Money Broker Packet for 2011

8/6/2019 Money Broker Packet for 2011

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Dear Commercial Real Estate Investor;

This is an exciting time in your life because you are making some critical decisions to becomewealthy in a time where there are endless real estate acquisition opportunities. I can onlycommend you for seeing and moving on commercial real estate deals during an economic timethat may be challenging for most people; these are the times that make investors millionaires.

"Buy low, sell high" is the motto that all multi-millionaires have and it's clear that you've gainedinsight to this insider secret.

Secrets to Using OPM

Real estate investing revolves around Other People's Money (OPM). If you are going to be asuccessful commercial real estate investor, you will need to master the art of real estate finance.In this packet, I'm going to guide you through the process so please do not skip over any of myimportant information.

For the past decade I've been working with commercial real estate lenders. What isdisheartening to me is seeing new investors who don't know any better fall into the traps ofcommercial lending. There are many unscrupulous characters out there who will makepromises that they cannot deliver on. I want to offer you as much valuable information before

you apply for your commercial real estate loan to help divert you from a potential lendingdisaster.

Holy Grail in Lending

The biggest myth in commercial real estate is the "Holy Grail" of lending or the "100% LTV(loan-to-value), No Personal Credit Needed" loan. The only time you can get a true no-cash-no-credit property is by using a property owner for 100% owner financing or a lease-option deal. Ifyou aren't involved in a 100% owner financing/lease-option OR a situation where you aregetting 100% bank-direct funding on a bank-owned (REO) foreclosure property (which is rare)then you will not be able to get a 100% LTV on a commercial property using a conventional

lender.

The other issue is that many new investors want a non-course loan (to negate personal financialresponsibility) and yet they do not have the right type of property or loan size to make thishappen. You can look at my FAQ sheet for information on what is required to get a non-recourse loan.

Finally, I am not a broker that has lenders who will work with partial owner financing deals. Ifyou plan on having the seller hold paper (or a private seller second), I cannot know about any

InHome FinancingInHome Financing



"deal on the side" you have going on with the seller of your property. Anything you tell me will be revealed to my lenders because this is what is required of me as a broker. Anything youdon't want the lender to know, including any private mortgage contracts you want to privatelyhave with the seller, is not something you need to tell me (verbally or in writing) nor should youtell me at any time during the process.

Due Diligence Requirements

One of the biggest problems with new investors is that they don't do any basic due diligence ona property they found online, usually using www.loopnet.com as a tool to tap into the onlineMLS. Some of the things you need to be aware of when you are considering buying a propertyis:

1) What are the "actual" numbers including income and expenses for the past 12months? You do not want "proforma" numbers. You can get the "actuals" from the listingagent via email or by placing a phone call to get this information.

2) How much money does the seller owe on the property? How many loans are on theproperty and for how much total? How many sellers are there? You can get this informationthrough the listing agent.

3) What is the verifiable occupancy level? You should get a rent roll for the past 3 monthsor longer to see how many tenants are in the property paying rent. Those that are not payingrent do not count as part of the occupancy level percentage.

Once you get the above information and you know whether the property has a good solid cashflow then you can start negotiating your final purchase price. You typically do this by putting inan LOI or offer form to the listing agent on record for less than what their asking price is. Theywill begin negotiating with you either verbally or via email.

Once you "lock in" an agreed purchase price that both you (the buyer) and the seller are happywith then you are in the "pre-contract" phase. This is when you can officially start the process ofapplying for your commercial real estate loan with me.

You can fill out my Loan Worksheet and mail it into me with a $500 fee and I will be able to getyou a loan preapproval within 3 business days. The loan worksheet is in this packet. My LoanWorksheet is the ONLY thing I need. I do not need or want a Cash Flow Evaluator Worksheetor a Loopnet.com listing. I ONLY NEED MY 3-PAGE WORKSHEET FILLED OUT ANDNOTHING ELSE FROM YOU UNTIL REQUESTED!

If you have any questions after you thoroughly read through this information packet at least

once, please call me at (734) 754-0117 or email me at [email protected] .

Sincerely,

Ron Espinoza

Ron Espinoza



Frequently Asked Questions1) What type of properties do you get loans for?

I can get funding on residential-commercial (apartment buildings of 5 or more units),commercial-commercial (office buildings, strip malls, etc.), storage units, restaurants, gasstations, and mobile home parks. I do not get funding on residential properties but I can refer you out to another broker if you need a residential lender.

2) What is your highest LTV?

The highest LTV (loan-to-value) is 80% provided the loan size is greater than $1,000,000, theoccupancy level is 90% or higher (for 90 days before closing), and the property is located in a"major market" (or a market where the population exceeds 250,000 people or more).

Note: Since the financed amount must exceed $1,000,000 then the final purchase price should be $1,250,000 or higher.

3) What are the loan terms and rates?

The interest rates run between 5.5% and 12%. This depends on the property and the lenderthat is used. The terms can range anywhere from a bridge loan with a term of 1 year to a fully-amortized loan term of up to 35 years on a fixed rate schedule.

