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Shawn Shayestehfar's Blog

By Shawn Shay | Mortgage Broker
or Lender in Los Angeles, CA
  • Investors Trying to Acquire Self-Storage Facilities?

    Posted Under: Market Conditions in California, Financing in California, Investment Properties in California  |  August 2, 2013 12:46 PM  |  944 views  |  No comments

    Increasingly more investors are now concentrating on the self-storage market sector. According to Cushman & Wakefield, self-storage investment sales increased in 2012 to reach $2.1 billion-the largest volume since 2007 and well over the $1.5 billion in sales the market has averaged in the last 5 years.

    As many REITs and private investment firms try to take advantage of this popular investment type, finding products can be difficult.  But why? 


    There are approximately  51,000 self-storage facilities in the US, but the difficulty for investors is that over 80% of them (40,000+) belong to ‘mom & pop’ owner/investors. As a result, it is not easy to accumulate a sizable portfolio of the asset type as few sales involve multiple properties. 

    However, for those investment firms that can uncover properties to invest in, the return of investment is very good. But why is this little market instantly quite popular with investors? There are many reasons: 


    1)   As competition warms up to buy multi-family properties, for instance, the prices are pushed up on the rest of the properties and pushing down cap rates, in several regions, back to 2007 levels.  This makes the profit margin for a lot of investors too low and they're searching for other alternative investments. 


    2)   The average total return nationally for large portfolio of self-storage facilities has been between 15% and 20%, making them one of the most profitable investment properties. This is due to lower vacancies and the fact that ‘lessees’ don’t have leases per se, so raising rates quickly in tight markets is much easier to do than in the MF sector by comparison.


    3)   There has been a record low number of new construction starts for self-storage over that last five years, which has also helped the fundamentals of existing properties.


    4)   So like the apartment buildings, occupancy rates have been growing to a national average of around 85% and rental rates have climbed over 6% nationally. Cap rates are still relatively high, making self-storage a very viable investment.

    5)   Further, the average stay for a residential customer is over two years and even longer for commercial customers. There is a diversified income due to the large number of units per facility, low volatility, no tenant improvements required to attract new ‘tenants’ and eviction costs are minimal. So, what’s not to like?

    But because of these reasons, good stabilized properties are demanding higher prices and lower cap rates, with the best self-storage properties now achieving cap rates under 7%, which is down considerably over the last few years by over 1%.

    Fortunately our firm can finance purchases of self-storage facilities with the use of the SBA 504 & 7A loan program.  The investors should be owner-operators under this program and the combined loan to value  can be as high as 90%. However, most transactions fall into the 80% CLTV or lower due to cash flow and debt service requirements.  Stabilized self-storage is an easier loan type for us to do under SBA 504 program, as new construction often takes well over a year to get stabilized and therefore generally requires a buyer with an existing portfolio of self-storage facilities that will debt service the new acquisition.  For more information on SBA financing please visit http://www.easysbaloans.com

  • $1,220,000 Debt Financing for Purchase of Single Tenant Retail Property in Long Beach

    Posted Under: Financing in California  |  April 7, 2013 5:06 PM  |  1,264 views  |  No comments

    City Capital Finance successfully secured a $1,220,000 debt financing of a single tenant retail store in Long Beach CA.   The borrower was in 1031 exchange and chose this property for his up-leg.  The term of the lease was for 15 more months with 2 five year options and our client was looking for long term loan. 

    Challenges: Beside short term lease, the tenant would not release internal financials to the lender.  Additionally, they wouldn't sign the lender's subordination and estoppel form which is required by most banks.   The borrowers also had credit issues and low credit scores and showed a significant carry over loss from their prior investments. 

    Solution: We leveraged our extensive relationship with a capital provider that would streamline the underwriting process and is comfortable with term of the lease and the tenant.  Our loan originator worked with the lender to demonstrate the one time carry over loss and rise in borrower's credit scores.   As a result, we secured a fixed rate loan for 10 years amortized over 25 years. 

    Economic Commentary

    Economists have boosted their estimates of first quarter growth to approximately 3.5 percent. Despite the increase in the payroll, tax consumer spending has held firm. The housing market is showing signs of a sustained recovery, which with rising stock market and limited inflation, continues to give consumers more confidence. The job market remains the big question, as the private sector added significantly fewer jobs in March than in February. 

