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Commercial Real Estate Loans | How to Qualify?



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commercial real estate mortgages and why

is important for the expansion of your

real estate portfolio that's the topic

for today's episode and without further

ado let's dive in

hello everyone and welcome back so today

it's gonna be all about commercial real

estate loans why is it important how

does that differ from the typical

residential loan and how you can

actually get qualified and get approved

for one of those lungs

so before we further dive in I've been

getting some calls and some questions

even emails from some of you guys asking

me ok so what's the difference between a

residential loan and a commercial loan

why should I go with a commercial loan

so at a high level I actually covered

some of that in this video up here but

for those who haven't seen it basically

when you get a residential loan that

loan goes into your personal credit so

basically they're gonna lend you money

based on how much money you made

throughout the year when you're doing a

commercial loan which is for anything

that's four units and above do you will

be qualified based on the income

potential of the property so we're

talking about something that has nothing

to do with you at this point I mean so

some degree it still does because they

need to put a face to the loan and

someone who's gonna be responsible to it

but at this point how much you make in a

year will not be relevant to the

application process to the loan process

because all the care is what the asset

has to provide does this property has

the income potential that it's gonna be

sufficient to cover the money that we're

borrowing the applicant in this case for

their real estate endeavors and if it

all makes sense if the numbers make

sense for them that's when the lender

will proceed and issue you the money so

you can continue expanding your real

estate portfolio so today we have a

guest and his name is Hector Parris and

he is from patch of land and the reason

why I worked with patch of land is it's

because their funding program is a

little different that most traditional

lenders their product is actually very

neat and I'll let him give you all of

the details so you guys can learn more

about the entire process of applying for

a commercial loan and without further

ado let's just dive in into the cone

okay so now we have Hector on the phone

Hector well

come to you the channel question we were

getting a lot of emails from some of the

viewers they're asking questions

regarding lenders what is it that they

need to put together for them so I

thought this was actually a good chance

to have a call with you and kind of like

go over the requisites but before we

even do that let's talk a little bit

about patch of land and your role and

what is it that you do that makes you

different from all the other lenders out

there in the market well this week I'm a

loan officer with patch Atlantic a loan

officer with them for several years so

what makes us different from other

lenders is that we can close along in as

little as 7 to 10 business days we don't

require much documentation we don't

require a current documentation we only

require any minimums to fix that are

cycles work for these fictions that

product ok ok

thanks for sharing and I believe you

mentioned at some point before we were

chatting you can actually provide

funding in as little as 7 to 10 business

days correct so again once we get a

complete package we can close in as well

as 7 to 10 business days once you're

actually in our system and we do your

second transaction with that we close

faster because we have at that point

your articles of incorporation certain

documentation so all we need is just an

updated application with the new address

for new numbers and title ok so thanks

for sharing so now I notice in your

website that you have a couple of

different programs available for

investors any chance you can just walk

us briefly through them I know you have

something for long term rentals flipping

and stuff like that correct

we have two products the first product

is a 12 month product with just 12

months interest only zero pre-baked so

you can get in and out of that product

as quick as you like that is strictly

for our fiction clip

six and a whole type property we have it

allowed on that product reason for the

short term on that alone is just

basically you need quick money to see an

opportunity out there you want to

purchase the property get some we have

money we finance 100% of the rehab on

all our terms all our loans so that you

can get in there and do what you need to

do and get out of

selling the property or refinancing it

into a longer term loan conventional

necking the other program that we have

is the rental loan program which is a 24

month product that product does not

allow any rehab is strictly short-term

key properties where you purchase them

there is no we have to be done there

either is a renter already currently

living in the resident where you kind of

beginning to mentor in that property

that product means a minimum of 660 on

the FICO score and it does have a

six-month interest guarantee on that

product so that's again gives you 24

months the ability to have it for a

little bit longer so that you could

stabilize the rental income on it so

that you can go to conventional

financing and longer term loans because

conventional financing as I understand

