7 Tips to Improve Your Personal Finances (Before We Talk About Commercial Real Estate Lending)

09/05/19 • 15 min

Commercial Real Estate Investing From A-Z

One of the most asked for podcasts has been on the financing side of real estate investing: do we need to be employed in order to get a commercial real estate loan? Does our credit score matter? How long are these loans for? Are the interest rates the same as residential loan rates? What does the downpayment look like? What are the risks, loan options, etc? We will have a series of interviews coming up with commercial lenders to discuss the financing side of things in order to clarify some of these questions for you. Before that, I thought it would be appropriate to discuss personal finances first, in order to make sure we are all starting this journey together on the right foot.

You can read this podcast and get all the links we discussed here: https://montecarlorei.com/8-tips-to-improve-your-personal-finances/
Top 8 Tips for Improving Your Personal Finances

If you have credit card debt, and you have an interest rate that is anything higher than 0%, fear not, you are not alone as we just found out! Call your credit card company and ask for a 0% interest rate. They will likely say no, and then you just open a credit card with Citi Double Cash, and transfer this debt to that new card, you will get 0% interest for 1.5 yrs, that will give you enough time to pay off your existing debt without it growing every month.
On that same note, if you have, let’s say $5,000 in credit card debt, and you are paying 20% interest in that debt, and you have $10,000 in your savings account, you should pay off that debt with your savings, so your credit card balance stops increasing by $1,000 per year. After you pay off your credit card debt, another benefit of this “Citi Double Cash” card is that you get 2% cash back on all of your purchases.
If you have a student loan, make sure you are getting the lowest interest rate as possible. If you have multiple loans, make sure to consolidate all of them into one very low interest rate loan: https://studentloanhero.com/featured/5-banks-to-refinance-your-student-loans/
If you have a checking account that is paying you 1 penny per month, you can open an account with Wealthfront, they are a company that is paying the highest rat that I could find, 2.32% today and they offer up to $1M in FDIC insurance (unlike the other banks that offer a maximum of 250k FDIC insurance). I know someone that works there and they told me that they’re able to give $1M FDIC insurance because they break the balance down with different institutions, for example, they’ll put $250k with Bank of America, $250k with Wells Fargo, etc.
Watch out your expenses! If you buy Starbucks everyday, you might want to buy a coffee machine and do it at home, I never understood why people pay $3-5 for coffee every day when they can make coffee at home. It was only after I had a really good job after my 30’s, that I started buying myself lattes, and on the weekends only!

You can get in touch with me here: https://montecarlorei.com/contact-us/

--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

You can read this podcast and get all the links we discussed here: https://montecarlorei.com/8-tips-to-improve-your-personal-finances/
Top 8 Tips for Improving Your Personal Finances

If you have credit card debt, and you have an interest rate that is anything higher than 0%, fear not, you are not alone as we just found out! Call your credit card company and ask for a 0% interest rate. They will likely say no, and then you just open a credit card with Citi Double Cash, and transfer this debt to that new card, you will get 0% interest for 1.5 yrs, that will give you enough time to pay off your existing debt without it growing every month.
On that same note, if you have, let’s say $5,000 in credit card debt, and you are paying 20% interest in that debt, and you have $10,000 in your savings account, you should pay off that debt with your savings, so your credit card balance stops increasing by $1,000 per year. After you pay off your credit card debt, another benefit of this “Citi Double Cash” card is that you get 2% cash back on all of your purchases.
If you have a student loan, make sure you are getting the lowest interest rate as possible. If you have multiple loans, make sure to consolidate all of them into one very low interest rate loan: https://studentloanhero.com/featured/5-banks-to-refinance-your-student-loans/
If you have a checking account that is paying you 1 penny per month, you can open an account with Wealthfront, they are a company that is paying the highest rat that I could find, 2.32% today and they offer up to $1M in FDIC insurance (unlike the other banks that offer a maximum of 250k FDIC insurance). I know someone that works there and they told me that they’re able to give $1M FDIC insurance because they break the balance down with different institutions, for example, they’ll put $250k with Bank of America, $250k with Wells Fargo, etc.
Watch out your expenses! If you buy Starbucks everyday, you might want to buy a coffee machine and do it at home, I never understood why people pay $3-5 for coffee every day when they can make coffee at home. It was only after I had a really good job after my 30’s, that I started buying myself lattes, and on the weekends only!

You can get in touch with me here: https://montecarlorei.com/contact-us/

--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Previous Episode

What's The Future of Retail, How Should a Retail Investor Approach Their Investments in Today's World?

