Key Terms to Understand When Considering Commercial Real Estate Loans Texas

Commercial real estate is valued differently than residential real estate. Knowing some key terms will improve your understanding of commercial real estate loans Texas.

Residential property value is determined greatly by the location and the size of the property as well as the amenities and finishes. But commercial real estate is a very different entity. The greatest value in a commercial property is the usable square footage. The ability to make money through the use of the property is all that really hold value so the current condition and features are not really as important as they would be in a residential property. Knowing and understanding the key terms used when evaluating commercial real estate will help you to better understand commercial real estate loans Texas and why certain properties hold more value than others.

Net operating income is a critical factor in determining the potential value of a commercial property. NOI is determined by evaluating the property’s first year gross operating income and then subtracting the first year operating expenses. As you would expect, you want to have a positive NOI. When a property makes money in its first year it is a strong indicator that it will continue to turn a profit and that is what increases the value of a commercial property. When a property has a positive new operating income then that property is going to be great collateral for commercial real estate loans Texas.

Cap rate is a term that is also used to evaluate an income producing property. This is an important term if you are purchasing a property and will be using part of it for your business and renting out the remaining portion of the property. The cap rate is used to project the net present value of the future cash flow generated by the property. Again, a property that is demonstrating good income is always going to be favored in commercial real estate loans Texas over a property which is not providing as much income. Purchasing a property with a strong income history will increase your potential for a commercial loan at a good interest rate.

Know What Lenders Are Looking For

When you are seeking a loan on a commercial property, lenders are concerned with the financial stability of your business and also your creditworthiness. But they are equally concerned with the value of the property that you are purchasing. Not only are they looking at the current market value but they are also looking at the earning potential of the property.

Finding the Best Property for Your Needs and the Loan Criteria

When you are shopping for a commercial property the requirements are somewhat different than shopping for a residential property. The residential property must meet only your needs. But a commercial property is often more desirable if it meets your needs as well as the needs of your lender. That means that if the property can generate income to decrease the risk on your loan then it is a better choice. You might not have considered being a landlord but having tenants who are helping to pay your monthly mortgage can be a big advantage for you.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tips You Should Know Before Appling for Commercial Loans Texas

Purchasing a commercial property can offer many benefits. But you need to fully understand the process before you apply for commercial loans Texas.

Most consumers know that a commercial property loan is a little bit different than a residential loan but they are not really sure how the two differ. When you research commercial loans Texas you will learn that commercial mortgages charge higher interest rates and often there are more restrictions written into the loan agreement than in the case of a residential mortgage. But borrowers who are savvy know that using a broker who specializes in commercial loans Texas can offer some great benefits. Brokers have access to second tier lenders who are willing to offer more competitive interest rates and lowers fees. These commercial loans Texas can be almost as cost effective as a residential mortgage loan.

Most first time commercial loan borrowers also don’t realize that they are going to need to make a more substantial down payment that they would on a residential property purchase. In some cases you might be required to pay 30% to 40% down. This is because the value of commercial properties can fluctuate much more and even more rapidly than residential properties. Lenders want to be sure that there is always equity in the property as that assures them of a means to recover their money if you default on the loan.

Another surprise for many new borrowers is the term of a commercial loan. A residential mortgage is commonly 30 years but a commercial mortgage can be as short as five years. The longest commercial mortgage loans are 20 years but most lenders will only extend the loan to 15 years. This means that you should also be expecting a higher monthly payment due to the shorter time frame of the loan.

What to Know If You Plan to Lease Space

If you are planning to lease part of the space in your new commercial property then you will also want to learn about the most common commercial lease terms. These terms can be very beneficial to you as you are depending on the lease money to help repay your commercial mortgage. Unlike the standard one year lease on a residential property, commercial buildings often require a longer commitment from the tenant. The most common terms are 3 years and 5 years. In addition it is very common to offer a 3 or 5 year option to allow the tenant to extend their lease after the initial term has expired.

Know What to Expect in Fees

Commercial loans require property appraisals and environmental tests to make sure that the property is not contaminated. These fees are passed on to the buyer and so are many of the administrative fees. You can expect to pay an application processing fee which is due prior to processing. This fee and the appraisal fee are normally nonrefundable. If you are approved then you will be asked to pay a processing fee, legal fees and points in addition to the interest on the loan. Knowing what to expect and how the process works can help to eliminate some of the stress that you will experience the first time that you are applying for a commercial property loan.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Lending Texas: How Harvey impacted Local Banks

Harvey's impact may result in immediate losses to Texas commercial lenders. Insurance payouts and construction loans could prove to be a long term benefit.

