Hard Money Lenders Save Apartment Complex From Bankruptcy

Share Article

With the project substantially completed, a developer of a 22-unit apartment complex in California needed immediate influx of additional working capital. Avatar Financial Group (http://www.avatarfinancial.com) provided a timely hard money loan to complete the building and bridge the gap between completion and sales of the units.

Loan: $3,500,000 - Project: 22-unit apartment building - LTV: 64%

One of the most difficult tasks in the construction industry is predicting the ‘snags’ that might increase the budget or prolong development. A few such snags put a 22-unit apartment building construction project in California over budget and behind schedule. The construction loan, as well as personal funds contributed by developer, was depleted.

With the project approximately 95% complete, contractors had stopped work. Although he had substantial equity in the project, the developer was unable to obtain bank funding and was about to lose the entire project for lack of the last leg of operating capital. An alternative funding source, able to provide creative financing, was needed to see the project through to completion.

Avatar Financial Group developed a funding package of $3.5 million dollars. Avatar paid off the construction lender and, by paying contractors, cleared the contractor liens from the property as well. The balance of $200,000 provided the operating capital needed to complete the project.

By building an interest reserve into the loan, Avatar’s package provided affordable monthly payments with an accrual of the additional interest due, along with a one-year balloon payment. This enabled the developer to achieve a monthly positive cash flow during the initial rental phase. The project is healthy again and provides much needed housing to the community.

Companies like Avatar Financial Group are known as hard money lenders. Hard money lenders fund where traditional banks and mortgage companies fear to tread. Used for commercial purposes, hard money loans are collateralized by the borrower’s equity in existing real estate. The proceeds of the loan can be used for any commercial purposes. Even private residences can be collateralized to purchase a business in some instances.

While hard money loans cost more than traditional mortgages – ranging from 12 – 20+% and 4 – 15+pts – they can be lifesavers for developers, rehabbers, business owners, and commercial property owners. Basic personal and corporate financial requirements are far less stringent than traditional banks; credit scores are less important than cash flow on the project and the financial viability of the project and the borrower. Hard money provides foreign nationals' access to US based real estate opportunities which would otherwise be unobtainable. Speed is also a great advantage of hard money loans: Avatar has a documented ready-to-fund timeframe of two weeks or less.

Based in Seattle, WA, Avatar Financial Group has funded more than $50,000,000 in commercial and residential real estate bridge loans in the past months. Information about the company and the projects they fund can be found at http://www.avatarfinancial.com or by calling the company at 888-886-0097.

# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Gillian Muessig
Visit website