The permanent lenders will underwrite the cash flow of your property, and in the case of life insurance companies, can provide you with non-recourse financing. Interest rates vary dependent upon the term of the loan requested. Currently, we have lenders providing 6.25 percent interest rates for three-year loan terms, 6.5 percent for five years, 6.75 for seven years and 7.25 percent for 10-year loans. These are fixed rates with the majority having either a prepayment penalty or a yield-maintenance requirement, as is the case for the life insurance industry. There are some lenders that will provide long-term fixed-rate financing without prepayment penalties.
Face to Face
Identify the best potential construction lenders in your market, find the highest ranking bank officer in the real estate lending group you can meet with and arrange a meeting to present your transaction. A loan transaction, properly packaged with the required documentation for the lender, including site and aerial photographs and a good narrative description of your transaction will allow you the best opportunity to make a good first impression. Although the Internet is good for e-mail and sending additional information to your lender, it should not be the medium of choice for submitting your loan.
Remember lenders are people who operate in a very stressful environment. Everything you can do to provide a well-documented transaction will make life easier for the lender and, hopefully, faster for you to receive an approval for your new construction loan.
Richard Hill Adams is chairman & CEO of American Realty Capital Advisors Inc., a Laguna Hills, Calif., company providing financing for land acquisition, debt and equity loans and construction loans for self-storage and mixed-use projects. To reach him, call 949.455.4100; visit www.arca-money.com.