Today we are reviewing where is retail going, how should a retail investor think and approach their investments in today's world, what are tenants looking for in a retail center, and what are major items that national tenants and landlords want to see in their lease.
Read the full interview here: https://montecarlorei.com/where-is-retail-going-lease-negotiation-national-tenants/
Where do you think retail is going based on your experience?
I'm sure a lot of folks that have come on your podcast talked about the retail evolution, the apocalypse, and that retail is dying. And when you look at the history of retail, it has always evolved based on consumer demands and convenience. From a macro view, we are seeing a slowing in the development pipeline, slightly higher cap rates compared to other sectors, and I'd argue we're a little overbuilt in the United States when it comes to retail. However, there is a tremendous amount of product that is obsolete, a lot of C lass C malls and Class C shopping centers across the US need to be repurposed and rezoned. We're starting to see this happening now, I go back to this idea that Sears completely disrupted retail back when they came out with their catalog, and then, the next flavor of the month was "It's more convenient to go to the mall." And then in the 90's power centers just ballooned, you had these huge giant anchors, and they were fulfillment stores. Now you have online shopping, and we're seeing all of these things shift out.
How should a retail investor think and approach their investments in today's world?
I think that regardless of the asset, you have to take a longterm vision on real estate based on strong fundamentals. We can't control what the Fed is going to do tomorrow, we can't control what cap rates are, and where they're going to trend, so I don't want to spend a lot of time worrying about those things. Commercial real estate is so cyclical, and it's always in either one of four phases. At the end of the day you want to find well located assets with really strong demographics, one, three and five mile radius, understand how many households, what's the average household income, what's the population, how's it growing, how's the job market? Just going back to the basics. And then we want to look for attractive opportunities. When you're in a rising cap rate market, you have to find ways to grow your NOI. The only way to do that is to really dig into the market dynamics and understand where the value is. There’s an art to underwriting shopping centers, it’s not the broker's job because they will say that you can just lease up this vacancy in three to six months, and this is the market rate they’re going to pay. There are so many more nuances to getting leases done, you have to find ways to lease and attract the right tenants.
As you work with a lot of tenants, what are they looking for in a retail center nowadays?
It has always been about market share, finding sales, and finding the desirable tenant mix. Retailers are getting so sophisticated when it comes to understanding what the market analytics, trends, and where they need to be in the marketplace. Demographics play a huge role in this: understanding traffic counts, traffic patterns, visibility, the amount of parking that they will need, and they want to partner with well-respected landlords that are going to take care of the asset.
Jason Ricks
www.concordiarealty.com
[email protected]
Blog post: http://www.concordiarealty.com/resources/crc020-online-sales-vs-brick-and-mortar-retail/

--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Next Episode

How to Apply for a Commercial Loan & How to Find the Best Lenders

Today we're discussing commercial loans: how are they different from residential loans, how to find the best lenders, how to apply to these loans and present them to the lender, and what are some of the terms that we get to choose on these loans.
Read the full interview here: https://montecarlorei.com/how-to-apply-for-a-commercial-loan-how-to-find-the-best-lenders/

How should a new investor present a deal to a lender in order to get approved?
Run your credit report up front, accumulate the last three years of your tax returns, put together a personal financial statement, and basically be candid with the lender. If you have anything that you think is going to look badly, like a past bankruptcy or past foreclosure, just explain it upfront. What are some different loan terms that we as investors would be able to choose from and decide on for commercial properties?
Basically you can choose how much leverage you want. It depends on what the lender's going to offer, but you can get leverage anywhere from 60 to 75 or 80%, we even do 85% of some stuff. Where you have the most flexibility, as a borrower, it's the prepayment. The longer you do your prepayment out, typically the lower your rate is going to be. So whether you do a three year, five year, or ten year prepay, that's really where you have the most flexibility when you're speaking to the lender.
Can these loans be transferred to a new buyer if we decide to sell the property before that three, five or 10 year prepay?
With most lenders, yes. with some lenders no. In today's market, most lenders would transfer, and there's usually a small transfer fee.
How do you recommend people going about finding really good lenders? I see a lot of people posting hard money loans and they really sound like a scam because their rates are so low. How can people make sure that they are really dealing with a legit lender and also a very good one?
There's a lot of scammers in this business, so I'm just being very careful. I would say to talk to other investors, see are they used for lenders and or bonkers and I would really do it that way. I wouldn't just, you, you know, if you're a new investor, just going in on your own, talk to other investors and network, you know, go to the networking groups. It pays to network with other investors. You know, I mean this is an information business or whatever one's one.
A lot of people say that you need to find a local lender where the property is based out of. Is that true?
No, that’s false, I don’t buy that for a minute. For example, the deal that I shared with you previously that I did in Ohio, it was a retail deal in Cleveland and we got great deal for them, 4.35%, 10 year term. 75% loan to value, with a California lender 2000 miles away. I think there might be a few times where a local lender makes sense, but off of the top of my head, I can’t think of a circumstance.
Were you there back in 2008 doing loans? Do you want to share a little bit about what was going on and how we should be prepared for a potential recession coming up?
Yes, I was. What was going on? Not a great deal. Nothing really. I was actually working at Marcus and Millichap back then and not much was trading. How do you prepare for that? That’s a good point. A lot of people believe, particularly in some of the biggest cities, particularly in multifamily, they think it’s a little frothy right now. The cap rates are sub five. I think looking at tertiary markets, secondary markets, and value add is kind of a protection for that.
Paul Castagna
(561) 306-6852
bedfordlending.com