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The Hottest Real Estate Market in 2022 Is in Florida

The years 2021 and 2022 saw record growth for the real estate market in Florida. There are calm suburbs and eclectic neighborhoods for every taste, making Florida a kind of buyer’s paradise in terms of wishlist items. How can real estate businesses take advantage of smart opportunities?

Why Florida Is Such a Hot Real Estate Market

The growing appeal of urban centers such as Miami, Orlando and Tampa Bay is one of the reasons Florida housing markets tend to be hot. These cities have it all: gorgeous vistas, amazing nightlife, strong economies and luxurious homes.

Another advantage of living in Florida is the incredible weather. Many people simply dream of living in this state of eternal summer, so the demand for housing stays traditionally high, just like in many California cities.

Why 2021 and 2022 Saw Incredible Market Growth

On one hand, needing to work from home meant that having a comfortable, safe and attractive house was an important investment, both for financial reasons and personal happiness. At the same time, interest rates for loans were exceptionally low for quite a while, making it even more enticing to purchase a dream home for the family.

Many people only see positives, not negatives, when it comes to buying a home in Miami or Miami Beach. Housing can costly here, but knowing that the price is likely to increase significantly in value in 10 or 20 years is a powerful incentive to invest without fear. What better time to enjoy the calming relaxation of sun, sand and refreshing breezes?

How To Take Advantage of Real Estate Opportunities

Real estate businesses, investment property owners and house flippers are in the middle of all of these potential profits. The situation is like farmers having an exceptionally bountiful harvest just when the prices for produce are at an all-time high. Entrepreneurs with the necessary resources stand to make incredible profits.

The key is having sufficient financing to cover purchase costs and needed improvements. Normally, getting ahold of such significant capital for today’s elevated housing prices would require many years or decades in business. Fortunately, with asset-based lending, newcomers can get started more easily than ever.

Why Bridge Loans Are Popular in the Florida Housing Market

Bridge loans are a type of asset-based lending. They provide short-term funding based on the value of the real estate you plan on buying. The property acts as collateral. This offers many benefits in Florida:

  • Lower credit score requirements
  • Faster approval
  • More flexibility for remodeling and improvements
  • Simpler documentation requirements
  • Wider range of available properties

It’s relatively easy to obtain approximately 75% of the cost of real estate with bridge financing, drastically reducing the capital your business needs to invest.

How The Future Is Shaping Up for Real Estate in Florida

Some analysts expect the supply of homes to increase gradually in the coming years. This may lead to partially lower sale prices and supply and demand equalize somewhat. That said, given the naturally strong demand for housing in many parts of Florida, especially around Miami and Orlando, a seller’s market is still expected for a long time.

It’s anyone’s guess how the market for investment properties such as luxury apartments in downtown areas may perform. On one hand, many people are retiring and looking for their dream home on the Florida coast. On the other hand, as up-and-coming business professionals return to work at the office, the demand for apartments with a lower commute may surge.

What Real Estate Market Changes Mean for House Flippers

Real estate market changes aren’t generally an obstacle for established real estate businesses. Instead, they provide an opportunity to increase profits.

In a seller’s market, savvy entrepreneurs can take advantage of higher prices and increased demand to make top dollar on real estate sales. When prices for homes drop, it becomes easier to find promising properties in need of improvements.

Whatever the market conditions, having access to flexible, fast and abundant capital is vital. At HML Solutions, we can help your business get approved quickly for a bridge loan. Receive the needed funds in 7–14 days with interest-only amortization, APR as low as 6.99% and loan amounts ranging from $100,000 to $50,000,000.

Contact us right away to learn more about asset-based financing for real estate.

Leveraged Buyouts: Using Bridge Loans to Get the Upper Hand

In modern business, it’s often the entrepreneur who has a better understanding of financing that comes out ahead. There are many types of funding available for business transactions, from equipment purchases to business acquisitions. Bridge loans are a common tool for buying business properties. How good are they for this kind of goal?

Situations When Buyouts Make Sense

There’s nothing predatory about buying out a partner or competitor. Often, this action just makes good financial sense. There are many situations when leveraged buyouts are logical.

