Commercial Mortgages: “How to See the Deal”

When I first started working with Commercial Mortgages about 10 years ago, I had a hard time wrapping my head around what went into putting one of these deals together. Each deal is truly unique and I soon found can have many moving parts. In order to get a better understanding of what I was doing, I needed to put in place a process, or standardized approach that I could follow on all my deals. After a while, I found what works for me and wanted to share this approach. I found that there are several key factors that contribute to a typical deal and how addressing these factors can help you to “See the Deal”.

Since most, if not all commercial mortgages are paper-based and there really isn’t a web-based system like filogix that you can use to enter information into in order to produce a clear picture, the story or summary that is prepared for a commercial deal is very important. This summary gives me a good overview and allows me to “See the Deal” so that when I’m speaking to a prospective lender, colleague or drafting a quick email, I can highlight the critical points fairly quickly and concisely.

One way to “See the Deal” is to use the 3-legged stool or a 3-point triangle like the one at the beginning of this article. Basically, the main points or factors that I work with and focus on in my approach are:

1)     The Covenant

2)     The Income

3)     The Real Estate

The idea is to analyze each point and gather the necessary details for each in order to determine whether that point is weak or strong. What documentation do you need to assess each point? Also, what or where are the risks associated with each point and if necessary how can these risks be mitigated? How can you best sum up each point?

When looking at the ‘Covenant’, consider this;

  • What is the Borrower’s net worth? With commercial mortgage financing, the Borrower’s income is not that important since we don’t rely on their income to pay the mortgage – the property’s rent does. The Borrower’s net worth is more important.
  • Is the Borrower’s net worth all comprised of real estate or is it well diversified? How much in liquid assets do they have?
  • If they needed to inject funds into the property for emergency repairs (ie. Roof or HVAC  system needs a replacement immediately) or they need to cover the mortgage payment from their own resources due to unexpected or chronic vacancy, would they have the funds available?
  • How’s their personal credit? Are their taxes current? Do they have any other sources of income?
  • Etc

When looking at the ‘Income, we typically consider what determines and what can affect the property’s rent and this can include;

  • Cash flow. What does this look like? How much rent does the property generate? What is the likelihood that it will continue?
  • Net Operating Income (NOI), which is Income minus Expenses. The NOI is important since we use the NOI to calculate the two critical ratios used in commercial lending – the Loan To Value (LTV) and the Debt Coverage Ratio (DCR)
  • What are the leases like? Short term, long term? Do the tenants pay for any expenses such as taxes, utilities, insurance or maintenance? Ie. Are the leases Gross, Semi-Gross or Triple Net?
  • Do all the leases come due at the same time, in the same year or are they staggered over several years (this is known as Rollover Risk)?
  • Are the rents belowat or above market rents? How do they compare to similar properties? Are there yearly increases (step-ups)?
  • What type of tenants are they? Weak or strong? For example, Tim Horton’s is a great tenant; stand-alone restaurants, not so great. What’s the history of the tenancy?
  • What is the vacancy like and how has it been historically?
  • Does the client have a properly prepared Rent Roll?
  • Etc

Finally, when looking at the ‘Real Estate’ (which IS the lender’s main security) some of the points to consider are:

  • What type of property is it? Conventional, unconventional or special use? Can it be easily converted for other uses?
  • Where is it located? Is it urban or rural? Is it located in an area with other similar properties? Or does it stand out?
  • What is the property worth? How does the value compare to similar properties? Do we have an appraisal?
  • What is the property’s condition? Are there any major repairs or upgrades that are needed in the short or medium term?
  • How old is the property? Is the property too old to repair? Do we have a Building Condition Report (BCA)? Will we need one?
  • Are there any sources of environmental impact on or near the property? What is located acrossnext to or upgrade to the property? Do we have an Environmental Site Assessment (ESA)? Will we need one?
  • Etc

I’ve ended each section with Etc because by no means did I include all of the possible things to consider or questions to ask.

