PMF Partners LLC offers unique advantages for the real estate borrower.
Speed of Closing The Transaction
Borrowers May Not Want or be Able to Provide Detailed Personal Financial Information
The Borrower Does Not Qualify for a Conventional Mortgage Loan
The Property Does Not Qualify for a Conventional Mortgage Loan
PMF Partners LLC offers unique advantages for the real estate borrower. PMF Partners LLC is able to close most loans in 2 weeks or less whereas institutional lenders require 6 weeks or more to close and fund a commercial mortgage loan. Further, private mortgage loans are asset based; the real property itself is the basis of the lending decision. Hence, if a property is producing or can produce sufficient income to pay the interest on the note and the value of the property will secure the note and provide sufficient equity, then the borrower’s credit is not an issue. Instead of concentrating on minute detail of the borrower’s credit history as institutional lenders do, PMF Partners LLC concentrate our due diligence efforts on the real estate securing the loan. We provide the real estate borrower investor with the ability to borrow on underwriting criteria not available through institutional lenders. No credit check or detailed application forms are required and PMF Partners LLC can usually render a decision in 24 hours.
PMF Partners LLC loan up to 65% of appraised value with no seasoning requirements. These loans are typically interest only, paid monthly and due in one year and may be renewable for a second year. There is no application fee , interest rate is 12 or 12.75% and 3 or 4 points origination fee is charged.
Why real estate borrowers are willing to pay high rates to borrow private money
When interest rates of 12% are added to 2 to 4 points, the real estate borrower is paying 15% annually. It’s obvious why this is a great deal for the private mortgage investor/lender and the broker, but why should real estate investors be willing to pay these high rates when conventional mortgage money costs 6 to 8%? There are many reasons, but all fall into four categories.
Speed of Closing The Transaction
Mortgage money obtained from banking or institutional sources, called conventional mortgage money, usually takes between 45 and 90 days to fund. Institutional lenders need not only obtain appraisal of the value of the property, but also require detailed examination of the borrower’s credit history and current financial status, as well as financial statements and tax returns not only for the property securing the loan but for all real property and business interests owned by the borrowing entity and the borrower himself. PMF Partners LLC on the other hand can usually complete a transaction within 14 to 21 days. Since the property value itself is the main criteria to be used in determining loan eligibility, much less information on the borrower and the borrower’s other properties are required, resulting in a much quicker approval process. The PMF Partners LLC is protected by lending at a much lower loan to value ratio, 65% is typical for the private mortgage lender vs. 80% - 90% for the institutional lender. Further, PMF Partners LLC can make a decision within 24 hours of receiving information; institutional mortgage money must be approved by a loan committee that may only meet twice a month, and that may send the loan request back to the loan officer for more information, necessitating a further two week delay until the committee meets again.
Real estate borrowers will often need cash immediately to take advantage of a purchase opportunity below market price. In many cases a seller being foreclosed upon is in denial until the last possible moment. In these cases it may be possible for a real estate investor with cash available to purchase the property at 70-75% of market value - if he can produce funds before foreclosure. Conventional or institutional financing can take too long. The real estate investor wanting to take advantage of this opportunity either needs to have the cash liquid or utilize the services of PMF Partners LLC. With so much profit potential in these situations, paying PMF Partners LLC's premium interest rates and fees is a small price to pay for being able to complete the transaction. If the real estate investor decides to keep the property, he can refinance with conventional money at his leisure. Further, if the investor in the above example seasons his property, that is owns the property for more than a minimum amount of time (6 months- 12 months is usual), then it may become possible for him to refinance based on the appraised value of the property rather than the lower of appraised value or cost. In such a case the real estate investor may be able to pull out some or all of his profit in the form of a new loan in excess of his property purchase price.
Real estate owners may get into temporary financial trouble, and need a loan to avoid losing their property to foreclosure. At just such a time conventional lenders back away. PMF Partners can provide refinancing, enabling the property owner to avoid foreclosure and providing time for the property owner to reorganize his holdings and reestablish his credit.
Borrowers May Not Want or be Able to Provide Personal Financial Information
The borrower may not have all financial information on all his real properties and businesses up to date or complete; he may have filed for an extension on his latest tax return; his accountant may be behind in preparing his financial statements. The institutional lender will want evidence and confirmation of even the smallest detail of the real estate investor’s personal and financial life. This is all important to the institutional lender since he is making a loan based upon the credit of the borrower as much or more than on the value of the property. While not being able to provide complete and detailed personal financial information would negate or at least severely delay getting an institutional mortgage, it should have no effect on the borrower’s ability to obtain a private mortgage loan.
Many borrowers simply do not want the hassle of filling out pages of applications, providing financial documentation, producing profit and loss statements on bank forms, going through credit checks, explaining minor credit issues, or providing tax returns. Many of our borrowers buy 10 or more properties each year; unless they plan to hold a property for the long term they either use bank pre-approved credit lines or private mortgage financing. This saves time and hassle and assures them and the seller that a transaction can be completed in a timely manner.
Sometimes life situations dictate the willingness of a real estate investor to provide details of his financial life for a public record where it can be accessed by just about anybody. More than once we’ve lent money to real estate investors with perfect credit who could have easily secured much lower cost conventional financing but were either getting ready to go through a divorce or involved in a messy lawsuit and did not want to provide signed financial statements.
The Borrower and/or the Property Does Not Qualify for a Conventional Mortgage Loan
This can be anything from low borrower credit scores or too much borrower debt, to the borrower’s properties not producing a sufficient enough income. Further, the property itself may not support the type of loan the borrower wants. If major repairs or rehabilitation is necessary, institutional investors will not be interested unless the project is very large and the borrower has an extensive track record. In these cases private mortgage money may be the only resource for the real estate investor/borrower. If a property is producing or can produce sufficient income to pay the note and the value of the property will fully secure the note and provide sufficient equity, then the borrower’s credit is not an issue for PMF Partners LLC.
Professional real estate investors, those entrepreneurial individuals who buy, lease, manage, restore, build and sell real estate full time, will often reach a point in their career where conventional financing is hard to come by. Somewhere between ownership of four small residential units where qualification is based on personal credit history, and ownership of large office buildings where loan qualification is based on the cash flow of the property, all real estate investors run into a financing problem. They have too many properties to qualify as small investors but their properties are too small to be considered for financing on the properties own strength. Further, the professional investor will not have a steady income from a job or business with verifiable history to strengthen credit scores. It is at this point that the investor must make a decision; take on partners or pay the high interest and fees for private (hard) mortgage money. Money borrowed is always less expensive than taking on an equity partner.
Every city has areas that are close to downtown and going through significant change. For most of the last half century this change has been downhill; the flight to the suburbs left these neighborhoods abandoned by all but the poor, the aged and the criminal. However the last fifteen years have brought revitalization to many of these areas. Population growth of these inner city neighborhoods are increasing at a tremendous rate with young professionals willing to pay high rents and empty nest couples willing to pay high prices to purchase and restore these “close in” houses.
This has presented a tremendous opportunity to the real estate investor with access to non-conventional financing. Most conventional lenders have been slow to catch on to this trend; while not specifically redlining these neighborhoods they have enacted barriers making borrowing on these properties for investors all but impossible. The conventional lender’s refusal to acknowledge property value increases in these areas, unwillingness to lend on property needing repair, and insistence on income verification from the real estate investor/rehabber have allowed us a very profitable niche area for PMF Partners LLC..