There are funding institutions and brokers out there who will tell you until they are blue in the face that there is no such thing as a funder who doesn't charge up-front fees. This is probably largely due to their need to defend the fees they have historically charged, and due to folks like me who actively promote the fact there ARE funders who don't charge up-front fees. As with most arguments, this boils down to semantics.
Let me tell you the truth and I will keep it as simple as possible:
1)
There ARE funders who will review a file and underwrite it with out expense beforehand, (yes they are hard to find, but they do exist), BUT there will ALWAYS be 3rd party fees (such as to appraisers, risk assessors, title companies) that the borrower is expected to shoulder in pursuit of their loan. Its that simple.
The skilled broker will work with both the borrower and the funder to estimate these expenses and build them into the loan proceeds, so that the client is not "short" at the end. I personally don't like it when a borrower is expected to cut a blanket check to the funder to start the "due diligence" process. Don't like it, but have done it. I PREFER to have these expenses discussed BEFOREHAND, and for the checks to be cut to any 3rd Party directly. This eliminates any possibility the funder is benefitting in any way from these fees.
2)
There ARE brokers who will review a file and prepare it for funder review with out expense beforehand, and there are ALWAYS expenses associated that process, but it is up to the broker whether or not to ask for compensation for this extensive amount of work. White Knight does not. We believe in putting our money where our mouth is and getting paid a success fee out of closing. If we don't think a loan is going to go anywhere, we won't waste your time or ours. Sometimes it takes a good deal of time to figure this out, but we will do that at our expense if the project is worthy or compelling. At least you are not out any money to find this out.
We do ask clients for a small amount of money once a funder is found that has issued terms that are acceptable and who has a) satisfied the borrower of its ability to fund and 2) satisfied the borrower of its intent to fund. A good rule of thumb for this fee is 1/10th of 1% of the loan amount, but with the bigger loans this is complete overkill so we usually just discuss what is appropriate with the borrower ahead of time. Never any surprises and total transparency is what you get when you deal with us.
Wednesday, May 27, 2009
Wednesday, May 6, 2009
A little patience pays off...
I am happy to say a private investor stepped up to take the loan scenario that I posted previously. It is my second loan for this investor, who is giving White Knight another chance since the first loan he did with us over a year ago is panning out nicely. He agreed to loan the borrower approx 80K (53% LTV) at 13 % interest and two points, for two years. He is not requiring an appraisal. If you want to earn similar returns on your cash, contact me for a referral and lets get going!
Thursday, April 23, 2009
Investor Needed
I have a great loan scenario for someone who wants to "get their feet wet" in the world of private lending, with out using too much money. I have a borrower in Madison, WI, willing to put up a nice income-producing property (duplex, upper & lower) worth about $163K, for a 70K loan. The property is free and clear. That loan amount is 47% of the value of the property. You would have first lien position, just like a bank. You would earn 16% on your money in the first year. Try making that on the stock market right now! Borrower will pay all closing costs. We do all the paperwork. You just cut a check and sit back and earn that nice interest. Please call me if your would like to have more information!
Tuesday, March 10, 2009
The Delights of Skype
...sure it's been around a while now, but I just never made the effort to get to know this service until I started doing work for a London based borrower looking to finance the purchase of a mega-resort in the Mediterranean. He is a big fan of it, and because all of a sudden I started having dealings with folks all over this planet, because of my dealings with him, and noticed all of those guys used it...I took the plunge.
...well, not much of a plunge really, I think the head set cost me $20 at the local Office Big Box. I got home, downloaded the Skype software in about 2 minutes flat, and it rang! It was my friend Ivan. Holy cow I couldn't believe the clarity of the call, no noise, a barely discernible delay.
If you do any business with folks overseas, do yourself a favor and get a Skype address, its the neatest thing since sliced bread. Oh, and if you want to use it to contact me, give it a whirl at:
"white.knight.cf"
...well, not much of a plunge really, I think the head set cost me $20 at the local Office Big Box. I got home, downloaded the Skype software in about 2 minutes flat, and it rang! It was my friend Ivan. Holy cow I couldn't believe the clarity of the call, no noise, a barely discernible delay.