By being able to “See the Deal” a commercial broker will be able to discuss the file clearly. Discuss the strengths and weaknesses. Discuss the risk factors and what can be done to mitigate those factors. This will also help in gathering the necessary documentation and identify what will be required in order to proceed, quickly and efficiently.

The benefits to developing an approach similar to this are many. This allows for a more streamlined and standardized process which will also make a broker’s life easier when putting the deal together and making the process as painless as possible for the client.

It also instills confidence in the lenders you will be marketing the deal to since it shows some thought and insight into your underwriting. Also, one factor I know is critical with most lenders, is to have some conviction and to believe in the deal; when submitting a file for review I find that really standing behind the deal, “…I recommend the deal based on…..” and list your thoughts goes along way versus saying, “….I have a deal….what do you think……?”. “Seeing the Deal”, makes it easier to stand behind the deal and express why. This will only strengthen your relationship with your lenders.

In the end, this will result in a quicker turn around and the ability to get a better deal for your client.

 

Ermanno Tasciotti  | January 2018

Commercial Mortgages: How Much Down Payment Do I Need?

“It Depends”. These are the two words I frequently use when discussing a commercial mortgage. Whether it’s how much of a downpayment is needed, what the rate is, amortization, etc. It depends.

Let’s consider the first one; downpayment. How much does a client need to put down for a commercial property purchase? When determining this amount, the process isn’t as simple as it is for a residential deal but in some ways is very similar.

Please note that the following discussion pertains to when underwriting a deal based on the property’s cash flow and when dealing with a lender that will look to the rental income as the primary source of repayment.

With residential, the clients can get a preapproved mortgage by calculating how much they qualify for using their income and existing debts. They can then make a Purchase based on their Pre-Approved Mortgage plus their Downpayment.

Simply put,

Preapproved Mortgage + Downpayment = Purchase Price

With commercial, you really can’t get a preapproval since the mortgage is generally based on the income of the property and not the borrower – having said that, I can take the income and expenses on a commercial property and approximate how much of a mortgage it can carry, while not a preapproval, it can give you some guidance – contact me for details!

So you start with a Purchase Price and then work backward similar to a residential preapproval and end up with the Qualifying Mortgage amount and subsequent Downpayment. The process looks like this,

Purchase Price – Qualifying Mortgage = Downpayment

The best way to illustrate this is with a couple of examples. To make things simple I will be looking at conventional and not high ratio financing.

Please note the following terms:

  1. Net Operating Income or NOI
  2. Debt Coverage Ratio or DCR, DSC or DSCR
  3. Loan To Value or LTV
  4. NOI. This is the net income once all expenses pertaining to the property are deducted from the rent collected. Typical expenses can include, property taxes, property insurance, utilities, snow removal, routine maintenance, etc. There will also be allowances made for Vacancy & Bad Debt, Structural Expense and Management. Every deal is different and it depends on the specifics of a particular deal which expenses will be included. Note that these expenses do not include mortgage principal and interest.
  5. DCR. This is the ratio of the NOI to the mortgage principal & interest payments. Depending on the deal, an acceptable DCR would be as low as 1.10 (or 110%) to 1.30 (or 130%). This should always be greater than 1.00 or 100%. The ‘extra’ or excess over 100% is a cushion that gives the lender comfort to account for any interruptions in rent due to high or chronic vacancy, unexpected costs, etc that could reduce the income for a period of time.
  6. LTV. The ratio of the loan or mortgage amount to the lesser of Purchase Price or Appraised Value. ‘Rule of Thumb’ LTVs can range from 60% to 70% for most commercial deals and 75% for multi-family (m/f) properties. (Note this 75% for the example below). Each lender is different.