4) What are your points and fees?

Fees are typically 3 - 4 points (or percent) for the broker and approximately 1 point (or percent)for the lender. Some lenders will charge 2 or 3 points but this is somewhat rare and usuallywhen you are paying the higher lender points you will be getting great loan terms. The pointsare based on the amount being borrowed and not the total sale price of the property.

5) What's the difference between a non-recourse and a recourse loan?

A recourse loan requires you to put up your personal credit and a personal guarantee to closethe loan. This is reported on your personal credit report by all 3 credit reporting bureaus. Anon-recourse loan does not report on your personal credit reports.

However, with all commercial loan types in our tighter lending environment, a personalguarantee is expected by all major lenders in this market. The difference is that you aren'tpersonally "on the hook" for a non-recourse loan as you are for a recourse loan. In the eventthat you default on a non-recourse loan, your company or LLC can file for bankruptcy againstthe mortgage and it wouldn't affect you personally even if you did provide a personal guarantee.This is why most investors want a non-recourse loan.

6) How can I make sure I get a non-recourse loan?

The loan size must be $1,000,000 or greater. The occupancy level must be 90% or higher. Theproperty must be located in a major market where the population size is 250,000 or greater.



7) What is your time frame to close?

Once the investor is formally engaged, depending on the lender and which program it is, theclosing can take place anywhere from 30 to 90 days.

8) Do you use hard money lenders?

No, I typically do not use hard money lenders to close loans.

9) What is DPA and how does it work?

DPA stands for "down payment assistance" and it's an unofficial term that is not really used inthe commercial lending business. This is when you have a one-stop-shop company who canprovide "wet" or transactional funds for your down payment with a Proof of Funds (POF) orLetter of Credit (LOC) to show the first-position conventional lender that you have the requireddown payment (which, in my case, is typically 20%). The buyer then asks the seller for a"buyer's repair credit" for the amount of the needed down payment (plus needed closing anddue diligence costs) which is used to pay back the transactional funder for the amount they putinto escrow for the cash down payment. Sellers would typically "hold paper" or offer a privatemortgage contract on the back end where the buyer would make payments to the seller after theclose of escrow to cover the amount they gave up in their equity in the buyer's repair credit.

There are no longer any one-stop-shop companies that do both the partial transactional fundingand POF together. If you were interested in using this technique, you would have to seek out a"transactional funding company" and a "proof of funds company" both separately (and you cando this by using Google.com). You would also have to make sure that the seller has the amountneeded (20% plus fees) in equity in order for you to make this type of deal work.

For more information on how this works, I recommend you check out a video atwww.MonicaMain.com and go to the Video link under Resources on the home page to the

right. Look for the DPA video and watch it to fully understand this process.

I do not handle DPA transactions nor can I know about your interest in orchestrating yourtransaction using this method because I am under the strictest regulations with my lenders and Ihave to legally reveal all details about your deal to them. If you reveal that you are using DPAthen I have to reveal this detail to them. If they find out that you don't plan on using your owncash to close the deal (but rather "borrowed" cash) then they will not fund your loan.

If you plan on using the DPA method, I cannot know that you are doing this. Please keep this detail to yourself.

10) Can I use partial owner or partial seller financing to close my deal?

I cannot assist you in using partial owner financing in a deal where you expect a conventionallender to take a majority LTV while a seller holds paper on the remaining amount either as asecond lien holder or on a private mortgage contract.



Instructions on Applying for a Commercial LoanIf you have found a property that you want to get a preapproval for, you can follow these simpleinstructions:

Step 1: Fill out the 3-page form (starting on the next page). You can either mail or fax it to me.

Step 2: Write out a check or money order for $500 to "InHome Financing." Include the checkor money order with the 3-page form and mail it to:

InHome FinancingAttn: Ron Espinoza26300 Ford Rd., #155

Dearborn Heights, MI 48127

Wiring Instructions to InHome Financing LLC

Comerica Bank 31200 Ann Arbor Trail

Westland, MI 48185 InHome Financing account number - 1851345510

Bank ABA routing number - 072000096

Step 3: Once the application and $500 payment is received, it will take up to 3 business daysfor me to get a preapproval for you.

Step 4: Once you receive your preapproval, you will be required to put your property dealunder contract. Upon putting our deal under contract, you will have to submit a processingagreement to me. This will be a remaining balance of $1,000. You can follow the paymentinstructions above for this additional fee. My fees are non-refundable.

Step 5: My lender requires a retainer fee of $2,500 for preliminary due diligence which iscredited back at closing provided that your loan size exceeds $500,000. This fee will berequested once you are completely under contract and have secured your pre-approval withme.

Step 6: You will be asked to provide specific documentation directly relating to your propertytransaction. These documents vary per deal and are simple to round up if the seller is aboveboard and can provide bank statements, filed tax returns, current rent rolls, trailing financials,etc. This is why it's recommended that you ask the seller if he or she can provide thesedocuments before entering into a contract on the property because all lenders are asking for thisbasic paperwork in order to fund any property deal. You will also need to provide an executivesummary outlining your long-term plans for your property.