    Capital Alert

    City Capital Finance has established relationship with several Credit Tenant Lease finance companies that structure highly leveraged and long term financing terms using private placement bonds.  The primary focus is the investment grade of the tenant and lease structure and secondarily on the property condition, location and type.  These types of financings are suitable for borrowers that are looking to maximize the leverage and self amortizing loan terms. 

    For more information about all types of commercial real estate financing, please visit our website at http://www.citycapitalfinance.com or call us at 310-598-5939.

  • Commercial Real Estate Loan Delinquencies Continue to Fall!

    Posted Under: Financing in California  |  March 28, 2013 5:27 PM  |  1,371 views  |  No comments
    A recent on-line article by National Real Estate Investor magazine reported on the results of CRE delinquencies for 2012. You may recall that early last year reports stated that 2012 was pegged to be a very bad year for CRE because there were over $170 billion commercial and MF loans coming due—and that many of these loans were originated in the ‘easy-money’ years of 2007. However, nothing close to the predictions took place.
    Instead, delinquency rates continued to slowly and steadily improve each quarter of 2012. Even the much feared ‘shadow-vacancy’ did not seem to be as large a factor as expected. ‘Shadow Vacancy’ refers to those 5-year leases which came due in 2012 (also drafted during the ‘easy-money’ phase of commercial lending) that were renewed in 2012 and continue into the first quarter of 2013 at lower market rates. Many lessee’s that were renewing were requesting less space than they had in the original lease—hence shadow vacancy. It was a factor, particularly in office buildings, but did not seem to affect delinquencies as much as the experts had thought.
    The delinquency problem that was predicted for 2012 was supposed to be exacerbated by the fact that underwriting standards were tougher and that fewer borrowers would qualify for refinances. But that didn’t happen either. In part, this author believes because: (a) banks were much more aggressive in the LTV’s they were willing to lend at in an effort to finally get some new loans on their books; (b) banks were offering much lower rates on longer term financing allowing more borrowers to qualify; and (c) borrowers of these CRE properties had the wherewithal to come to the table with additional cash to ‘make’ the loans qualify that otherwise would not or they sold their under-performing buildings outright with most being purchased in cash by REITS, hedge funds and other well-heeled investors.
    So, in short, another alleged CRE catastrophe didn’t happen. As the REI provided graph shows, delinquencies among bank held CRE loans (as well as Life, CMBS and Agency) declined or stabilized in 2012 in contrast to many predictions.

    According to the MBA, even CMBS delinquencies have improved, declining from a high of nearly 9 percent early in 2012. In the fourth quarter, 8.7% of loans held in CMBS were 30 days late or more in their payments. That’s 13 basis points lower than the quarter before. CMBS delinquency rates are slowly easing from a peak of 8.97% in the second quarter of 2012.
    So, what happens in 2013?
    Now that commercial real estate has made it past 2012, the future looks less challenging in many respects. Fewer loans will hit the end of their loan terms in 2013 as compared to 2012 : $170 billion in 2012 as compared to just $119.5 billion in 2013, and, 2014 will be lower as well with the next potential wave of problems coming in 2015, 2016 and 2017—when 10-year loans originated in the boom years come due.
    City Capital Finance continues to arrange financing on quality commercial real estate properties in both A and B markets, that is, B market areas being defined as smaller market areas (50,000+ population).   We secure financing from $1 million  to $100 million and more loan amount on Commercial Real Estate and apartment building properties.
    We will consider office, medical, retail, warehouse, light industrial, commercial condos, mixed-use (retail), and all type of special purpose properties such as self storage, gas station, car wash and so on.  For more info please call 310-598-5939
  • $1,050,000 Cash Out Refinance On Single Tenant Industrial Building in Orange County

    Posted Under: Financing in California  |  March 14, 2013 3:26 PM  |  1,311 views  |  No comments

    City Capital Finance successfully placed a 65% LTV cash out refinance on an 8500 SF single tenant industrial property in Irvine. This commercial mortgage loan represented a return of equity for property owners as they purchased the property couple of years ago through foreclosure. The five year loan is fixed for 3.6% and amortized for 25 years.

