coincide with ISCS, it’s hard not to. But veterans of the conference explain there are ways to get the most out of the show.
Is the cavalry coming to save the day? For Ft. Worth business owner and developer Ted Allen, when it came to getting a bridge loan to take a $10 million dollar retail renovation project to finish, the answer from banks was “no.” Rather than let the project languish and continue to bleed money, Mr. Allen turned to a retail broker who in turn connected him to the lending experts Kennedy Funding.