Banking activity in the Houston area accounts for 2 percent of banking activity nationwide. The storm may have inflicted up to 190 billion dollars in property damage. Not all banks are equally exposed to this damage, but the impact the storms impact will certainly be felt commercial banks in the region. In particular by those organizations with a majority of their accounts in the Houston area.

Banks that are concentrated in the Houston area face greater exposure to Harvey's aftermath. Allegiance Bankshares faces the greatest risk. Virtually all of its deposits and accounts originate from the Houston area. Other notable banks, Prosperity Bancshares and Zions Bancorp, also face significant risk. 30 percent of Prosperities accounts and 19 percent of Zions are concentrated in Houston.

During the storm the brunt of the impact on banking activity manifested in closures to local banks. Prosperity, for example was forced to close 60 locations during the storm, or 25 percent of its total branches. However the greatest concern for investors probably remains the potential damage to properties mortgaged by these local banks. This uncertainty drove down share prices down, not just for these organizations, but for exchange trade funds (ETFs) invested in these regional banks. For example, the 3.2 billion dollar KRE fund has 1.31 percent of its shares with Prosperity and 2.46 percent of its shares with Zions. The share price of KRE fund and of these banks themselves, dipped in the immediate aftermath of the storm. However the price of these shares seems to be recovering as investors grow more confident in the long term stability of these local commercial banks.

At this point it remains difficult to assess just what the long term impact of Harvey will be on commercial lending in the Houston area. One way to assess the impact of the storm is to examine the impact Hurricane Katrina had on local Banks in New Orleans. Analysts predict in the short-term, loan activity will drop off and losses will pick up as damaged properties are written off of balance sheets. However many see a bright future for Houston's’ regional banks. Local banks saw deposits grow by 20 percent in the wake of Katrina. This may be the case in Houston as insurance companies issue pay-outs and federal aid comes into the area. Lending activity may also increase as those impacted by the storm seek financing to rebuild and repair damage. Prosperity CEO David Zalman claims “We’re used to this, in the long run, this will create a robust economy for the state. You will see deposits increase in Texas banks because of the insurance money.”

In the short-term Texas commercial lenders and regional banks will suffer as damage is assessed.

The scope of physical damage to bank facilities is still being assessed, as well as the damage to properties financed by these local banks. In the short term this uncertainty may spook some investors. This was evident in the immediate impact on share prices for the Houston based commercial banks mentioned before. Investors seem to have long term confidence however, as the share prices of these banks has since recovered.

Texas commercial lenders and regional commercial banks may see a long term benefit from Harvey.

No doubt as federal aid and insurance pay outs are distributed, locals will increase their deposits in these banks. Lending activity is also likely to rise in the long run as those impacted by the storm seek financing to reconstruct their damaged properties. However investors long term confidence in the regions banks may not recover, if another disaster of similar scale to Harvey, strikes Houston area in the near future.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Texas Commercial Mortgages: Billions at stake due to Hurricane Harvey

Hurricane Harvey puts many securitized commercial mortgages in Texas at risk.

Moody’s claims some 1,500 properties may have been impacted by Hurricane Harvey amounting to 19.4 billion in outstanding CMBS loans. The number of CMBS financed properties at risk varies with each analysis. Competing methods of analyzing the storms damage to investors’ portfolios have emerged. One method is to consider the wider area impacted by the storm, the other is to consider the areas that were more acutely impacted.

One method of analyzing the damage is to consider properties in the disaster area declared by Governor Gregg Abbott. The area includes 54 counties and reaches as far as San Antonio. An opposing approach is to consider the disaster area declared by FEMA, an area encompassing some 33 counties. The first approach gives a broader sense of the storms potential impact on CMBS properties, while the second offers a more clinical assessment.

In the state declared disaster area there are about 1,200 CMBS loans amounting to 15.1 billion dollars that could be impacted by the storm. These loans are not government sponsored, and therefore, pose a higher credit risk to investors. Retail properties have the highest exposure among these loans. Making up 32.9 percent of the total, or 5 billion dollars, of the outstanding CMBS loans.