Residential Example

Clients are looking at purchasing a single-family dwelling. They are preapproved for a $562,500 mortgage (GDS/TDS are in line) and have $187,500 for the downpayment. Using the formula above,

$562,500 + $187,500 = $750,000

Pre-Approved Mortgage + Downpayment = Purchase Price

They can purchase a home valued at $750,000. This works out to an LTV of 75% ($562,500/$750,000). Assuming that the credit is good and the property is acceptable – the deal could be fairly straightforward.

Commercial Example

Now let’s look at a commercial property selling for the same amount of $750,000 and again, the client has $187,500 to put down.

We’ll assume the subject is an 8-plex m/f. The subject is fully occupied with a rental income of $7,200/mo or $86,400/yr. Applicable expenses come to roughly $46,400/yr.

The NOI in this case is $86,400 – $46,400 = $40,000.

I’ll assume that the property is appraised at $750,000. As you will see below, the property value won’t be a factor in determining the mortgage amount. The driver will be the DCR.

Now here’s where they differ. In order to get an acceptable mortgage amount, we will use a trial rate (let’s go with 3.5%) and generate a P&I payment based on a 5 yr term & 25 yr amortization. Working backwards we make sure to stay within an LTV of 75% and a DCR of 130% (In this case – some lenders may go with 120%).

Trial and error yields a mortgage of $515,000, a DCR of 130% and an LTV of 68.7%. Using the formula above,

$750,000 – $515,000 = $235,000

Purchase Price – Qualifying Mortgage = Downpayment

So if they are buying the subject for $750,000 and the property qualifies for and can only support a mortgage of $515,000, the client will have to come up with a downpayment of $235,000 or $47,500 more than they have. As you can see, you just can’t take the purchase price and calculate an amount based on either 60, 65 or even 75% LTV. Furthermore, if the same property sold for $800,000, the mortgage amount is the same since the NOI doesn’t change and the client would now have to put $285,000 down (64.4% LTV).

In this case the client now has three options if they wish to proceed:

1)      Come up with the difference from their own resources.

2)      Secure a second mortgage. This will likely be at a higher rate & fees and note that the lender providing the first may have to approve allowing the second due to serviceability.

3)      Look at an alternative lender (private, etc) that will do the full amount requested ($562,500) or even higher but at a higher rate & fees.

In summary, when calculating downpayment for commercial, treat it like a residential preapproval and work backwards.

  • The ‘client’ would be the property and the ‘client’s income’ would be the NOI.
  • The DCR would be the qualifying ratio much like the GDS/TDS.
  • Once you have a ‘Qualifying Mortgage’ (ie. Pre-Approved Mortgage), then you look at the purchase price/appraised value for the difference.

Now I must stress that the numbers alone DO NOT determine whether or not you have a deal; they’re just a guide or an estimate to get the analysis going. As per the Mortgage Triangle I will discuss in a future post, the Income is one point that must be fully analyzed; there’s also the Real Estate and the Covenant.

I hope this helps give a clearer picture as to how the downpayment needed for a commercial mortgage is determined. As you can see, it depends.

If you have any questions or comments, please feel free to call me at 647.302.8065.

Now is the time to think commercial!

 

By: Ermanno Tasciotti |  January 2018

Toronto’s Tale of Two Markets Is Hot Condos and Cold Houses

  • New regulations, rising interest rates will mute spring sales
  • Immigration, high-tech jobs to keep floor under market

It’s a tale of two housing markets in the Toronto area as Canada’s biggest city gears up for the crucial spring selling season: sales of big detached homes are slow, while condo deals are booming.

On one side are people like Karen Berends, who put her C$1.5 million ($1.2 million) house back on the market in nearby Oakville this month after two failed attempts to sell in the past year. She reduced her asking price by about C$51,000, but still there are no takers, and she’s kicking herself for not cashing out last spring when the market was in a frenzy.

“We could’ve walked away with a really good amount of money in our bank account if we had taken the money last year, but our head wasn’t in it at that point,” Berends said in a phone interview. “It’s been a complete 360 this time around — it’s absolutely dead.”