it requires at least six months with the

renters in there to stabilize so those

little products in real estate

relationships are important but what's

more important is efficiency so patch of

land is already doing their part by

providing funding and approximately

seven to ten bits in space but what

can't the applicant in this case do on

their site to expedite that like do you

expect them to handle all documents in

one shot like what what is it that an

ideal candidate will be like for you to

work with so on a fix and flip we'll

just stick with that since the majority

of our business there's not much that as

an application the we do only lend to an

LLC or corporation so the client will

have to have an ALICE you set up we

don't need that to start the process but

we do need it to finish to cross the

finish line so if they want to be

diligent they want to maybe go up high

for an LLC ahead of time so that way

they already have the documents that are

going to be needed to be sent in to us

we need the purchase contract will be

executed by both the seller and the

buyer so that will happen once they do

find the property if they're going to

use a general contractor they might want

to start talking to general contractors

see kind of what their pricing is

because you're gonna have to shop that

so that they I think for them to be more

efficient would be to set up their LLC

and then find a general contractor that

they're going to feel comfortable with

that way when they do find the property

they're always already

to where that contractor comes out gives

them a but what what needs to be

done and go from there outside of that

bank statement is something that they

can get to us fairly easily a driver's

license and then the insurance

information for the their agent that is

needed and that's pretty much it

thank you this this is actually quite

helpful because some of the the viewers

in the channel they are getting started

a realist a some of them have done real

estate using the traditional forms of

lending going through the bank and

getting the 20% down so some of them

might not be familiar with the whole

concept of closing a property on an LLC

so the fact that you're sharing with

them that they should do that beforehand

to get the process expedite it

definitely helps them a lot so now how

do you actually determine if a deal is

it's worth lending money to why do you

do some sort of calculation or

evaluation or urine or is it something

that the applicant needs to provide well

obviously if the numbers make sensible

to the deal so how it works is we deal

with new investors all day long so we

have a client that has zero investment

there's just starting off getting in the

business then we will lend them 80% of

the purchase price to day one and

finance 100 percent of the rehab budget

where validates whether we're gonna do

the deal on that is just establishing

customers investment over the last three

years and partnerships and the investors

are in the status saturated they're 0

and then the asset itself for asset base

so I wouldn't be property or at least a

zip code at some point just to confirm

that the property is in a desk location

that's not rule out in the middle of

nowhere in the woods or next to a power

plant train station or some source where

it might not sell as quick or have

renters want to rent that property

that's why we need that those are

basically the two pieces of information

that I need or we need in order to be

able to confirm whether we're going to

proceed with a deal or not the only two

reasons why deals with not the only two

reasons but too much arteries and wide

deals would not close with patch of land

with me then the valleys don't commend

whether they say they are we're gonna

have to learn appraisal on every

property so if we say that a property

we're gonna buy for a lot of thousand

we're going to put 20

dollars in rehabbing and that's 120 and

the after repair value once everything

is completed is worth 160 but the

trailer comes in as the after repair

value only 130 the numbers are too

closer too tight to make it make sense

what we never want to do is put a client

in a position where the profitability is

so small they might get frustrated and

walk away from the deal we're not in the

business of closing on deals we'll have

you we just want to lend money get

clients in the properties sell the

property refinance the property and move

on to the next deal right okay so that

way it's a win-win for everybody I was

gonna add correct so we will do our due

diligence or I will do my due diligence

to look at the property of the whole

situation that is the reason lining the

application to get a full picture of

what the client is about what the

property is about and I can make a

determination like yes this is a viable

loan let's go forward or no it's not

stay away because of these reasons or we

cannot do it because of these reasons so

that the client is not going to lose

anything because they're just giving me

information for me to make a decision as

to whether we're going to be able to

lend or not once we make the

determination that we are able to lend

then we move forward and go through the

process right and to add to that so one

thing that I've experienced with some of

the the viewers and even some of the

colleagues when they first started on a

real estate investment is that they were

too afraid to kind of like fully sure

the truth like oh well they're gonna

find out that I don't have any

experience and and they might not want

