My New Blog

Stated income loans have been popular for years. In commercial lending, the concept of "stated income" can be confusing, because there are different ways to calculate income. The traditional method of calculating income, and the one used by most banks, involves a detailed review of your tax filings, usually the last three years. The banks will use the income and expenses you have reported, historically, on the tax returns. Your other personal income and expenses will be thrown into the mix, as part of a "global cash flow" analysis.

The other method of calculating income for commercial properties is to use income and expenses from the income statement for the last couple of years.

So stated income for commercial is misleading - since there is more than one way to calculate income - in a way there is no such thing as a "stated" income loan for commercial loans, because there are zero lenders who don't utilize either one or the other method of income calculation.

So many lenders "claim" stated income but what they are doing is actually a "no tax return" type loan, however income is still calculated using however just historic income statements and rent roll. Usually lenders charge more for this.

Our favorite apartment lender now has a policy of not asking for tax returns, and they use only the income and expense statements for their analysis. They do not call it a "stated income" loan, and most importantly there is no surcharge, and their rates are as good as any other apartment lender I have found.

This is an enormous advantage for consumers; files typically fail for either having too many write offs on the schedule E, or for too many debts overall - global cash flow analysis failure.
Posted in:no tax filings and tagged: apartment loans
Posted by Chuck Green on January 24th, 2018 10:41 AM

Commercial Apartment Loans

Although rates have started to slowly climb back to historic norms, they are still overall very attractive. Most of our lenders are offering a five year rate, and some offer a seven year rate. We have only one lender now who offers a ten year fixed rate. This is reflective of industry concerns about rising rates; banks don’t want to hold your 4.00% rate for ten years when rates could be back at 6.00% by 2018.

It is important for consumers to look at more than just the rate. This is of course the first question every consumer wants to ask, but more seasoned investors will look more closely at the “terms of conversion” or how the rate adjusts after the five year period expires, which is typically index plus margin = new rate.

Even more important are the prepayment terms. Many lenders now have a prepayment penalty and a yield guarantee, or a defeasance clause. Your plan is to buy and hold? Terrific, but life is unpredictable and a statistically high number of commercial loans need to sell or refinance in the first five years.

What about points? Most commercial loans require at least one point. Most of our lenders provide a commercial loan at par (no points) which allows room therefore for the broker to charge a point (more or less) and still have the loan be competitive.

What about wear and tear on the buyer / borrower? We just closed a large commercial loan in southern California for a 25 unit property, and we were competing against the Freddie Mac program. (This is a great program by the way, but not when you are in a hurry…). The Freddie Mac program had a better rate than we did, but not by much.

The Freddie program not only asked for a huge fee in advance, but required an engineering study (along with the appraisal) – many thousands of dollars to hire an engineer, and had other difficult hurdles, including requiring an insurance policy with a terrorism rider. After a while, the client gave up and focused on our loan, which had a great rate, was non-recourse, and the client paid less than one point, and we finished ahead of schedule.

So not only did we close the loan ahead of schedule, but we also saved the client from losing his earnest money deposit, which he would have lost with the Freddie Mac loan. Of course, he not only would have lost the deposit – he would have lost the property as well.

Posted in:commercial and tagged: apartment loans
Posted by Chuck Green on August 4th, 2017 12:18 PM
Our company BACF Inc has been fortunate enough this year to close on two large high rise projects, roughly 60 high end condos and town-homes to enter the tight local Real Estate Market as badly needed inventory for anxious buyers and Realtors.

Both projects involved private financing, combined financing of over 21 million dollars to complete the well designed and attractive projects in Santa Clara County.