Then there’s Beth O’Donoghue, a sales representative at Brad J. Lamb Realty Inc., who says the market is as hot as it’s ever been. Her clients recently lost out in three separate condo bidding wars in a week, including one with 11 offers. That’s convinced O’Donoghue, who’s invested in four new condos herself in the city in the past four years, to hold onto her assets for now.

One she bought in pre-construction for C$420,000 and figures she could sell for close to C$700,000. “If you would have told me three years ago when I bought this place that I would’ve made this much money on it already, I would have said you’re crazy,” she said.

Polar Opposites

After a decade as one of the world’s hottest housing markets, Toronto is moving in two directions. Transactions have certainly cooled since May as the government introduced new rules to tame runaway prices. But the impact has been largely on big, expensive detached homes, with sales plunging 41 percent in February from a year earlier, and prices dropping 12 percent since hitting a record last year. Condo prices, in contrast, soared about 20 percent since last February.

Toronto Market Heat Moves to Condos

The deviation is largely as a result of mortgage regulations that went into effect on Jan. 1 as well as rising interest rates. The rule requires that even people with a 20 percent down payment, who don’t require mortgage insurance, prove they can make payments at least 2 percentage points above the rates under which they go into contract.

That’s pushing buyers out of the detached segment and right into the condo market.

“I’ve been looking at the condo market for years and I’ve been waiting for it to correct and it’s just not happening,” Patrick Rocca, a real estate agent at Bosley Real Estate Ltd., said by phone. “Honestly, this scares me. When you have condos selling at C$1,000 to C$1,200 per square foot for resale, that’s mind-boggling.”

Slower Spring

Real estate agents and economists expect some stabilization in the detached market as the spring selling season swings into full gear, but the price spikes of last year are probably history. The condo market is likely to keep chugging, bolstered by millennials in high-paying technology and financial jobs, strong immigration and pinched supply, according to Bank of Montreal economists.

“Spring will probably take a little more time to get going than years past, but there’s so much demand in the marketplace as Toronto continues to attract people around the country and the globe,” said Christopher Alexander, regional director at real estate firm Re/Max Integra.

Meanwhile, things are getting tough for tenants too. The combination of stress tests, urbanization and high home prices is creating the perfect formula for skyrocketing rents, said Simeon Papailias, co-founder of the Real Estate Center, a Toronto-based real estate management company. Many homebuyers who no longer qualify for a mortgage are turning to renting instead, which in turn attracts investors who want to become landlords.

“This market is creating new monsters — it’s taking a life of its own and it’s creating a new marketplace,” Papailias said by phone.

Chinese Buyers

Berends, the Oakville homeowner, has placed ads in several Chinese media outlets in hopes of attracting foreign shoppers. “Apparently there are still buyers in mainland China, but they’re not really jumping,” she said.

She’s hoping to retire to a home she’s building north of the city in a few years, but she’s waiting for the right price for her existing house.

“I’m thinking we might have to take it off and wait till next year,” she said. “It’s just so difficult to know.”

By: Nathalie Wong

— With assistance by Erik Hertzberg

29 March 2018

Commercial Real Estate Loan (CRE)

Commercial Real Estate Loan (CRE) is income-producing real estate that is used solely for business purposes, such as retail centers, office complexes, hotels, and apartments. Financing – including the acquisition, development, and construction of these properties – is typically accomplished through commercial real estate loans: mortgage loans secured by liens on commercial, rather than residential, property.

Just as with residential loans, banks and independent lenders are actively involved in making loans on the commercial real estate. Also, insurance companies, pension funds, private investors and other capital sources, make loans for the commercial real estate.

Let’s take a look at commercial real estate loans: how they differ from residential loans, their characteristics and what lenders look for.

Individuals vs. Entities

While residential mortgages are typically made to individual borrowers, commercial real estate loans are often made to business entities (e.g., corporations, developers, partnerships, funds, and trusts). These entities are often formed for the specific purpose of owning commercial real estate.