to lend to me and I remember telling

them well if you don't tell them the

truth they're gonna find out regardless

once they start checking on the stats

and the numbers of the properties so and

then before in the past I've actually

had colleagues when they recently

started and even some people will reach

out to me separately ever since I

launched the channel and they asked well

if I if I tell them that I don't have

any experience that the lender might not

want to necessarily lend to me and they

might think that I'm a high risk type of

applicants I think that and so the

answer I used to tell them was well if

you don't tell them the truth they

they're gonna find out regardless once

they start running the number and that's

that's a horrible way to start building

our relationship because you're burning

it right from

GetGo exactly and that's why I always

say Lucy honesty is the best policy just

tell me what you're up against and then

I so that we know how to work around it

again we're gonna lend to new investors

so we don't need any experience when it

comes to that piece now if we're doing a

ground-up construction which is building

a single-family residence from the

ground up then we need experience at

that one so if you tell me you don't

have experience this better for me to

tell you that I cannot do that deal

upfront then for us to go down the path

have you spend money start the process

bringing documentation that Bolton I

find out that the expanse is not there

and the Jo dies at that point so that is

the reason it's better before coming

give me all the information I can better

understand what it is we're trying to do

and get the loan to go through the last

thing we want to do is waste people's

time or people's money right right

correct correct I read something about

pre-funding I don't know if that's

something that we should be covering

here like what exactly does pre money

just let the client know that our loans

are pre funded they're ready to go that

way one we have to close a deal for

example if we rush to the wire ends

right you know you're down to the last

day finally all the documentation we got

we got in that were needed to close a

deal finally come in we're able to just

push a button and send the money through

the wire through that's what pretty

funding means amazing that we got to get

the documentation and we have to wait

still process it

sometimes we're at or this tends to

happen towards the end of up a lot in

our industry we have loans where we're

waiting for just one piece of

documentation to just make sure that

we're clear to be able to send that

money to do and then that that piece of

documentation comes in out in the ninth

hour and we get it yep it's good to go

push the buttons of the money that's

what pretty funny

houses do is be able to get the money

quick to the client when they need it if

they're planning to do a deal sooner

rather than later they should start

providing you with the documents just

that way you have everything it's like a

pre-qualification process kind of thing

and then at the end they should just

provide you the actual document that

really matters what is the contract or

or whatever is it that you require and

urine correct which we're going to

require

information of fun so we're not going to

be waiting for certain basic stuff up

front to fund alone but what I'm talking

about is stuff

tidal clearing title clearing the banks

they're making sure there's enough money

there to close that final things that

are needed because again when we start

the process you're just giving me basic

information and then we're sorting

through it our processors will now

filter through that information and say

okay we're missing you know these items

so get us these items so that we can go

to underwriting once the file goes to

underwriting the underwriting processes

they'll scrub all the information and

then determine what else is needed in

order to close a loan so conditions this

will come out then we go back to the

client say okay

it's out of underwriting this is these

are the conditions that we need to be

met in order for us to close the loan

that's what I'm talking about those

pieces of information that sometimes

they come in in the ninth hour and we're

trying to close a deal so once we get

all the documents that are needed in

order to fund the deal we're ready to go

to the loan perfect perfect thank you

and you actually answer my question on

underwriting before I even get to ask

and so to just a level side for those

who don't know what and the writing

needs it's basically the process where

the bank or the lender itself is going

through the paperwork there's our

commentation just to assess that

everything is complete and ready to go

for closing and if something is missing

then that's when you will hear back and

with additional requests and stuff like

that correct the underwriters job is to

scrub through the documentation so that

is the reason why we want you to be

forthcoming upfront to let us know what

it is that we're dealing with so we know

how to work around it because we have to

present the story together and explain

to them look at this as a situation this

is what we're doing and so we can move

forward because if the under edit

doesn't know the story they're not going

to go to the they're gonna their job is

to go through the paperwork and see

what's missing or if there's anything

that is false information or what have

you so again the underwriters do their

due diligence and confirm what you have

