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Investment Properties are those whose income stream is derived from leasing space to others. These are typically apartments, mixed-use, office buildings, shopping centers and parking garages.
Investment properties are the easiest to evaluate and structure. The first and most important element is to determine the cash flow, or net operating income, of the property. A profit and loss statement for at least three years and year-to-date within the last month are essential. With the net operating income in hand, our experienced consultants can calculate the appraised value of the property with trained accuracy.
This evaluation is usually straightforward and swift. However, some investment projects may involve significant renovation or new construction and rely on future rents. The credibility of those forecasted rents is tested based on current data, and a more subjective evaluation is made of the configuration of the future markets, including the impact of competitive products.
Investment property loans can be as much a 90% of the value. Most, however, are 80% or less. To bridge this gap between debt and loan amount, secondary financing is needed, either in the form of equity or debt.
The Tag-Team Approach to Financing
Many primary debt providers limit or prohibit the use of another lien on the property, which would require any financing to be unsecured by the property. Most lenders will not accept such conditions. Fortunately, the Equity Companies recognized this market condition several years ago and developed a special product known as Partners-N-Profits™.
Structured so only the debt provider has a lien on the property, this program provides capital for the project in conjunction with the primary financing that is unsecured by the real estate. This enables the entrepreneur to qualify for debt programs and pricing otherwise not available. While more expensive than debt because of the greater risk, it is much less expensive or intrusive than venture capital.
The Loan That Invests in You.
Another product offered exclusively through the Equity Companies to address the special need of supplementary capital is the ShareholderLoan™. This product utilizes the equity the sponsor has in other projects or holdings to borrow the capital needed to purchase the subject property, in conjunction with primary debt.
The name of the product is derived from the most common method of investing the loan proceeds in the property – ownership of shares. Most investment properties are owned by privately held corporations because this form of ownership is mandated by the primary lender and affords a corporate shield from liability for the shareholders.
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HOW EQUINET WORKS