An entity may not have a financial track record or any credit history, in which case the lender may require the principals or owners of the entity to guarantee the loan. This provides the lender with an individual (or group of individuals) with a credit history and/or financial track record – and from whom they can recover in the event of loan default. If this type of guaranty is not required by the lender, and the property is the only means of recovery in the event of loan default, the loan is called a non-recourse loan, meaning that the lender has no recourse against anyone or anything other than the property.

Loan Repayment Schedules

A residential mortgage is a type of amortized loan in which the debt is repaid in regular installments over a period of time. The most popular residential mortgage product is the 30-year fixed-rate mortgage.

Residential buyers have other options, as well, including 25-year and 15-year mortgages. Longer amortization periods typically involve smaller monthly payments and higher total interest costs over the life of the loan, while shorter amortization periods generally entail larger monthly payments and lower total interest costs. Residential loans are amortized over the life of the loan so that the loan is fully repaid at the end of the loan term. A borrower with a $200,000 30-year fixed-rate mortgage at 5%, for example, would make 360 monthly payments of $1,073.64, after which the loan would be fully repaid.

Unlike residential loans, the terms of commercial loans typically range from five years (or less) to 20 years, and the amortization period is often longer than the term of the loan. A lender, for example, might make a commercial loan for a term of seven years with an amortization period of 30 years. In this situation, the investor would make payments for seven years of an amount based on the loan being paid off over 30 years, followed by one final “balloon” payment of the entire remaining balance on the loan. For example, an investor with a $1 million commercial loan at 7% would make monthly payments of $6,653.02 for seven years, followed by a final balloon payment of $918,127.64 that would pay off the loan in full.

The length of the loan term and the amortization period will affect the rate the lender charges. Depending on the investor’s credit strength, these terms may be negotiable. In general, the longer the loan repayment schedule, the higher the interest rate.

Loan-to-Value Ratios

Another way that commercial and residential loans differ is in the loan-to-value ratio (LTV): a figure that measures the value of a loan against the value of the property. A lender calculates LTV by dividing the amount of the loan by the lesser of the property’s appraised value or purchase price. For example, the LTV for a $90,000 loan on a $100,000 property would be 90% ($90,000 ÷ $100,000 = 0.9, or 90%).

For both commercial and residential loans, borrowers with lower LTVs will qualify for more favorable financing rates than those with higher LTVs. The reason: They have more equity (or stake) in the property, which equals less risk in the eyes of the lender.

Commercial loan LTVs, in contrast, generally fall into the 65% to 80% range. While some loans may be made at higher LTVs, they are less common. The specific LTV often depends on the loan category. For example, a maximum LTV of 65% may be allowed for raw land, while an LTV of up to 80% might be acceptable for a multifamily construction. There are also private mortgages available for commercial lending.

Debt-Service Coverage Ratio

Commercial lenders also look at the debt-service coverage ratio (DSCR), which compares a property’s annual net operating income (NOI) to its annual mortgage debt service (including principal and interest), measuring the property’s ability to service its debt. It is calculated by dividing the NOI by the annual debt service. For example, a property with $140,000 in NOI and $100,000 in annual mortgage debt service would have a DSCR of 1.40 ($140,000 ÷ $100,000 = 1.4). The ratio helps lenders determine the maximum loan size based on the cash flow generated by the property.

A DSCR of less than 1 indicates a negative cash flow. For example, a DSCR of .92 means that there is only enough NOI to cover 92% of annual debt service. In general, commercial lenders look for DSCRs of at least 1.25 to ensure adequate cash flow. A lower DSCR may be acceptable for loans with shorter amortization periods and/or properties with stable cash flows. Higher ratios may be required for properties with volatile cash flows – for example, hotels, which lack the long-term (and therefore, more predictable) tenant leases commonly to other types of the commercial real estate.