told me so for example if you had told

me I had reinvented to investment in the

last two years where they confirm that

you actually have done two investments

in the last years if I can

pass that information depression is an

attachment information then it doesn't

matter so that's the reason why you tell

us about what you what you're trying to

do where your background what your

history is and then we decide okay

here's what's going to best fit you

here's your pricing you know get me the

documentation and we go forward so it's

a pretty simple process a lot of people

tend to overthink it and think they need

a lot of stuff but when it comes

investing because it's application

there's not much we don't require any

income documentation people are always

afraid you know I don't make enough

money to cover that's not the point the

point is if the property makes sense for

you to purchase you have the 20% to put

down you're gonna be able to sell it for

a profit then you can get in and use our

money to buy that property and sort of

have to come up with more money for 20%

to 50% of the average out there right

and just to clarify for those who don't

understand that the terminology of asset

base it just simply means that the money

that's gonna be lent to you will be

based on the income of the property

versus a traditional mortgage it's based

on how much money you make so that's

where Hector's making that distinction

it doesn't matter how much you make

because they're gonna be focused on how

much money is the property making how

much potential the property has in this

case all right all right great great so

Anna for everyone looking to make more

money to continue to invest in your real

estate portfolio patch of land best have

a broker and an affiliate program that

you can actually join and make money

is that correct Hector correct so the

broker program is there's certain states

every state is different some states you

need to be licensed as a broker in order

to be able to sign up as a broker all

you would do with you sign up as a

broker with their company and then you

would get clients to try to send you

business the volkl program that we have

we actually will set you up with your

own landing page put your logo your

phone number on our marketing materials

so it will have everything that we do

but just have your information on it

we'll set you up with the landing page

work that way you can send that

information that marketing material to

your claims they will click on that site

go directly to us but you will be

connected to that client forever

brokers are able to charge whatever they

want on their end so we make our plunge

and then the broker will charge their

place as far as the affiliate program

goes that's for someone who just wants

to refer somebody wants to give me a

name give me a phone number just you

know handshake introduce us and then

I'll I'll take over that client try to

close that client if we do close alone

with that client that you introduced us

to

you'll make a half a point on the back

end which means once the loan closes

whatever the loan amount that we closed

on that client you'll make half a

percent on that that is the only

information that's required for that is

for you to sign an agreement

send us the w9 because the company will

1099 you at the end of the year which

means they're just going to report that

they paid you X amount of dollars for

the year for you to report on your taxes

and this who ever wants to be part of

the affiliate program or become a broker

they don't need a license or any type of

LLC or legal entity set up it can

absolutely do it under their name

correct the broker has to be licensed

their search states that require like

you familiar with their state their cert

stage that will require licenses

majority of them do not so I would say

90% of the states do not require so you

can just sign up on our site again if

you go to path no plan

/h Perez you will be able to see the

information there and sign up there for

the broker program or they are still in

program okay great and I think that's

basically it for today ray yeah if you

have any questions you have any concerns

were over here we're more than happy to

help especially in new investors who

have a lot of questions I understand it

does get a little daunting as far as

trying to invest but it really the

process is not that difficult I can be

reached at area code for two four three

zero eight zero three four two again

that's for two four three zero eight

zero three four to give me a call and

more than happy to walk clients through

the process

all right that sounds awesome so Hector

thanks a lot for joining us today

a welcome me on this one all right

thanks and okay so that's everything we

have for today so hopefully you found

the call to be valuable

and don't forget the contact information

for Hector is down in the description

box below so if you want to get in touch

with him footage just hit the link and

get in contact with him he also provided

you with his phone number so feel free

to reach out and as always if you know

someone who's gonna find this

information share and this video

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share the link to this video so that way

they can get informed on what's

available out there for real estate

investors and don't forget to hit the

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down below and without further adieu

I'll see you guys next time take care

bye bye

you