When a small business wants to expand into a new market, it has several options for reaching this goal. It could locate real estate, go through the process of hiring employees, build relationships with local clients and gradually build up its profits. Unfortunately, this method is time-consuming and risky, especially when there are several competitors in the area.

A leveraged buyout allows businesses to skip most of these steps. Instead of building a second location from the ground up, it’s easier to simply purchase the assets of a competitor and take advantage of its local reputation and business savvy.

Buyouts also make sense when a company is at the peak of its operating potential permitted by real estate. One option would be to invest in real estate expansion, but it may be more cost-effective simply to purchase another company’s assets. Combining personnel, real estate and equipment in this way can expand production capabilities and profits significantly and smoothly.

Bridge Loans for Leveraged Buyouts

Generally speaking, buyouts always use bridge loans for financing, at least at the beginning. This is because a bridge loan allows purchases to obtain strong outside capital with minimal risks to personal assets.

With a leveraged buyout, the assets and equity of the company being purchased can be considered as collateral to back the loan. This provides excellent funding for business acquisition, and it’s not necessary to have a huge bank account to make the transaction happen.

It’s important to note that bridge loans are short-term financing options. Along with higher interest rates come many benefits for business needs. These advantages are why so many small businesses and corporations alike turn to asset-based lending for large company purchases.

The Advantages of Bridge Loans for Leveraged Buyouts

The first benefit of bridge loans for buyouts is speed. It’s possible to get approved for financing in a period of a few weeks. Acquisitions can be completed quickly, which is usually a plus both for the buyer and the seller. The sooner the transition happens, the sooner businesses can focus on generating increased profits.

Another advantage is flexibility. Conventional purchases need to go through an extensive vetting process. Banks want to know every detail about how loans are used, carefully going over the finances of the applicant’s company and the financial records of the acquired business. This makes negotiations difficult and puts the final decision in the hands of a loan board that doesn’t understand the goals of both parties.

Bridge loans don’t have those requirements. Establishing the as-is value and equity of business assets is important, but the credit rating and other financial conditions of applying businesses aren’t. Even small businesses with imperfect credit or new entrepreneurs can qualify for leveraged buyouts of franchise locations and other companies.

The Bridge Loan Process

Asset-based lending revolves are the loan-to-value ratio. This ratio determines the total funding provided for the as-is value of the assets used for collateral. In the case of buyouts, this ratio isn’t always based on the company’s purchase price. It can look at the company’s equity, inventory, equipment, bank accounts and other assets, as well as any collateral the purchasing business wants to utilize.

LTV ratios vary, sometimes from 70% to 90% for leveraged buyouts. That limits the size of the down payment and investment needed for business owners. The funds obtained can also be used for necessary improvements and upgrades.

Successful Balance Transfers

A common way our customers use asset-based loans is to accelerate closing for buyouts. Business owners simultaneously apply for traditional funding, which takes longer for approval. Once the term loan goes through, the balance is transferred. At HML Solutions, we have a lot of experience with business acquisitions in Florida. Contact our offices to get the funding you need.

When to Use Hard Money Loans for Property Purchases

Purchasing real estate is usually a big-ticket item. The majority of people do not have sufficient funds on hand to purchase a property outright. They must rely on some form of financing.

Different forms of real estate financing can be considered, depending upon the reason for property purchase and the time from envisioned for ownership. If your time frame is short, a hard money loan may be an ideal choice for consideration.

What is a Hard Money Loan?

Hard money loans, also known as bridge loans, are short-term forms of funding typically utilized in the real estate arena. Unlike traditional mortgages, which often carry terms of fifteen to thirty years, a hard money loan typically is paid back within six months to two years, or even less. 

When being considered for a hard money loan, the value of the property, which secures the loan, is more important than the asset base and creditworthiness of the customer. This enables those with less than stellar credit ratings to access working capital.

Unlike mortgages, which are typically underwritten by banks, a hard money loan is usually obtained from a private lender or financial agency. Similarly to mortgages, they can be structured in different ways. Some are even structured as interest-only loans followed by a large-balloon payment to retire the debt.