Interest Rates and Fees

Interest rates on commercial loans are generally higher than on residential loans. Also, commercial real estate loans usually involve fees that add to the overall cost of the loan, including appraisal, environmental report, legal, loan application, loan origination and/or survey fees. Some costs must be paid up front before the loan is approved (or rejected), while others apply annually. For example, a loan may have a one-time loan origination fee of 1%, due at the time of closing, and an annual fee of one-quarter of one percent (0.25%) until the loan is fully paid. A $1 million loan, for example, might require a 1% loan origination fee equal to $10,000 to be paid up front, with a 0.25% fee of $2,500 paid annually (in addition to interest).

Prepayment

A commercial real estate loan may have restrictions on prepayment, designed to preserve the lender’s anticipated yield on a loan. If the investors settle a debt before the loan’s maturity date, they will likely have to pay prepayment penalties. There are four primary types of “exit” penalties for paying off a loan early:

  • Prepayment Penalty. This is the most basic prepayment penalty, calculated by multiplying the current outstanding balance by a specified prepayment penalty.
  • Interest Guarantee. The lender is entitled to a specified amount of interest, even if the loan is paid off early. For example, a loan may have a 10% interest rate guaranteed for 60 months, with a 5% exit fee after that.
  • Lockout. The borrower cannot pay off the loan before a specified period, such as a 5-year lockout.
  • Defeasance. A substitution of collateral. Instead of paying cash to the lender, the borrower exchanges new collateral (usually Treasury securities) for the original loan collateral. High penalties can be attached to this method of paying off a loan.

Prepayment terms are identified in the loan documents and can be negotiated along with other loan terms in commercial real estate loans. Options should be understood ahead of time and evaluated before paying off a loan early.

The Bottom Line

With commercial real estate, it is usually an investor (often a business entity) that purchases the property, leases out space and collects rent from the businesses that operate within the property: The investment is intended to be an income-producing property.

When evaluating commercial real estate loans, lenders consider the loan’s collateral; the creditworthiness of the entity (or principals/owners), including three to five years of financial statements and income tax returns; and financial ratios, such as the loan-to-value ratio and the debt-service coverage ratio.

By: Daniela Peeva |  June 26, 2017

Top 5 Reasons to Use Mortgage Alliance Commercial Canada (MACC)

At Mortgage Alliance Commercial Canada (MACC) we pride ourselves in providing the best service possible. Our number one source of referral is via word of mouth, hence we make sure to conduct business professionally and diligently so all parties are satisfied. Here are 5 reasons we think you should use MACC on your next commercial transaction:

 

Top 5 Reasons to Use Mortgage Alliance Commercial Canada (MACC)

 

  1. Mortgage Alliance Commercial Canada was voted Canada’s Best Commercial Mortgage Broker for 5 years in a row by Canadian Mortgage Professionals Magazine
  2. MACC is Licensed across Canada with offices in Quebec, Ontario, Alberta, and BC
  3. MACC has maintained privileged relationships with all major lenders across the country to allow our clients to access better terms and conditions for their financing needs
  4. MACC will simplify and manage the entire process of the transaction from loan underwriting to lender negotiations, through to the disbursement requirements to ensure that successful completion and funding of the project
  5. MACC has 30 dedicated and experienced commercial mortgage professional at your service

 

If you have a current project you are working on and would like our assistance or have any questions on the best route to take, don’t hesitate to contact us.

MACC, Your commercial financing solution!

416-499-5454 ext 102

info@macommercial.ca

 

7 Steps to a Hot Commercial Real Estate Deal

Ask any real estate professional about the benefits of investing in commercial property, and you’ll likely trigger a monologue on how such properties are a better deal than residential real estate. Commercial property owners love the additional cash flow, the beneficial economies of scale, the relatively open playing field, the abundant market for good, affordable property managers and the bigger payoff from commercial real estate.

But how do you evaluate the best properties? And what separates the great deals from the duds?

Like most real estate properties, success starts with a good blueprint. Here’s one to help you evaluate a good commercial property deal.