    Challenges: The tenant was a small privately owned company that had a complicated financials and showed no net income in their profit and loss statements. The NNN rent was also low which didn't show enough cash flow to service the debt for most lenders and there wasn't any historical performance as tenant moved in to the property recently. Borrowers also had complicated financials and tax returns which made it difficult to underwrite their personal cash flow. We also faced difficulties with the appraisal as there were limited number of comparables in that area.

    Solutions: City Capital Finance identified lenders that would use the lease and underwrite the loan based on the current operation. We also convinced the credit manager to accept the low rent and short term lease. Our professionals worked with the lender to get them comfortable with the borrowers' tax returns and financials and we worked with the tenant to provide a simpler profit & loss statement to satisfy the lender.

    Capital Alert

    City Capital Finance is working with several lenders to finance owner user commercial properties in all 50 states from $500,000 and up. These loans are funded for industrial, warehouses, office, retail, commercial condos, auto sales lots, auto repair, Restaurant, gas stations, mini storage facilities, gyms, mixed use, preschools and other types of properties. The rates starts at 2.75% for 5 year fixed 25 year amortized.

    Economic Commentary

    The number of Americans filing new unemployment benefits fell last week, suggesting a pick-up in the labor-market recovery. A better measure of labor market trends, the four-week average for new claims, fell to 348,750—the lowest level since March 2008—pointing to some firming in underlying labor market conditions.

    For more information about all types of commercial real estate financing, please visit us at http://www.citycapitalfinance.com or call us at 310-598-5939.

  • $1,200,000 Cash Out Refinance on Two Multifamily Apartment Buildings in Los Angeles County

    Posted Under: Financing in California  |  March 5, 2013 6:37 PM  |  1,362 views  |  No comments

    City Capital Finance secured a 60% LTV multifamily loan for cash out refinance of two apartment buildings in Santa Monica and mid-Wilshire/Korea town sub-market of  Los Angeles.  The borrowers were interested to cash out some equity to acquire another investment property.  Built in 1960s & 1970s,  both properties were not maintained properly and needed a lot of cosmetic and rehabilitation.   The loan is fixed for 7 years at 4.1% with 30 year term. 

    Challenges: Borrowers didn't show their income in their tax returns and they didn't report enough income in their Schedule E of their tax returns.  Also they didn't have any reliable and good records for their rents and expenses.  Furthermore, one of the borrowers had some credit issue due to on-going legal dispute with one of their old tenants and late payment of credit card. 

    Solution:   First, our professionals took the rent roll and some of the expenses that borrowers showed and made a complete rent roll and operating statements for three years.  We identified a lender that would not review the sponsors' tax returns and uses the rent roll and expenses as a way to underwrite the transaction.  Our loan originator highlighted the borrower's long term ownership of the properties and their conservative characteristics with debt.   As with the credit issues, we provided the underwriter with explanation for the late payments and provided proof of settlement with the previous tenant. 

    Capital Alert

    City Capital Finance is actively funding small balanced commercial mortgage loans between $500,000 to $2,000,000 in California and Arizona and other selected states with a streamlined underwriting process.  These loans funded for apartment buildings, single and multi-tenant industrial, retail, office and few special pupose assets  with loan to value as high as 75%.  The rate starts at high 3% with 25 to 30 year amortization. 

    For more information about all types of commercial real estate financing, please call us at 310-598-5939

  • Mortgage financing for real estate – Facts you should know

    Posted Under: Financing in California  |  December 3, 2012 9:56 PM  |  1,660 views  |  No comments

    Real estate investment happens to be one of those avenues that has helped investors build up wealth for years. If you wish to get into the whole business of real estate, then it actually might not prove that easy. Most importantly, you can find it extremely difficult to find a loan that’ll get you started in this entire zone of real estate investment. You need to explore all the options available as well as the various loan criteria, if you’re looking to get commercialreal estate financing. Read on to find out more.

     

    5 Key facts of mortgage financing for real estate investors

     

    5 key facts that you should know when out to get mortgage financing for real estate investment have been discussed below.