We have some other projects pending close that involve residential home development and infill projects, in the SF Bay Area, Sacramento and even Riverside County. Involving potentially hundreds of new homes, these projects will do their part to help the country recover and grow.
Posted in:high rise projects and tagged: Construction
Posted by Chuck Green on October 29th, 2015 2:39 PM
Recently closed a commercial loan for 19 different single family homes in Contra Costa County; this one loan holds all 19 properties at a low rate, 4.75%, and provided cash out to client, so that he could continue to invest. This property was financed by commercial loan, which are exempt from FNMA limits for number of loans in a portfolio. Plus this type of loan can be made to accommodate the sale of properties within the portfolio, and the purchase of new property to add into the portfolio.
Posted in:commercial lending and tagged: Investor loans
Posted by Chuck Green on October 29th, 2015 2:30 PM
We recently closed a purchase for an apartment in the Stockton area, and this was complicated greatly by the fact that the buyer is a foreign national. The apartment has 51 units, and was in reasonable condition. We had to use private financing of course, as the banks will not go anywhere near a foreign national, because someone from a foreign country makes a poor guarantor, having most of their assets out of the US. The purchase price was $1,875,000, and we provided a $1,000,000 loan on the subject, plus another $650,000 in financing against six non-owner single family units in several other counties. This allowed the client to acquire the subject with minimal cash, roughly $300,000 or so. This was an exceptionally complex purchase transaction, involving several contacts among two countries, two title companies, our lender, and seven properties spread among four different counties. I am very happy to have it done.
Posted in:General
Posted by Chuck Green on March 27th, 2014 2:46 PM
Recently, one of our hedge fund partners has stepped forward with an appetite for medium to large apartment (multi-family) loans. They prefer loan sizes in excess of $1,000,000 but they can lend at up to 78% LTV, and are less concerned about debt service coverage. They offer rates generally in the low fives to mid sixes (depending upon location and property condition). Amazingly, these folks can close an apartment loan in less than ten days, and require minimal documentation. Plan on paying 2 points. Foreign Borrowers are usually accepted, even with no US tax returns, and no US credit. Overseas funds are fine if they can be verified. Our rep claims that this fund closed a commercial apartment loan in less than 24 hours in 2013.
Posted in:General
Posted by Chuck Green on February 13th, 2014 9:23 AM

One of my favorite new commercial products is designed for all of those investors out there who have been buying and buying properties ever since the 2008 mortgage market collapse.

It is a simple concept really. One big commercial loan is created, and it pays off all of your existing loans – even hard money – on all or at least most of your properties. Each of your properties then becomes collateral for the new loan. Since the rates for this loan can be in the fives, you usually end up well ahead.

If you have a property already financed at a low rate, then just leave it alone. It is your choice which properties to finance with this loan, and which to leave out.

The loan requires full documentation, personal financials, leases, tax filings, appraisals for every property, and possible safety inspections as well.

Once the new commercial loan is in place, if you then later sell a property that is encumbered by the loan, the lender will do a partial release so you can complete the sale. If you find a new property then just let us know and we can expand the existing loan to help you bring this property into the existing portfolio.

We have one client closed, and another almost closed – in each case the savings are in the thousands of dollars every month.

It is a very exciting product, and most folks have never heard of it.

Posted in:General
Posted by Chuck Green on January 28th, 2014 11:44 AM

Construction loans in our current tight financial market are very challenging. Most banks won’t touch them. Some banks may claim to offer construction loans, but with terms so severe and demanding that most clients quickly realize that it’s not worth the effort. I have heard horror stories from clients who came to work with our company, after first trying to work with local banks such as First Republic, Boston Private, and Wells Fargo. Typically, these banks require either large depository relationships, or large reserve accounts, that are so ridiculously excessive that it almost makes the loan pointless; as one client said, “if I had all that money for reserves I would never need the loan in the first place”.

One of the most difficult aspects of construction loans these days is the subset of “construction completion” loans; these are loans which complete a project that has been started already. Most banks will automatically pass on any project that has already started construction, and only a couple of banks that I know of will consider a project that has already broken ground.

Their reason for this attitude may not have anything to do with you, or the strength of your project. A project that has been started before the loan is created is considered to be a "broken priority" situation, and this refers to potential risk from mechanics liens.

This may seem like a problem with the lenders, but actually it is not. The problem rests with the title industry. Title companies of course provide title insurance, and banks and even most private lenders will always want a full policy of title insurance.

Once a project has broken ground, it becomes apparent to title companies (who require an inspection) that work has begun, but it is of course impossible to tell how much work has been done, and to verify what has been started, and to identify which company or subcontractor has or has not been on site, and has engaged in any labor that could result in activities that require compensation.

So here is the complication for a project that has started work already. You can keep immaculate lists of all work on the property, you can have all of the subcontractors sign unconditional releases, and you can ask the contractor for indemnity, but when it comes time for a title company to issue a title policy there is no way to “prove” that your list is complete, and there will always be (to a title company) some risk of some unknown subcontractor filing a mechanic’s lien against the property.

The priority given to mechanic’s liens create a high level of risk to all banks and construction lenders, and to title insurance companies. a very common “workaround” that a title company will offer will be to add an “exception” within the policy that excludes mechanics lien risk. This is a solution only for the title company – no lender that I have ever worked with will accept mechanics lien exclusion.

A very common method to resolve this issue is a costly and painful “shutdown” of the project, and a filing and recording of a notice of work stoppage on the project, and then waiting typically six months for the risk of mechanics liens to go away. Once mechanics lien risk has been managed, then a full title policy can be issued, and work can be resumed until completion.