1. Learn What the Insiders Know

To be a player in the commercial real estate, learn to think like a professional. For example, know that commercial property is valued differently than residential property. Income on commercial real estate is directly related to its usable square footage. That’s not the case with individual homes. You’ll also see a bigger cash flow with commercial property. The math is simple: you’ll earn more income on multifamily dwellings, for instance, than on a single-family home. Know also that commercial property leases are longer than on single-family residences. That paves the way for greater cash flow. Lastly, if you’re in a tighter credit environment, make sure to come knocking with cash in hand. Commercial property lenders like to see at least 30% down before they’ll give a loan the green light.

2. Map Out a Plan of Action

Setting parameters is a top priority in a commercial real estate deal. For example, ask yourself how much can you afford to pay and then shop around for mortgages to get a sense of how much you will pay over the life of the mortgage. Using tools like mortgage calculators can help you develop good estimates of the total cost of your home.

Other key questions to ask yourself include: How much do you expect to make on the deal? Who are the key players? How many tenants are already on board and paying rent? How much rental space do you need to fill?

3. Learn to Recognize a Good Deal

The top real estate pros know a good deal when they see one. What’s their secret? First, they have an exit strategy – the best deals are the ones where you know you can walk away from. It helps to have a sharp, landowner’s eye – always be looking for damage that requires repairs, knows how to assess risk and make sure to break out the calculator to ensure that the property meets your financial goals.

4. Get Familiar With Key Commercial Real Estate Metrics

The common key metrics to use for when assessing real estate include:

Net Operating Income (NOI)

The NOI of a commercial real estate property is calculated by evaluating the property’s first year gross operating income and then subtracting the operating expenses for the first year. You want to have positive NOI.

Cap Rate

A real estate property’s “cap” – or capitalization – rate, is used to calculate the value of income-producing properties. For example, an apartment complex of five units or more, commercial office buildings, and smaller strip malls are all good candidates for a cap rate determination. Cap rates are used to estimate the net present value of future profits or cash flow; the process is also called capitalization of earnings.

Cash on Cash

Commercial real estate investors who rely on financing to purchase their properties often adhere to the cash-on-cash formula to compare the first-year performance of competing properties. Cash-on-cash takes the fact that the investor in question doesn’t require 100% cash to buy the property into account, but also accounts for the fact that the investor will not keep all of the NOI because he or she must use some of it to make mortgage payments. To uncover cash on cash, real estate investors must determine the amount required to invest to purchase the property or their initial investment.

5. Look for Motivated Sellers

Like any business, customers drive real estate. Your job is to find them – specifically those who are ready and eager to sell below market value. The fact is that nothing happens – or even matters – in real estate until you find a deal, which is usually accompanied by a motivated seller. This is someone with a pressing reason to sell below market value. If your seller isn’t motivated, he or she won’t be as willing to negotiate.

6. Discover the Fine Art of Neighborhood “Farming”

An excellent way to evaluate a commercial property is to study the neighborhood it’s located in by going to open houses, talking to other neighborhood owners, and looking for vacancies.

7. Use a “Three-Pronged” Approach to Evaluate Properties

Be adaptable when searching for great deals. Use the internet, read the classified ads and hire bird dogs to find you the best properties. Real estate bird dogs can help you find valuable investment leads in exchange for a referral fee.

The Bottom Line

By and large, finding and evaluating commercial properties is not just about farming neighborhoods, getting a great price, or sending out smoke signals to bring sellers to you. At the heart of taking action is basic human communication. It’s about building relationships and rapport with property owners, so they feel comfortable talking about the good deals —and doing business with you.

 

By: Daniela Peeva | June 14, 2017

Proud to announce we are nominated as the Best Commercial Broker for a 4th year in a row

For the last 15 years, M. Durand has built and led a firm that has become the largest, most active pan-Canadian firm dedicated to the Commercial Mortgage Brokerage Industry. M Durand’s efforts have been recognized by his industry peers’ who have nominated him in each of the last 4 years as the best commercial mortgage broker in Canada. No other professional in the industry has seen such recognition.