Considering the areas impacted according to FEMA the number of CMBS loans at risk is smaller, but the overall impact remains the same. In the 33 counties declared “disaster-areas” by the agency there are 900 non-government sponsored CMBS loans, amounting to a balance of 12.2 billion dollars... Retail properties again face the greatest exposure, making up about 30.1 percent of the total.

It will be difficult to directly quantify the impact of Hurricane Harvey on the CMBS market and Texas commercial mortgages in the short term.

Whether analysts consider the broader area impacted by Hurricane Harvey or the areas more acutely impacted the extent of the damage to the CMBS market will be difficult to estimate in the short term. The damage to each individual property will have to be assessed.

What is clear from both overviews is that retail makes up the largest share of CMBS loans potentially impacted by the storm. The performance of these loans in the future will largely depend on how the local economy recovers and whether these retailers will be able to retain their customers.

In the long term securitized commercial mortgages in Texas will continue to face risk from natural disasters.

Simply put CMBS lenders don't underwrite the potential cost of natural disasters. Therefore the market will always face exposure when disasters like Hurricane Harvey take place. Flood insurance, FEMA assistance and the willingness of private insurers to underwrite risk encourages development in disaster prone areas, in Texas and throughout the nation. Insurance may repair the damage caused by these disasters on the surface, putting some investors at ease. But the damage Hurricane Harvey inflicted on the local economy remains unclear. With retail properties facing the greatest exposure, the greatest risk to CMBS loans is not superficial damage that can be repaired, but Harvey's long term damage to the local economy and whether retailers can secure customers in areas where the population is displaced.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Texas: What Tenants need to know

If you lease commercial real-estate in Texas, your land lord is obligated to protect your health and safety. However if a land lord refuses to make reasonable repairs it is vital that you don't take preemptive steps.

There are two types of conventional commercial leases in Texas, the periodic lease and the term lease. The periodic lease gives the tenant having the option of terminating the lease at the end of each month. Under a periodic lease tenants are obligated to pay rent for a full month plus one day, before vacating the property. Term leases last for a period agreed upon between the land lord and the tenant. Under this type of lease generally no changes can be made until the lease is up for renewal. Under a term lease tenants may have to pay the cost of maintaining the property.

No matter what type of lease your business has the land lord is obligated to ensure your basic health and safety. The land lord must ensure basic fire protection and ensure that devices like smoke detectors are well maintained. The land lord must maintain basic security and keep locks and alarms are in working order. Apart from these basic conditions, the land lord’s responsibilities will largely be defined by the terms of your lease. If you believe poor conditions have a material impact on your health and safety, the land lord is obligated to make repairs. If your lord refuses to make repairs, it is vital that you avoid withholding rent or taking preemptive action.

If you lease commercial real-estate in Texas, take specific steps before taking any action against your land lord.

The Texas Attorney Generals website advises you to make any complaint directly to your land lord via a certified letter. Clearly outline the repairs needed to the property. Prior to taking this step, be sure your rent is current. Upon sending the letter, request documentation proving your land lord received it. The land lord must make repairs within a reasonable time frame. This is generally within seven days of receiving the letter. If the land lord doesn't take reasonable steps to make the repairs outlined in the letter, send the letter again and wait another seven days. If the land lord doesn't respond, you may be able to terminate the lease. You may also be able to make any necessary repairs yourself and deduct the cost from your rent. You may also sue your land lord in order to compel them to finance the repairs you believe are necessary.

With Texas commercial real-estate the land lord’s responsibilities are largely defined on a case by case basis

Generally the terms of your lease will outline the land lord’s responsibilities for maintaining the property. Although land lords are obligated to protect your health and safety, you may have to prove in court how conditions on the property negatively impact you and explain why you believe your land lord is responsible. Therefore don't violate the terms of your lease prior to sending a certified letter, to demonstrate that the land lord is aware of your complaint. Consult with legal experts if necessary.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Texas: 2017 Trends for the Dallas Office Market

The job market in the Dallas area remains robust. The demand for office properties will increase as business continues to expand. This is pushing prices higher in the short term. A common trend throughout the commercial real-estate market in Texas.

