Use Real Estate Financing
One of the biggest misconceptions of real estate investing is that you need to have lot of money to get started, which simply isn’t true. The secret that many professionals don’t understand, is the fact that there are a number of different real estate financing options available to fund every investment. Because the method in which a specific deal is funded can greatly impact its outcome, understanding the financing aspect is imperative. Thats where Upwise is here to help you!
As an investor, there are a few different ways to go about financing real estate investments. Each one will have its own set of pros and cons, and your financing approach will depend on the property and the situation. For investors, it’s important to remember that not all financing options are created equal. What works for someone else may not necessarily work for you, but the trick is understanding which real estate financing option will compliment your business strategy. Let us guide you and give you the wise options for your investment. For more information please call one of our in house Real Estate Financing specialists at (917) 444-3959.
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What is a Real Estate / Asset Backed Loan?
An asset-based loan is secured by assets instead of emphasizing cash flow, which is typically real estate or whatever assets a business has on its balance sheet. Lender will use collateral which can be quickly and easily liquidated. Assets can also be accounts receivables, equipment, land, crop, purchase orders and inventory. Asset backed loans secured by collateral offered by Upwise are most often structured as term loans and revolving lines of credit.
Why Choose a Real Estate / Asset Backed Loan?
Most borrowers turn to asset-based lending because they’ve had bad luck getting approved by traditional cash flow based lenders or they want a cheaper cost of capital and confidence in their ability to pay back the loan. In asset-based lending, tangible collateral serves as the most important aspect in the approval process. Borrowers will use an asset for more favorable terms typically resulting in a higher loan approval and lower interest rate.
The loan amount is determined by the market value of your assets. Typically, most lenders will lend 75 to 85% of the value of their accounts receivables, and around 50% of the value of their inventory or equipment. Also 70% to 90% on the market value of property and typically 50% of the value of raw land.
So, if you have assets that you would like to leverage as collateral for more favorable terms, then this may be the best choice for you. For more information, please call one of our Real Estate Financing Specialists @ 917-444-3959.
Most Customers Who were approved for a Real Estate Financing had:
**Based on Previous Upwise Clients
What does a Real Estate Financing Cost?
You should know how much the cost of capital will cost you no matter what type of financing you’re applying for.
Let’s take a look at a cost example.
Example of a Real Estate / Asset Backed Loan
Let’s say you have a commercial property that you operate your business out of, that is worth approximately $1.1 Million.
In most cases, the lender will require you to get an appraisal done to determine the value of your property.
Lets say the properties appraised value was determined to be $1 Million. In this scenario, Upwise will be able to lend 80% LTV based on the appraised value of the property. Meaning the loan size will be $800k based on the appraised value on the asset.
The term length will determine the monthly payment and amortization schedule. Payments can be interest only, principle and interest, deferred, and an interest reserve may be required.
Consider other fees associated with asset based loans as well. These fees include but may not be limited to appraisal fees, site survey fees, legal fees, escrow fees, origination fees, packaging fees, prepayment fees, and others.
Don’t overlook fees on your loan offer—be sure to factor any and all small fees you might have to pay in order to understand the true cost of your asset based loan.
In order to understand your loan completely, make sure to ask Upwise for an amortization schedule. All fees associated with the proposal will be transparently laid out for each borrower in a term sheet. For more information, please call (917) 444-3959 to speak with an Upwise Real Estate Financing Specialist.
Recent RE Financing Transactions
South Hampton, NY
Experienced borrower looking to fix and flip the subject property in South Hampton, NY. UpWise Capital was able to provide a 12 month loan at a 78% LTV. The investor is planning on spending $160K on renovations. The plan that this developer for this subject property was to renovate the property and add a pool in the backyard. Total Loan Amount: $2,745,800
Repeat borrowers and experienced investors were under contract to acquire two buildings for $22 Million with $12 Million in construction costs. Upwise was able to provide a 36 month loan at 70% of the After-Repair Value with a 6 month interest reserve and interest only payments. Once the project is complete the investment group is anticipating a 23% return-on-investment from a sale. Total loan amount: $23.8 Million
Cash Out Refinance
Experienced borrower and builder with great credit and experience in the cannabis industry was looking for a 12-month loan against his businesses land valued at $10 Million owned outright. Upwise was able to provide a loan at 65% LTV. Total loan amount: $6.4 Million to build a warehouse, production facility, and greenhouse.
Documents Required for a REAL ESTATE LOAN
The best strategy to follow before you apply for these loans is to be prepared. The more readily available your documentation is, the faster you’ll move through the process.
The following is a checklist of the most commonly collected documents. It can be very helpful to work with your accountant or tax preparer to gather some of the financial documentation.
Upwise marketplace requires the previous 2 years of business and 1 year of your personal income tax returns.
Also known as an “Income Statement,” a Profit and Loss Statement measures a company's financial performance over a specific period of time. This statement includes all revenue and expenses over a given period.
We require at least 6 months of your business bank statements. If showing more gives us a better picture on how your business performs, feel free to send us a full year of statements. You may have more than one business bank account, so please make sure to include these statements for each account.
These can include entity and location documents such as business licenses, Articles of Incorporation, commercial leases, or franchise agreements.
To ensure all of your information is correct on the contracts, we require a clear copy of you DL & VC to verify this information.
This statement provides an overall financial snapshot of your small business. As an equation, it looks like: Assets = Liabilities + Equity. The two sides of the equation must balance out to equal each other.
Most banks require some type of collateral. For Upwise, collateral required depends on the Term loan size. Business term loans from traditional banks and certain online lenders will be the hardest term loan products to qualify for.
Getting a traditional business term loan isn’t easy if you’ve got a low credit score or no collateral to secure that cash with. In fact, collateral might be a requirement for a term loan—depending on the rest of your business’s financials—and you risk losing that collateral if you can’t repay your loan. And while many of these products might not require a specific piece of collateral but, instead, put a “blanket lien” across all your business assets, so the same risk still applies.
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