Congratulations Michel!

The BIG hit of the month!

HulkHand

The BIG hit of the month!

 

 

 

CC JULY

Asset Class: Multi-Unit Residential Building
Loan Amount: $4,931,800

Rate: 2.46%

Term: 10 Years

Amortization: 25 Years

Details: Conversion of 39 to 57 housing units

 

SEND US YOUR REFERRALS TODAY! info@macommercial.ca or call (416) 499 – 5454 ext. 259

 

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THINK COMMERCIAL, THINK MA COMMERCIAL
MACC – Your Commercial Mortgage Solution

Take Advantage of Low Rates

MACC secured funding for a $4.1M loan on June 27th at a rate of 1.88% for a 5 year term!

 

TAKE ADVANTAGE OF LOW INTEREST RATES!

Not all financial institutions offer the same interest rates or the same terms and conditions. MA Commercial (MACC) has access to over 50 lenders throughout Ontario and the rest of Canada. This means that your transaction or your client will be directed to the best lender.

MACC will review all options on the market to secure what is most beneficial for you or your client.
We can offer 5-7-10-15 and 20 year terms, as well as amortizations of 20-30-35 and 40 years. The rates are at historically low levels so call us today to secure the best rates for your transaction!

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If you just want some general information on a potential transaction please feel free to contact us! Together, we will look at scenarios to find what suits the transaction best.

MA Commercial, your commercial mortgage solution!

 

(416) 499 – 5454 ext. 259 or info@macommercial.ca

For all your Commercial Mortgage Needs

Just how safe is the ‘safe’ world of syndicated mortgages?

With its playful indoor slide and five-storey “bio-wall” of greenery, Toronto’s five-year-old Corus Quay building—the headquarters of Corus Entertainment—served as an inspirational backdrop for attendees of Fortress Real Development’s “Listen, Learn and Lunch” event three years ago. Attendees at the glitzy real estate event on the shore of Lake Ontario noshed on sliders and listened intently to speeches by several Fortress executives, including CEO Jawad Rathore and chief operating officer Vince Petrozza, as well as star local developers like Toronto “condo king” Brad Lamb. “There’s many ways to make money in real estate,” Lamb says in a heavily edited video of the event posted on Fortress’s YouTube channel, complete with jaunty music. “But one way to make money in real estate is the safe way, which is buying Fortress investments.” A few moments earlier, a Fortress exec trumpeted the value of the firm’s partnerships with Lamb and a Windsor, Ont.-area developer named Charles Mady, saying they are “some of the strongest partnerships you can imagine being part of.”

Fast forward to 2016: Fortress has taken over one of Mady’s projects in Barrie, Ont.—a building with 82 condo units and an eight-storey office tower—after both the development and developer ran into financial trouble. It’s a good thing Fortress stepped in, too, otherwise potentially hundreds of investors who funded Fortress’s contribution to Collier Centre through what’s known as a “syndicated mortgage” may have lost their shirts.

It was stark reminder that there’s no sure thing in the investing world, including Canada’s supposedly “proven” real estate market (to borrow another term from Fortress’s marketing). Yet Fortress has ridden a wave of enthusiasm for its housing and condo projects in recent years, as eager investors, many of them already homeowners, have sought to double down on their exposure to that overheated sector of the economy.

Headed by Rathore and Petrozza, Fortress Real Developments promises to scout out “high quality” projects with “top developers” across the country, including condos in relatively sleepy centres like Barrie, St. Catharines, Ont., and Regina. The firm then offers developers services that include everything from “analyzing and buying the land, to hiring the architects, to building the sales centre to retaining the planners who obtain permits and approvals from the city to improving the quality of the rental units.”

The real magic, however, happens on the back end…. To continue reading click here.