In 2016 Dallas area was the nation’s fastest growing metro. The employment base in Dallas expanded by the 3.5 percent in 2016. This growth in employment was the largest in the nation. Robust economic growth in the Dallas area will ensure a steady demand for office properties over the next few years. This increased demand is pushing prices higher. Although new construction is pushing up the price of office space in the short term, in the long term the Dallas area will likely remain affordable.

Prices for commercial office space are reaching record highs, with some competitive areas reporting prices as high as 50 dollars per square foot. These record high rents reflect the economic growth in the area. New companies are establishing themselves in Dallas and they are willing to pay the increased price for office space. Improved absorption rates in the area demonstrate this fact. Office space is being leased and sold off twice as fast in comparison to the same time last year. Not only are established companies looking for new locations, but new companies are moving into the area as well.

This year 2.5 million square feet of office space was sold or leased. 1.4 Million sq. ft. of which was new construction finished in either 2016 or 2017. The availability of new office space in the area is forcing some land lords to make drastic renovations to their properties to retain existing tenants. Although rental prices this year reached a record high of 25 dollars per square foot, the availability of new construction will make the market more competitive, pushing prices down in the long run.

Speculative construction remains high and this is pushing prices higher. Similar to much of the Texas commercial real-estate market.

New premium office space is selling off quickly in the Dallas area, fueling speculative construction. The total amount of office space under construction is down slightly from last year to roughly 8 million sq. ft. However rental rates are up, with an increase of 5.4 percent year to date. Half of the new premium construction is already leased. Clearly speculative construction is paying off for developers and tenants are willing to pay higher prices. But with construction and demand remaining steady in the area the price of office space is likely to stabilize.

As with much of Texas commercial real-estate, increased supply and steady demand may cause prices to stabilize.

Dallas’ robust economy ensures the demand for new offices will remain steady, fueling further construction. As the supply of office space increases, prices are likely to stabilize from their current highs. The construction of new office space is pushing up average rental prices in the Dallas area this year. However compared to other metropolitan areas, the Dallas area remains relatively affordable. This affordability will make the area attractive to employers for years to come.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Enter a post titleCommercial Real Estate Texas: 2017 Trends for Office Real-estate in San-Antonio

The commercial real-estate market in San Antonio remains resilient, particularly when it comes to office space.

Nation-wide the market for offices seems to be declining or stagnating. The San Antonio market is a unique exception. The market for new offices is rapidly expanding. New jobs are pushing up demand for offices in the area and new construction is filling up fast. Even with record breaking construction, the market may not be keeping pace with demand, pushing the price of office space in the area even higher.

The San Antonio area, like much of Texas, is seeing increased job growth. According to a CRBE analysis 24,900 total jobs were created in the region as of May of 2017. Office-related jobs have expanded by 2 percent this year. This job growth is accelerating the demand for new offices, making the San Antonio market a unique exception when compared to the rest of the nation, where demand appears to be leveling off or declining.

The price of office space in the area is at a record high, with an average price per sq ft at 22.54. This price is 2.7 percent higher than it was when compared to the same time last year. The rental price for Class A properties, with triple net leases, went up an astonishing 10.9 percent just since the last quarter. New properties are charging record these record high rental rates. The average price for office space is likely to increase, as new construction in the area escalates. 1.2 million sq. ft. of office space broke ground this year. Low vacancy rates in the area indicate that many tenants are willing to pay the increased prices.

Low vacancy rates, particularly in the case of new offices, indicates rising demand in the area. 40 percent of the 390,000 sq. ft. delivered so far this year is already leased out. The CBRE analysis quantifies 1.2 million sq. ft. of additional office space will be needed to keep up with future demand. Even with all the recent construction in the area, vacancy rates are lower this year.

As is the case with much of Texas commercial real-estate, the market for offices in San-Antonio is expanding.

Even with record breaking levels of office construction, new offices are filling up fast. As jobs move into the area, the demand for office space will only increase. The speed with which new construction is being sold off could indicate that construction is not keeping pace with current demand.

Increased demand will push rents higher in the area. A common trend with Texas Commercial Real-estate

San Antonio will remain an attractive place to do business for many years to come. The low vacancy rate, even in the face of record prices indicates that tenants in the area are willing to pay a premium for office space. With the vacancy rate tightening and the supply of new offices seemingly insufficient to meet current demand, land lords will continue to have greater leverage to charge even higher rents.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage