Posts Tagged ‘mortgages’
Funeral Home Commercial Loans
Specialized commercial properties are among the most difficult small business finance situations for commercial borrowers. A particularly challenging set of circumstances both for initial purchases and refinancing is common for funeral home mortgages.
As a further complication for a difficult funeral home business loan, fewer business lenders are currently willing to offer competitive small business finance terms. There are now noticeably fewer local and regional banks offering funeral home mortgages. Other specialized property financing such as golf course mortgages is also experiencing similar difficulties.
Business owners should be ready for the possibility that the small number of active regional and local banks will probably offer short term financing instead of long term financing for funeral home loans. The percentage of value for the commercial financing is a critical finance issue that can vary significantly. Particularly with commercial mortgage terms for percentage of value and length of loan, it is of critical importance to avoid undesirable business loan terms when refinancing or buying a funeral home.
There are several problems found in funeral home mortgages that are not typically seen in other commercial loans. When the primary goal is commercial refinancing for funeral home financing, it is likely to be more complicated than the original business financing for purchase. The commercial real estate loan value is often less than the business value for funeral home business loans. The problem with this disparity is that many business lenders will provide a business loan that includes only the commercial mortgage loan value, and this will produce significantly reduced business financing.
For funeral home financing, there should be reasonable commercial financing fees during the early stages of the business loan process. Several lenders have used the shortage of reduced options for funeral home refinancing, building and acquisition to take advantage of commercial borrowers needing this specialized help. A common tactic is to charge excessive fees of $25,000 and more even if the commercial financing is not finished.
For this specialized business loan category, availability of adequate lenders has shrunk. Prudent choice of a lender will be a prime factor in securing a viable funeral home mortgage. It is important to select a lender with the ability to avoid the commercial mortgage obstacles described and successfully complete the complex business loan process.
The use of a small business finance consulting expert should be conducive to a better understanding of difficulties to anticipate in a complex commercial loan situation. The use of preliminary business consulting should be helpful in obtaining better terms and avoiding serious problems since funeral home business loans are among the more difficult commercial financing situations that a commercial borrower is likely to encounter.
Note Buying - You Can Own These Non-performing Notes
Start Your Note Buying Business Now
So you’re eager to get started in the note buying business and you’re wondering what kind of non-performing notes are out there to buy. Here is an example to feed your appetite.
A Note Buying Opportunity
The Note Rate: 11.13%
Non Performing note balance: $62,957 payoff amount $66,885
Estimated property value: approximately $112-114,000 (rough guess based on bank’s BPO and Zillow’s low range value - a cheap AVM to refer to) LTV (loan-to-value): 50%
The Note Buying Exit Strategy
One way to view this is: Buy a non-performing note for worth $63K at a 50% LTV for $56K.
Thru a refinance of the borrower’s defaulted mortgage, you can pay off the loan at full amount ($66,885) in at time span of about 60 days.
Making almost $12,000 on $56,000 wouldn’t be bad in 2 months.
The return on your note buying investment would be 21%. That isn’t even annualized.
Note Buying - Exit Strategy 2
Another route would be to bring the non performing loan current and reinstate the loan. (hint: sometimes a foreclosure action may get your borrower’s to do something with their loan)
If they are able to bring their defaulted mortgage current, you would get the reinstatement amount of $4,000 and on top of that a recurring monthly payment of $574. That is a total of $11,000 in your pocket within the 1st year. A 19% return!
Assuming the borrower refinanced within 3 years, I’d amortize that return over 3 years and get a 14.6% return on my note buying investment.
And even if they do nothing and you end up taking over the property, there is still about 50% equity that you have available.
Many ways to skin the note buying cat…