Pros and Cons of Hard Money Loans

As in any form of financing, the pros and cons need to be considered before entering into an agreement. Here are a few of the positive aspects of hard money loans:

  • Impeccable credit history is not needed
  • Money becomes available quickly after approval
  • Can be granted even if other forms of credit have been denied

On the opposite side of the coin, there may be a few concerns to think about when considering a hard money loan. The interest charged by the lender is likely to be higher than in other types of loans, in part to compensate for the possible low credit score of the borrower. There may be fees that need to be paid upfront. Prepayment penalties may be part of the agreement. And finally, a large down payment on the property may be required by the lender.

Typical Situations in which Hard Money Loans Make Sense

Hard money loans for property financing are commonly considered in the following situations: Fix-and-flip projects, property purchasing when borrower credit rating is a concern, and certain forclosure-prone situations.

  • Fix-and-Flip Businesses. Hard money loans can be perfect for the fix-and-flip business person. In these situations, the property buyer only wants to own the real estate for a short time until renovations are completed. Once finished up, the property will want to be sold for a handsome profit. Many fix-and-flippers are engaged with multiple projects at the same time, requiring the need of a substantial amount of working capital.
  • Credit Concerns. There are many reasons why a traditional bank or credit union may deny individuals a loan. Some examples might include a recent divorce that affected the credit score of the loan applicant, or the inability to provide adequate documentation for ta borrower’s income and assets. Hard money loans can be utilized in these situations.
  • Special Foreclosure Situations. Occasionally, homeowners have substantial equity built up in their homes but are at risk of foreclosure. A hard money loan might be obtained if the lender can be assured that the homeowner will be able to sell the house, pay off the existing mortgage, and still make a profit from the sale.

Connect with HML Solutions

Here at HML Solutions, we are an energetic team of business professionals, investors, and successful entrepreneurs working to provide project funding for businesses, contractors, and individuals with immediate financial needs. We lead the field in bridge and hard money loan solutions for real estate.

If you already have a property or two in mind, we can discuss the particulars and start the short application process today. Your funding may be available in as little as five days.

Likewise, if you are looking to establish a win-win relationship with us, say for the continued financing of fix-and-flip properties – even if you don’t have a particular property in your sights right now – we welcome your call. 

Foreclosure Properties in Florida: Using Hard Money Loans

When homeowners can’t pay their mortgages, the bank takes possession of the properties per the loan agreement. However, owning property isn’t much use to financial institutions. Rather than holding onto real estate, banks sell the property to recoup their losses. These sales are the perfect opportunities for property investors to snatch up real estate at a discount.

How do you take advantage of these opportunities? The most important steps are understanding the foreclosed house sales process and having the appropriate funding.

Why Purchase a Foreclosed Home?

Foreclosed houses aren’t cheap by any means, but you can get more bang for your buck. You may even get a property you couldn’t otherwise afford. As an investor, that means a big chunk of change when you eventually sell.

Buying foreclosed properties is also much quicker than a traditional sale. When you take the traditional route, you have to look at the listed properties and make a bid. If the seller doesn’t agree to the offer, you have to negotiate, a process that can take weeks. Finally, you have to decide on a closing date, which can get delayed for a variety of reasons. In the end, you never really know when you’ll take possession of your new property.

In contrast, houses in foreclosure have a very streamlined buying process: auctions. If you attend an auction, you have a limited docket of properties to choose from, so you have to quickly decide whether or not to bid. Additionally, once you win, you immediately take possession of the property. Investors looking for quick turnaround times can really benefit from this process.

What Is the Process for Buying Foreclosed Properties?

One of the most important steps in attending a foreclosure auction is having cash. In fact, most banks require attendees to provide proof that they can pay before they’re even allowed in the door. Why is this necessary? Bid winners must immediately pay in full, and if they don’t have the funds, the bank has to arrange another auction and delay payment for that particular property.

Once the auction begins, anyone can bid. If the auction’s in person, individuals raise their paddles to signal their bid, or they can vocalize a higher price to beat out others. Whoever makes the highest bid gets the property.