     

    1.   Function of mortgage financing

     

    The basic function that mortgage financing serves for real estate investors is to provide adequate money that’ll enable you to purchase a particular piece of property. This helps you to buy an investment without really putting up too much of your own money and that reduces the risk involved too.

     

    2.   The requirements involved

     

    There are a few requirements involved with mortgage financing. For instance, if you go on to obtain a traditional loan from a bank, then obviously your credit score should be high. Again, there’s the requirement for a larger down payment when it comes to real estate. As for the interest rates, then they’ll be a notch higher than your residential mortgage rates generally are.

     

    3.   The cash flow

     

    You should take into consideration the cash flow involved with each deal. Take note of how much money can be brought in when you rent out the property. After that you should look at your mortgage payment amount and how much you’ll have to pay as maintenance cost. Now, if you see a positive cash flow here, then the deal can be worth it. However, if there’s a negative flow, then you might like to look at some other deal.

     

    4.   Seller financing option

     

    There’s the option of seller financing that isn’t considered by many investors. However, it can actually work in your favor as this actually finances your purchase. You begin by making a down payment and then go on to make the monthly payments. For this you’re not required to have good credit and the down payments can be smaller too.

     

    5.   Other considerations

     

    In case you can’t get mortgage financing through any of the conventional methods, then you’ve got to think creatively to make the necessary property purchase. There are other options like making use of the home equity loan on your house and lease options for securing a property.

     

    If you keep in mind the 5 facts discussed above, then it shouldn’t be a big deal for you to obtain the necessary mortgage financing for real estate investment.


    For more information about commercial mortgages please visit http://www.citycapitalfinance.com
  • Most Common Misconceptions For Foreclosure Real Estate Investment

    Posted Under: Financing in Los Angeles County, Foreclosure in Los Angeles County, Investment Properties in Los Angeles County  |  December 2, 2012 4:57 PM  |  1,069 views  |  No comments

    With thousands of investment opportunities around every corner, consumers with a little extra funding often find it hard to choose the right way to increase their money. All investments involve some amount of risk, but some types offer greater rewards than others as well. Purchasing a foreclosed property can help you build a portfolio of investments that are worth more than you have spent on them. However, investing in real estate foreclosures is not as simple as some experts claim. Understanding the risks and returns of this investment system will allow you to make an informed choice before spending any money.

    All Foreclosed Properties Are Damaged

    Many homes and offices fall into a state of disrepair when the mortgage holders begin to slip on payments. If there are no funds to cover the loan payments, it`s also unlikely that the occupants can afford roof repairs or foundation improvements. However, not all foreclosures are damaged or in need of serious renovation. This is why it is crucial to have properties inspected by a professional before you make an offer. A great deal can turn into a nightmare if you become the owner of a home that isn`t fit for habitation.

    Foreclosures Are a Quick Route To Big Money

    These two misconceptions are usually intertwined in the minds of potential investors. Buyers are motivated to purchase homes that were rehabilitated by investors, but this demand is not spread equally throughout the country. Some very inexpensive properties may sit for years while you wait for a buyer, or it may be snatched up in just a few weeks. It can be hard to predict the demand for property in a specific area if you are dealing with homes or buildings that are not already on the open market.

    There`s No Competition

    Many beginning investors spend a lot of time searching for a market that isn`t already saturated with competition. While the world of foreclosures is still relatively new, a lot of large and small investment groups have moved into it. The biggest profits come from high demand properties, but competition will be fierce for these buildings. The bank itself is allowed to make offers on the foreclosure. You will need a keen eye and a deep understanding of real estate trends to enjoy consistent success and profits in this field.

    The Buying Process is Simple

    Foreclosure processes and requirements can vary from county to county. Each area may require different types of bidding or certain waiting periods to allow the original owner to pay off their debt. You may end up spending money on a home that doesn`t legally become your property for six months or a full year. Short sales and auctions work differently in each region of the country. Be sure to check your local rules to save time and minimize losses during the buying process. You can find information on websites like Los Angeles foreclosure and City Capital Finance to plan your finances. Sticking to the rules will ensure the entire process runs smoothly from the beginning to the end.

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