Category Archives: real estate lending

Buying a commercial property? Do your homework!

11 Wednesday Oct 2023

Posted by in commercial real estate, real estate investing, real estate lending

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Performing due diligence is an essential step for commercial real estate buyers. The following is a checklist that covers some of the key areas to consider during the due diligence process:

  1. Property inspection: Hire a licensed property inspector to perform a thorough inspection of the property, including the building structure, mechanical systems, electrical systems, plumbing, and other essential features.
  2. Environmental assessment: Conduct an environmental assessment of the property to identify any environmental hazards or contamination, such as lead-based paint, asbestos, or hazardous waste.
  3. Title search: Conduct a title search to ensure there are no liens or encumbrances on the property and that the seller has the right to sell the property.
  4. Zoning and land use: Check the zoning and land use regulations to ensure that the property is suitable for the intended use.
  5. Lease review: Review all lease agreements to understand the current rental income, lease terms, and lease renewal options.
  6. Financial analysis: Review the financial statements for the property, including operating expenses, rental income, and capital expenditures.
  7. Market analysis: Conduct a market analysis to determine the current market value of the property, the demand for similar properties in the area, and the potential for rental income growth.
  8. Insurance review: Review the property’s insurance policies, including coverage for property damage, liability, and natural disasters.
  9. Legal review: Review any legal documents related to the property, such as easements, covenants, and restrictions.
  10. Tenant interviews: Conduct interviews with current tenants to understand their satisfaction with the property, any issues they have experienced, and their intentions to renew their leases.

Overall, a thorough due diligence process can help identify any potential risks or issues with the property and ensure that the purchase is a sound investment.

Ask and know what commercial lenders are charging you!

06 Saturday May 2023

Posted by in commercial real estate, real estate lending

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The fees charged by a lender for a commercial real estate transaction can vary depending on the specifics of the transaction and the lender’s policies. However, here are some of the typical fees that may be charged:

  1. Loan Origination Fee: This is a fee charged by the lender to cover the costs associated with processing and underwriting the loan. This fee is usually a percentage of the loan amount and can range from 0.5% to 2% of the loan amount.
  2. Appraisal Fee: Lenders often require an appraisal of the property to determine its value. The cost of the appraisal is usually passed on to the borrower and can range from a few hundred dollars to several thousand dollars depending on the complexity of the property.
  3. Environmental Assessment Fee: If the property being financed has any environmental concerns, such as potential contamination, lenders may require an environmental assessment to be conducted. This can include a Phase I Environmental Site Assessment (ESA) and/or a Phase II ESA, and can cost several thousand dollars.
  4. Title Search and Insurance Fees: Lenders require a title search to ensure that there are no liens or other issues with the property’s title. The cost of the title search is typically passed on to the borrower, along with the cost of title insurance to protect the lender against any issues with the title.
  5. Credit Report Fee: Lenders typically require a credit report to assess the borrower’s creditworthiness. The cost of the credit report is usually passed on to the borrower and can range from a few dollars to a few hundred dollars.
  6. Underwriting Fee: Some lenders may charge an additional underwriting fee to cover the costs of evaluating the loan application and making a lending decision.
  7. Legal Fees: Borrowers are typically responsible for their own legal fees, as well as any legal fees incurred by the lender. Legal fees can vary widely depending on the complexity of the transaction.

It’s important to note that not all of these fees may apply to every commercial real estate transaction, and there may be additional fees not listed here depending on the lender and the specifics of the transaction. Borrowers should carefully review their loan documents and ask their lender about any fees they may be charged.