Why Use Hard Money Loans To Buy Foreclosure Properties?

Hard money loans don’t require the same amount of paperwork as a mortgage, which means they’re approved more quickly. Additionally, lenders are more interested in property equity rather than credit history. As a result, people with less-than-ideal history can still qualify. This arrangement works out well for investors who may have large amounts of debt due to other projects but will be able to pay off their loans when the time comes.

Additionally, most hard money lenders don’t impose prepayment penalties. Since investors repay when they sell, lenders accept prepayments to attract more clients.

What Should You Know Before Applying for a Hard Money Loan?

Of course, every kind of financing has its downsides. Before you apply for a hard money loan, consider the following:

  • The interest rates may be higher than traditional mortgages.
  • The interest rates may be variable instead of fixed.
  • The loan terms are usually 12 to 24 months, which is much shorter than a mortgage.

Of course, these cons may be worth the many benefits. For example, the interest rate may be higher to account for the greater risk, but most hard money loans don’t require monthly repayment of the principle. Instead, you make interest-only payments until it’s time for the payoff.

Also, the short loan term isn’t necessarily a bad thing. If you plan to flip a property, you want to sell it as soon as possible, usually within a year.

How Can You Qualify for a Hard Money Loan?

While you don’t need amazing credit to qualify for a hard money loan, you do need some cash of your own. Most lenders want a down payment of 20% before they agree to fund a project.

Who Can You Turn to For a Hard Money Financing?

HML Solutions is proud to offer hard money loans to property investors. If you need fast cash, give us a call today. Our financial professionals can review your options and walk you through the application process.

Securing Construction Financing for Your Next Project in Miami

At HML Solutions, we know the importance of construction financing to ensure your development projects do not experience capital hiccups. Many contractors and construction companies believe securing financing is a challenging process, which is correct in specific situations and with certain loan programs. However, the application and approval process can be a breeze with the right lender.

Companies looking for construction loans often make the mistake of seeking conventional loans from traditional institutions. A regular bank must abide by specific regulations that make the loan process more time-consuming and tiresome.

A private lender specializing in construction or hard money loans has more freedom in the application and approval process, meaning it can speed up the process and get your projects funded quickly.

Many people fret over the higher interest rates private lenders charge for short-term loans, but with construction loans, the difference in rates is likely minimal in the long term. Still, because of the rates, we encourage all applicants to have an exit strategy to ensure they pay off the loan before the loan terms exceed their value.

Securing a construction loan is not as challenging as it might seem, especially when going through a private lender like us. Still, there are at least five things to consider to help secure financing for your next project.

1. Determining Loan Affordability

Before applying for a loan, consider the financial commitment if approved. We want to ensure that all our clients receive a fair loan that they can afford. Hard money and other short-term loans naturally come with a higher interest rate, but that rate fluctuates based on the borrower’s qualifications.

You have the power to affect the affordability of a loan. Your credit score, down payment, construction experience, and property value will all play a role in the final details of the loan. An individual with excellent credit, a sizeable down payment, and property clear of debt will receive better terms than an applicant with limited experience and an existing mortgage.

2. Looking Into All Your Financing Options

A short-term loan, 12 to 24 months, is a decent option for residential builders, those looking to build the project, sell it, and move on. However, construction loans with 12 to 24-month terms might not be the best option for construction investors, those looking to hold onto the property as a long-term investment. For such an investor, better options include short-term loans that include opportunities to roll the investment into a mortgage.

We can help you assess your financial options. We offer consulting services. Our team will discuss all your options, going into detail about the products in our portfolio. If necessary, we might be able to customize a financing solution specifically for your project.

3. Understanding the Security of Interest-Carry or Reserve

In some cases, we can add an amount to the loan, called an interest reserve. Essentially, we periodically advance funds to cover interest charges on the loan’s outstanding balance. If necessary and possible, we can extend such a service for the life of a loan, allowing a client to focus on the construction project rather than monthly obligations. The account works similarly to a construction draw account.

The option reduces the risks for the borrower and the lender. Both parties can rest assured that monthly payments will be made for the set period of the interest reserve.