Posted in:General
Posted by Chuck Green on November 1st, 2013 10:07 AM

New products available as of June 2013.

Transitional / Bridge Product – non hard money

This is not a bank product – banks do not have this program. The loan far less expensive than private or hard money and it is perfect for investors who desire a reasonable rate and cost structure during a period of transition, or for investors who wish to avoid the banking industry’s need for personal guarantors. The most powerful aspect of this program is that properties can receive funds to help with rehab costs and construction costs, and – once completed and stabilized - this loan will (usually) automatically transition into permanent commercial financing programs with competitive rates without added fees, appraisals, and title costs. Available in entire USA.  Eligible asset classes include multifamily and apartments, office, retail, hotel and hospitality, student housing, some industrial.

This is a very powerful product for investors with property that does not meet the strict guidelines of the banks and Fannie Mae for issues that include:

  • Property condition, including construction completion
  • Stability or seasoning of income and debt coverage
  • Property in transition or Re-configuration (example old retail building now apartment)

Rates and cost can vary, depending upon class of property, strength of property performance, and strength of sponsor; however rates can be as low as 4% and generally are not higher than 10%. The fee structure is usually 2 points total (1 lender 1 broker), with a lender exit fee of 1 point that is waived if the client converts to permanent financing with this lender.


  • Purchase or refi (purchase out of foreclosure OK)
  • 1-3 year term – interest only payments, flexible amortization term
  • Up to 80% loan to future value
  • Up to 80% LTC (loan as a percentage of total cost)
  • Typically non-recourse


  • $2,500,000 minimum loan size
  • Cash flowing properties only – need current and future debt coverage ratios
  • Good sponsorship including strong resume and decent liquidity
  • Full financials and documentation
  • First liens only


Multi-family apartment loans with long term financing available, below market pricing:

This is not a bank product – banks do not have this program – funding via insurance, pension or hedge fund sources, via a third party underwriting source. The loan is not inexpensive, but it is perfect for investors who desire a long term low rate that is immune from market fluctuation, or investors who wish to avoid the banking industry’s need for personal guarantors. The most powerful aspect of this program is that properties can be recently stabilized and do not require the 6-12 months of seasoned stability required by FNMA and the banks. Available in entire USA.

Rate is approximately 4.25% fixed for ten years (rates subject to change of course)


·         Cash out OK to 75% (in general – depends upon property condition and performance)

·         5,4,3,2,1 prepay

·         30 year amortization

·         Non-recourse loan (no personal guarantee usually needed)

·         Fannie Mae requirement for stability is not recognized


·         Full financials

·         Loan sizes $500,000 and up

·         Signed LOI

·         $5950 deposit at time of LOI execution

·         1.25 – 2.25 points depending on loan size

Posted in:General
Posted by Chuck Green on June 20th, 2013 1:19 PM

Today it dawned on me that the commercial lending market is finally on the move, and improving.

For the last four years the market has been controlled by the mid size to bigger banks, who were only “in theory” lending into the commercial market, but in reality fighting intensely over the same few assets that were performing strongly, at a low LTV, with perfection in both their personal (sponsor) financials, and tenant mix, tenant strength, vacancy, and debt coverage and LTV.

The market has been difficult for so long that I barely remember what a normal market is like. Good files have been turned down routinely over the last few years for all sorts of reasons; the most common reasons being:

· Strength of sponsor (If the building is performing, why is this so critical?)

· Stability (banks want 6 or more months of tenant stability – why?)

· LTV (current appraisal process is flawed badly)

· Cash out (If the building will perform at this loan size, why is this so critical?)

· Foreign National (If the building provides good collateral, where is the risk?)

Recently we have started working with some new commercial mortgage funds. These are massive investors that are entering the commercial lending scene in a big way; with a great deal more of a common sense approach that seen by any of the banks.

We now have established good relationships with five of these funds, and they have aggressive rates and manageable fees. They are not going after the hard money / private money commercial business exactly, but have positioned themselves perfectly so as to be able to compete with the banks, offer some still good options for loans that do not quite meet bank guidelines, and can still manage some decent pricing for commercial loans that are even somewhat “less than perfect” that used to be (over the last several years) forced to consider hard money loan options.

Assets in poor condition, with high vacancy, deferred maintenance, poor debt service coverage, and very poor sponsors will still need to look at hard money and private money……but the field is expanding and we have some very good options now that were not available this time last year.

If you have a commercial loan that was accepted into a bank, reviewed, and yet somehow fell short of their lofty expectations, then we need to talk. We are doing multifamily commercial loans all over the United States.

Posted in:General
Posted by Chuck Green on May 7th, 2013 3:06 PM