If you do any business with folks overseas, do yourself a favor and get a Skype address, its the neatest thing since sliced bread. Oh, and if you want to use it to contact me, give it a whirl at:
"white.knight.cf"
Thursday, February 5, 2009
Financing Home Developments
I wanted to share with you some recent communiques between myself and an experienced broker in SC area, to give you a feel for what is happening in the South right now as far as financing home developments goes. I have been working with an experienced developer in SC with multiple successful developments to their credit. With bank capital dried up, they can't get the funds to do what they do, and are suffering for it. (parenthesis are mine)
"(names removed), thanks to the introduction by Marianna, I extend greetings from Johns Island, SC which is my operational home base as a ten year established business development and commefcial finance consultant. I am also a Sr. VP with the Sigma Capital Group, a "boutique" investment bank primarily focused on the energy/renewable energy, clean-tech and Eco-Green RE sectors.
In addition, I am a Managing Co-Partner in the Home Builders Consulting Group.
Yana advised me of your immediate need to secure re-financing for your projects in --- and in the ---- areas of SC and, as I sure you are aware, this moment in time is far from favorable with regard to ANY type of residential development and certainly not for "spec" home construction.
I have included a couple of paragraphs that I recently sent to Yana:
**"As far as your SC Developer client is concerned with those projects in ---- and in ----... IF he has a sufficiency of verifiable PRE-SALES then there MAY be a way of securing HARD MONEY funding. You mention an airplane.... who owns it, what type and how old? What is it worth? How much is owed on it?
You advise that current projects are "worth" $2.675-million. What is their "Quick Sale Value". Deduct out present bank debt = "equity in project". How much money do they need and for how long?"**
I currently have three fairly sizeable MPC's in The Carolinas that have been "stalled" due to (Bank name deleted) "pulling the plug" without notice on the respective developers seven months ago even though those folks were in no sense delineqnent or behind schedule. Now, they are in "deep s_ _t" because they have zero cash reserves with which to engage with any new lender let alone cover the required cost of updated MAI Appraisals.
The once favored "Senior Living/ 55+ Lifestlye" market has CRASHED because prospective buyers are now either "upside down" on their present "metro home" or their available equity, assuming they could find a buyer at today's reduced value, does not provide them with sufficient profit to engage in a new purchase + cost of physical relocation. Sad, but true.
(I know ) ------, a major web publisher of recreational and lifestyle real estate developments, and his advertiser base and daily traffic count has dwindled to a perilous point.
Even upscale modular brands such as ---- Homes have been forced to "shutter" Plants that were once thriving.
Is there "hope" in this current misery? Depends on how you define "hope"! I do have an investment group that will selectively acquire "distressed" developments at a price that enables the developer to escape with their hides almost whole but even those "vultures" are thinking twice about deals they have already issued LOIs on.
My "friends" at ---(name of bank) ---are now refusing to even consider residential "spec"/developer deals because they are holding too many delinquent projects.
Yana advises me that you are at least succeeding to find TWO buyers per month which is better than most! I assume that with a legitimate pre-sold purchase contract with a mortgage pre-approved buyer that your existing bank relationship will fund the construction loan.
