Loan requests that in actuality need equity capital, not debt capital. Hands down. These come in three varieties
1. No equity base……..Despite the popularity of “no money down” and “100% financing”, almost all successful commercial real estate investments have equity of 25% – 50%. The numbers just don’t work with all debt, i.e., negative cash flow, high foreclosure risk, no reserves, etc.
2. Deals where the risk is very high and or the return is very uncertain. It takes a equity like return to counter balance the risk and uncertainty of the deal.
3. The sponsor lacks capital, experience and or expertise. He’s not going to be able to fund the deal with debt or debt only, he’ll need to give up equity and control to new capital.
To make matters worse these types of deals are marketed in a way that insures that the maximum time is wasted with the least likely chance for success
1. The broker bringing us the “deal” is fourth in a broker daisy chain
2. The “investor / lender package” consists of the listing broker’s promotional brochure
3. The financial projections, if any, have absolutely no realistic basis.
Want to increase your income? Start by working on DOABLE deals.