Step 7: Once you submit all the required documentation, an appraisal will be ordered. This isordered by whichever lender or bank I use to fund your property deal. Once the appraisal iscomplete and all the requested documentation is provided, you should order a buildinginspection since many lenders and banks are now requesting a building inspection report.



SAMPLE OF HOW TO FILL OUT THE WORKSHEET

Loan Worksheet Page 1 of 3 Acquisition of Rental Property Attn: Ron Espinoza

This first section is to be completed by submitting BROKER

Broker Company Name InHome Financing Broker Address 26300 Ford Rd., #155City Dearborn Heights State MI Zip Code 48127 Contact Name Ron Espinoza Title President Business Number 734-754-0117 Fax Number 734-402-8873 Email Address [email protected]

The remainder of this worksheet is to be completed and signed by BORROWER

Purchase Price $2,500,000

Cash contributed by buyer $500,000

Any note amount held by seller $0

Loan request $2,000,000

Personal credit scores of buyer 680 700 710

Is buyer an existing company/business or an individual? LLC

The following questions pertain to the property to be acquired:

Property address 1313 Mocking Bird Lane

City Major State NY Zip 12345

Important: All 3 Credit BureauFICO Scores MUST Be Included!

The "Amount Held By Seller" Must ALWAYS Be $0!

This secTion

noT To Be AlTered!



Loan Worksheet Page 2 of 3

Acquisition of Rental Property

Property Description How many acres? 1.2

Building square footage? 15,000

How many stories? 5How many units? 100

When built? 1983

Wood Frame, Steel, Brick etc.? Wood Frame

Percentage Owner Occupied? 0% Percentage Rented or Leased? 90%

Percentage Office Space? 0%

Percentage Warehouse Space? 0%

Percentage Retail Space? 0%

Percentage Apartments? 100%

Percentage Condominium?0%

Percentage Light Industrial Space? 0%

Percentage Other? 0%

Total mortgage(s) against property now $1,750,000

The Occupancy Percentage is

Extremely Important! Please Do Not Neglect to Fill in a Percentage!

Owner Occupied is Usually 0%

Unless theCurrent Owner is Living on the

Property!

This Data is Gathered from the Seller or Listing Agent! In Fact, Any Data You DoNot Know About the Property Can Be Acquired from the Seller or Listing Agent!



Loan Worksheet Page 3 of 3

Acquisition of Rental Property

What type of statement (audited, reviewed, compiled) Audited

Are tax returns available relative to the property to be acquired? Yes

What type of past experience does buyer have relative to operating this type ofproperty, if any? Commercial Real Estate Investing

Are there any existing tax liens or judgments on the property or borrowing entity?

No

Have there been any personal or business bankruptcies regarding the buyer of

this property within the last five years? No

Additional Comments, if any:John Doe

Signature of Buyer or Authorized RepresentativeJohn DoePrint Name and Title

02-01-11Date

NEVER Put That You Do NOT Have Any Experience; If You Are a New Real EstateInvestor, Please Use "Commercial Real Estate Investing" As Indicated Above.

Please Do Due Diligence on Your Property Including Calling theCounty Where the Property is Located to Get Information About Existin Tax Liens, Fines, and Jud ments A ainst the Pro ert !

If You Personally Have a Bankruptcy or Foreclosure Within the Past 5 Years, YouNeed to Have Someone Else Apply for the Loan on Your Property Deal Who Has

Better Credit; You Will NOT Be on the Loan ANYWHERE if You Want an Approval!



Loan Worksheet Page 1 of 3 Acquisition of Rental Property Attn: Ron Espinoza

This first section is to be completed by submitting BROKER

Broker Company Name InHome Financing Broker Address 26300 Ford Rd., #155 City Dearborn Heights State MI Zip Code 48127 Contact Name Ron Espinoza Title President Business Number 734-754-0117 Fax Number 734-402-8873

Email Address [email protected] The remainder of this worksheet is to be completed and signed byBORROWER

Purchase Price $______________________________

Cash contributed by buyer $_____________________________________

Any note amount held by seller $_______________________________

Loan request $_____________________________________________

Personal credit scores of buyer ______ ______ ______

Is buyer an existing company/business or an individual? ______________

The following questions pertain to the property to be acquired:

Property address _____________________________________________

City____________________ State_________________ Zip__________



Loan Worksheet Page 3 of 3Acquisition of Rental Property

What type of statement (audited, reviewed, compiled) __________________________

Are tax returns available relative to the property to be acquired? __________________

What type of past experience does buyer have relative to operating this type ofproperty, if any?

Are there any existing tax liens or judgments on the property or borrowing entity?

Have there been any personal or business bankruptcies regarding the buyer ofthis property within the last two years?

Additional Comments, if any:

____________________________________ Signature of Buyer or Authorized Representative

____________________________________

Print Name and Title

_____________________ Date

Money Broker Packet for 2011

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Transcript of Money Broker Packet for 2011