You are more than welcome to call me to discuss. Best regards,
Richard Cooper
Richard Cooper Consulting
3759 Mary Ann Point Road
Johns Island, SC 29455
My clients responded to the email with this:
" Richard, Sorry it took a few days to respond . . . --- and I have a 14 acre site that is zoned for 46 ranch condominiums. We would like to get started moving dirt somewhere between summer and fall with a twelve month development period before units are ready for closing. So the first closing would not be until mid 2010. We are well aware traditional bank funding will not be available in this time frame so we are in search of private funding that offers more flexibility. If this is something that you think you can be of help with we would like to set up a time meet and go over more of the details. Thanks "
Which was followed with this:
Richard, --- and I have a 14 acre site that is zoned for 46 ranch condominiums. We would like to get started moving dirt somewhere between summer and fall with a twelve month development period before units are ready for closing. So the first closing would not be until mid 2010. We are well aware traditional bank funding will not be available in this time frame so we are in search of private funding that offers more flexibility. If this is something that you think you can be of help with we would like to set up a time meet and go over more of the details. Thanks
Which was folowed with this:
----, many thanks for your reply. To give you some idea of how bad things have gotten I have a client (very established and profitable hotel development/operations group) seeking financing for a new ---- hotel in ---- GA. Seven months ago, pre-approved at 75% of COST. Lender pulled out prior to closing citing internal liquidity issues. Now down to two lenders who are offering 65% of COST which client can live with but with a "nasty" clause that they are having a problem with.... Personal Guarantors from each of the Stock holders who own 10% or greater of the project in addition to 8-Points (total) and pre-pays of $20K.
The word "condo" = a stake in the lender's heart, particularly if a new development. The only way of appealing to a lender with this type of project is to be able to demonstrate and PROVE a continuum of STRONG demand for that type of property within the subject market from potential buyers who can be MORTGAGE APPROVED BY LENDER. In addition, 75% of the available units need to be PRE-SOLD to approved buyers. In absence of that criteria then the best I can offer would be a land refi, assuming you already own the 14-acre site. The loan would be based on up to 50% of the MAI Appraised "As-Is" value as further DISCOUNTED to arrive at a price that the lender believes would attract a buyer within 120-160-days if they had to foreclose. I have one lender who might have interest and their combined points and rates will be "Welcome Guido and Vinnie!". Although they add points and interest into the loan amount and defer payment for the 12-month loan term (which is helpful) on a loan of $10-million (for example) the borrower would be paying back a total of almost $13.25 million. Another issue that has to be factored is "Declining Values". Value basis today $XXX. What % reduction is probable within the next 12-months? Regardless of points and interest rates, ANY new residential construction anywhere in the Country requires the developer to have 40% of COST available to invest in their project and that assumes there are very little market related negatives in effect or projected. PLUS, the requirement for plenty of confirmed PRE-SALES. "
I hope you enjoy these examples of what is happening now across the country...as financing dries up, I have found it helpful to cooperate with brokers across the country to get deals done...if you are a loan officer or broker who would like be included in our network, please contact me. If you are a private investor or lender and are interested in taking a look at this or other loan requests we now have, please contact me!
"(names removed), thanks to the introduction by Marianna, I extend greetings from Johns Island, SC which is my operational home base as a ten year established business development and commefcial finance consultant. I am also a Sr. VP with the Sigma Capital Group, a "boutique" investment bank primarily focused on the energy/renewable energy, clean-tech and Eco-Green RE sectors.
In addition, I am a Managing Co-Partner in the Home Builders Consulting Group.
Yana advised me of your immediate need to secure re-financing for your projects in --- and in the ---- areas of SC and, as I sure you are aware, this moment in time is far from favorable with regard to ANY type of residential development and certainly not for "spec" home construction.
I have included a couple of paragraphs that I recently sent to Yana:
**"As far as your SC Developer client is concerned with those projects in ---- and in ----... IF he has a sufficiency of verifiable PRE-SALES then there MAY be a way of securing HARD MONEY funding. You mention an airplane.... who owns it, what type and how old? What is it worth? How much is owed on it?
You advise that current projects are "worth" $2.675-million. What is their "Quick Sale Value". Deduct out present bank debt = "equity in project". How much money do they need and for how long?"**
I currently have three fairly sizeable MPC's in The Carolinas that have been "stalled" due to (Bank name deleted) "pulling the plug" without notice on the respective developers seven months ago even though those folks were in no sense delineqnent or behind schedule. Now, they are in "deep s_ _t" because they have zero cash reserves with which to engage with any new lender let alone cover the required cost of updated MAI Appraisals.
The once favored "Senior Living/ 55+ Lifestlye" market has CRASHED because prospective buyers are now either "upside down" on their present "metro home" or their available equity, assuming they could find a buyer at today's reduced value, does not provide them with sufficient profit to engage in a new purchase + cost of physical relocation. Sad, but true.
(I know ) ------, a major web publisher of recreational and lifestyle real estate developments, and his advertiser base and daily traffic count has dwindled to a perilous point.
Even upscale modular brands such as ---- Homes have been forced to "shutter" Plants that were once thriving.
Is there "hope" in this current misery? Depends on how you define "hope"! I do have an investment group that will selectively acquire "distressed" developments at a price that enables the developer to escape with their hides almost whole but even those "vultures" are thinking twice about deals they have already issued LOIs on.
My "friends" at ---(name of bank) ---are now refusing to even consider residential "spec"/developer deals because they are holding too many delinquent projects.
Yana advises me that you are at least succeeding to find TWO buyers per month which is better than most! I assume that with a legitimate pre-sold purchase contract with a mortgage pre-approved buyer that your existing bank relationship will fund the construction loan.
You are more than welcome to call me to discuss. Best regards,
Richard Cooper
Richard Cooper Consulting
3759 Mary Ann Point Road
Johns Island, SC 29455
My clients responded to the email with this:
" Richard, Sorry it took a few days to respond . . . --- and I have a 14 acre site that is zoned for 46 ranch condominiums. We would like to get started moving dirt somewhere between summer and fall with a twelve month development period before units are ready for closing. So the first closing would not be until mid 2010. We are well aware traditional bank funding will not be available in this time frame so we are in search of private funding that offers more flexibility. If this is something that you think you can be of help with we would like to set up a time meet and go over more of the details. Thanks "
Which was followed with this:
Richard, --- and I have a 14 acre site that is zoned for 46 ranch condominiums. We would like to get started moving dirt somewhere between summer and fall with a twelve month development period before units are ready for closing. So the first closing would not be until mid 2010. We are well aware traditional bank funding will not be available in this time frame so we are in search of private funding that offers more flexibility. If this is something that you think you can be of help with we would like to set up a time meet and go over more of the details. Thanks
Which was folowed with this:
----, many thanks for your reply. To give you some idea of how bad things have gotten I have a client (very established and profitable hotel development/operations group) seeking financing for a new ---- hotel in ---- GA. Seven months ago, pre-approved at 75% of COST. Lender pulled out prior to closing citing internal liquidity issues. Now down to two lenders who are offering 65% of COST which client can live with but with a "nasty" clause that they are having a problem with.... Personal Guarantors from each of the Stock holders who own 10% or greater of the project in addition to 8-Points (total) and pre-pays of $20K.
The word "condo" = a stake in the lender's heart, particularly if a new development. The only way of appealing to a lender with this type of project is to be able to demonstrate and PROVE a continuum of STRONG demand for that type of property within the subject market from potential buyers who can be MORTGAGE APPROVED BY LENDER. In addition, 75% of the available units need to be PRE-SOLD to approved buyers. In absence of that criteria then the best I can offer would be a land refi, assuming you already own the 14-acre site. The loan would be based on up to 50% of the MAI Appraised "As-Is" value as further DISCOUNTED to arrive at a price that the lender believes would attract a buyer within 120-160-days if they had to foreclose. I have one lender who might have interest and their combined points and rates will be "Welcome Guido and Vinnie!". Although they add points and interest into the loan amount and defer payment for the 12-month loan term (which is helpful) on a loan of $10-million (for example) the borrower would be paying back a total of almost $13.25 million. Another issue that has to be factored is "Declining Values". Value basis today $XXX. What % reduction is probable within the next 12-months? Regardless of points and interest rates, ANY new residential construction anywhere in the Country requires the developer to have 40% of COST available to invest in their project and that assumes there are very little market related negatives in effect or projected. PLUS, the requirement for plenty of confirmed PRE-SALES. "
I hope you enjoy these examples of what is happening now across the country...as financing dries up, I have found it helpful to cooperate with brokers across the country to get deals done...if you are a loan officer or broker who would like be included in our network, please contact me. If you are a private investor or lender and are interested in taking a look at this or other loan requests we now have, please contact me!
Thursday, January 22, 2009
Borrower Beware...
Well, if I was three days GREENER I may have fallen for a really slick scam. There are a LOT of commercial lenders out there who are not lenders at all. This particular group cultivated me and my business for months, slyly "turning down" loans, etc. Something didn't smell right and lucky me, I have friends very adept at looking up information on people. Here's you TIP of the DAY...don't send a dime to anyone that you haven't checked out with a minimum of FOUR references, plus court case background checks. Also, lucky me, I am forming great relationships with HONEST brokers and REAL lenders so the chances of getting taken are slim. (No one is more paranoid than me right now, with all the first person first hand FRAUD running rampant). There is no way I'd allow you to get involved with an outfit that doesn't pass muster. And I don't expect you to do business with me, without checking ME out. References Happily Given! Nuff said!
Friday, January 9, 2009
Well I've been vewy vewy bad about keeping up with posts. So let me do a couple quick ones... Our most recent loan request was from a publicly owned east coast company needing 5.8M to purchase another company in the south, with no money down. Normally that scenario would never fly because no investor likes to get involved with a borrower who isn't putting their money where their mouths are; but I was surprised with a loan offering just today from a hedge fund in CT. I guess the fact that the sellers were willing to take a hefty 2nd, and the company is profitable as all get-out, posting 2 and 3 million dollar net profits in the last couple of years, may have something to do with it.
Preliminary terms are: a five year balloon prices at 11%, interest only, with a 2 year prepayment penalty (3%), and three points to the investor. A hefty due diligence fee of 25K was negotiated down to 15K, and the borrower tells me today to proceed. So I tell the hedge fund its a go, and they say, send in the Executive Summary. I'll let you know how it plays out, but in these days of few companies getting funded for hardly anything, it sure is nice to have an offer. I'll let you know how it goes.
The other successful offering we got just a couple days ago were for a east coast special needs housing remodeling contractor...they needed 500K working capital to fund materials, etc. for 3 million dollars worth of contracts in hand.
We got an investor to bite on the deal, and these were his terms: 1) form a corporation (borrower was operating as a sole propriatorship), and the terms were: a 500K secured revolving credit facility priced at 12% interest only, for a term of two years, with an option to renew for an additional one (1) year term, provided the Borrower is not in default, at a cost of one percent (1.0%) of the gross amount of the loans. There was one point to the lender at close, plus a 1 point facility fee. This particular investor also requires a 10K due diligence deposit. We'll post how that one goes as well! Cheers to you for a happy and profitable New Year!
Preliminary terms are: a five year balloon prices at 11%, interest only, with a 2 year prepayment penalty (3%), and three points to the investor. A hefty due diligence fee of 25K was negotiated down to 15K, and the borrower tells me today to proceed. So I tell the hedge fund its a go, and they say, send in the Executive Summary. I'll let you know how it plays out, but in these days of few companies getting funded for hardly anything, it sure is nice to have an offer. I'll let you know how it goes.
The other successful offering we got just a couple days ago were for a east coast special needs housing remodeling contractor...they needed 500K working capital to fund materials, etc. for 3 million dollars worth of contracts in hand.
We got an investor to bite on the deal, and these were his terms: 1) form a corporation (borrower was operating as a sole propriatorship), and the terms were: a 500K secured revolving credit facility priced at 12% interest only, for a term of two years, with an option to renew for an additional one (1) year term, provided the Borrower is not in default, at a cost of one percent (1.0%) of the gross amount of the loans. There was one point to the lender at close, plus a 1 point facility fee. This particular investor also requires a 10K due diligence deposit. We'll post how that one goes as well! Cheers to you for a happy and profitable New Year!
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