4. Plan for Possible Contingencies

Construction projects often run over budget. To increase your odds of approval, show a prospective lender that you understand the risks by allocating an additional 10% to 15% to cost overruns.

Many lenders, including us, will not charge interest on unused funds, especially if they were not advanced. Keep in mind that it is challenging to secure additional funding once a project is started, so it is better to over budget.

5. Verify the Ability of All Contractors

Many investors will not contribute to the actual construction of a project. You will still need to verify the qualifications of your contractors. As the borrower, you are on the hook for the loan.

Contact Our Team for More Information

Contact HML Solutions today to get the financing you need for your next construction project in the Miami area.

Can You Use Bridge Loans for Business Acquisitions in Southern Florida?

It’s important to choose the right type of financing for business ventures. Often, things aren’t black and white when it comes to loans. There’s not really a “right” or “wrong” loan for business acquisitions or other needs. Instead, you have to decide which type of funding helps you meet your current goals. This applies to traditional loans as well as alternative funding such as bridge loans.

This guide answers many common questions about bridge loans and acquisitions. You can learn when, how, and why to use a hard money loan for this purpose, as well as things to avoid.

What Are Business Acquisitions?

Acquisitions can refer to many things in the world of business. In this article, we use the term in a few ways:

  • Buying a competing business
  • Acquiring assets from another business, such as equipment or inventory
  • Purchasing a franchise location
  • Expanding operations by acquiring a small business in a new location
  • Obtaining another company’s customer lists
  • Buying part of your own business from a partner

What Financing Options Are Available for Acquisitions?

Small businesses can apply for SBA financing from the Small Business Administration. Many types of conventional loans can also cover business expansion, buyouts, and acquisitions.

The downside of all of these options is that they have strict requirements for business owners. You have to meet qualifications related to credit score, years in business, annual revenue, cash flow, and financial documents. Many conventional loans also require substantial collateral.

The other option is to go the route of alternative financing. Bridge loans are one of our most popular types of alternative loans. Depending on the size of the transaction, you can also utilize invoice financing or merchant cash advance programs for acquisitions.

What Are the Advantages of Bridge Loans?

Bridge loans are a type of asset-based lending. They’re also called hard money loans. They provide funding based on the value of an asset, such as real estate, inventory, equipment, or something similar. Bridge loans offer many benefits:

  • Faster approval: You don’t need to provide or fill out endless documents to qualify for a bridge loan. There’s no need to show years of tax returns or balance sheets. This saves a lot of time during the qualification and closing phases. Instead of waiting months for approval, you can get funded in a few weeks.
  • Greater flexibility: Traditional loans often come with a huge list of prohibitions. It can be frustrating to have to get bank approval for every little thing. Bridge loans don’t have any of those strings attached.
  • Lower requirements: Unlike the strict requirements of SBA loans and other traditional funding, the qualifications for bridge loans are comfortable for small business owners. Even companies with past credit issues or less-than-ideal annual revenue can qualify. The main thing that matters is the value of the asset you use as collateral.

These advantages can be amazing for business acquisitions.

What Are the Downsides of Bridge Financing?

As mentioned at the beginning, there’s no right or wrong type of financing for all situations. Bridge loans can be a powerful, flexible and amazing tool with tons of pros, but they also have some cons you need to be aware of.

For one thing, the interest rates on bridge loans are higher than with traditional financing. Hard money loans also have shorter terms for repayment. They’re designed exclusively as short-term financing.

When Are Bridge Loans a Smart Choice for Business Acquisitions?

If you can qualify for a low-interest, long-term loan option such as an SBA loan, that should be your first choice to save money. When you have to close quickly on great opportunities, however, bridge loans are a better choice. Choose asset-based lending when you need speed and flexibility to complete the transaction.

At the same time, make sure you have sufficient funds on hand (or as a result of selling acquired business assets, such as inventory) to pay off the bridge loan quickly. You can also transfer the balance to a long-term loan once it clears, combining speed and savings. Only businesses that have good credit scores should attempt this, however.

At HML Solutions, we care about your business. Let our financial advisors show you ways to save money and get financing quickly with our bridge and hard money loans.

Can You Get a Bridge Loan With Imperfect Credit?

Having sufficient financing on hand is essential for real estate ventures. Whether you’re looking at buying and reselling properties, flipping residential properties, or improving commercial real estate, you likely need a loan to have the money for your projects.

What if your business has a less-than-ideal credit rating? Many banks expect high credit scores for qualification, in addition to good cash flow and revenue.

The good news is that several financing options can help companies with imperfect credit. Learn more about your options and keep advancing toward your business goals.

Bridge Loans for Real Estate Needs

One of our most popular financial tools for real estate businesses is the bridge loan. Also known as a hard money loan, this option focuses provides flexible financing quickly. Thanks to many benefits, bridge loans can be exactly what your company needs to reach real estate goals:

  • Friendly for remodeling: Conventional bank loans rarely cover remodeling expenses. Traditional lenders don’t like the risk associated with fixer-uppers or house flipping in general. On the other hand, our team is happy to help finance this type of project with a bridge loan.
  • Fast: Hard money loans are often approved within a week or 10 days. That can help you get started with properties quickly. When your local real estate market is competitive, having this type of speed is essential to be able to compete. It lets you keep generating profits and working instead of sitting around waiting months for approval.
  • Flexible: In addition to providing funds for remodeling, bridge loans can also be used to pay contractors, buy furniture, upgrade appliances, cover interior design costs, take care of your business’s payroll and handle many other needs. Even emergency expenses aren’t a problem. For example, if a home remodel uncovers something not originally planned for, such as structural problems, you can use the funds to cover the necessary repairs.

In other words, hard money loans are an ideal fit for real estate projects. That’s likely why they’re so popular with our clients. With a bridge loan, you’re always the one who calls the shots, not a bank loan board. You have the freedom to manage projects as you see fit, which helps maximize your potential profits and adapt to the housing market quickly.

Credit Score Requirements and Terms

If this is your first time hearing about bridge loans, all of these benefits may sound too good to be true. We promise that they’re not. When you choose asset-based lending, it’s simply easier to qualify for great terms.

There’s no hidden magic behind these excellent rates. The reason bridge loans are so friendly to small business owners is that they focus on the value of collateral rather than the credit score of the borrower.

Imperfect credit doesn’t disqualify you. We know that many business owners have credit issues. It’s common in today’s economy, especially for small businesses. We prefer to focus on your experience, passion, and drive to succeed.

Asset-Based Lending

In case you’re wondering, collateral is an asset that is used as a repayment guarantee for the loan. This asset helps secure the loan and reduce some of the lending risks. That’s necessary for small businesses to qualify for financing.

Before you start to worry about your business’s assets, though, you should know how bridge loans work. You don’t need to use personal assets or real estate that you already own (though you can if desired). Instead, we often provide financing based on the value of the property you want to purchase and improve.

The loan-to-value ratio determines how much financing you can receive compared to the as-is cost of real estate. An LTV of 70% means you receive 70% of the purchase cost as a loan. To buy a home worth $100,000, you would combine the down payment with a bridge loan of $70,000.

Credit Score Benefits

A hard money loan can even help you repair imperfect credit. Buying low, making several value-added improvements, and reselling real estate can net you significant profits. Part of the money can pay off your bridge loan and another part helps you cover outstanding debts.

At HML Solutions, we have an excellent reputation with real estate businesses. Contact us to learn more about our bridge loans for investment properties.

What to Know About the Current Multifamily Property Market

Traditionally, multifamily properties have been lucrative investments. However, rising inflation costs in a decreased demand for this type of property have had a direct effect on the amount of money you can make by purchasing a multifamily property. Before you become an investor by purchasing a multifamily property, make sure you have a thorough understanding of the current state of the market. 

What Is the Current State of the Multifamily Property Market?

Many multifamily properties have numerous vacancies. Even if you have room to accept applications, you will probably get few tenants. There are two reasons for these vacancies.

Firstly, many people have implemented strict social-distancing protocols in the last to years due to the rise of COVID-19. In an effort to get away from crowds, many people have moved away from cities where multifamily housing is popular. There is less of a demand for multifamily properties because the cities have fewer people, so construction of multifamily housing has decreased drastically. 

Secondly, inflation has driven the cost of living drastically higher than it was at the start of the pandemic. Landlords must charge more rent to cover the cost of the mortgage, but because few jobs are giving employees extra pay, many people cannot afford the increasing prices of rent. Instead of living independently on a multifamily property, people must reside with family members in single-family dwellings will forward because of inflation.

These two reasons make investing in the multifamily housing market a risky venture at the moment. The good news is that inflation always fluctuates, so when it goes down, it will likely get much easier to fill vacancies on more property. Similarly, as we adjust to life after the COVID-19 pandemic, people will start to be less afraid of being around the crowd and will start to move back to the cities they vacated when the sickness first hit.

Why Is Investing in Multifamily Property Risky?

With the price of multifamily properties so low, you may think that now is the perfect time to prepare for a future investment. You can find desirable multifamily housing properties for great prices, and if you can afford to purchase them now, you will make a significant profit when the market picks up.

However, multifamily housing is a significant investment. Even at affordable prices, you will pay a large sum of money for a good property. You must still make mortgage payments even if you do not have income from tenants. This means that you may lose a significant amount of money before you begin to turn a profit.

In most cases, it is possible to sell an investment that doesn’t work out. With the housing market, selling off failed investments is not usually beneficial. You may be able to find property at great prices, but that means you will not be able to sell it for the same price if it does not work out. You can’t make money on a failed investment in multifamily housing. If you decide to sell for any reason, you will most likely lose a significant amount of money. It’s often hard to find a buyer in the current market, so you may not be able to get anything for your property. If you choose to buy now, make sure that you will not have to sell the property for any reason.

What Is the Outlook for the Market?

Although the current state of the multifamily housing market does not make it a favorable investment, it is expected to rebound quickly. The demand for multifamily housing will grow again as we continue to rebound from the COVID-19 pandemic and people no longer need to practice social distancing. As the market grows, demand will skyrocket, so it is best to be prepared if you want to get into multifamily housing investments.

There is no way to know exactly when the housing market will rebound. However, we are already starting to see the market grow slightly as people return to densely populated cities, so many experts believe that the market will peak again by 2024.

Get Financing for a Multifamily Property

If you want to be ready when the multifamily housing market rebounds, it helps to have the right financing so you can buy property at an affordable price. Contact HML Solutions today to ask about the financial solutions we offer to help you secure multifamily properties.

Real Estate Markets Show Projected Growth in Southwest Florida

Those who have predicted a huge dip in the real estate market in southwest Florida this year have so far been mistaken. Instead, real estate growth for both commercial and residential properties continues to defy predictions and expectations. The year-over-year change in the market has been both positive and significant.

In March of 2022, nearly 1,000 real estate professionals gathered to speak about current market trends and what’s expected for the future of real estate. Part of the discussion centered around the rising amount of building permits in various counties. Though the rise in permits isn’t technically sufficient to be classified as a boom, it is indicative of a very good market.

Taking advantage of a Prosperous Market

Now may be the perfect time to chase real estate deals and purchase properties in southwest Florida, when there is not a looming risk of a huge dip or crash. However, leading real estate professionals still recommend caution to investors in the industrial segment. Though commercial and residential real estate is still dependable and prosperous, the same may not be true for industrial real estate. As such, experts still recommend caution to those who want to invest in industrial real estate.

In industrial real estate, bigger deals are happening as large distribution businesses enter the market. But the assets are not out there for purchase, which means sales volume in the industrial segment is decreasing.

To help meet rising demand, many counties are ramping up warehouse construction. So there is certainly some room for profit in the industry, but investors should still exercise caution since industrial real estate often comes with a higher cost (and thus a higher risk) than other types of real estate. But still, the risks involved with investing in industrial real estate are quite low this year.

A Word About the Residential Sector

According to three savvy market analysts, the remainder of the year is likely to be favorable for investors in the residential real estate industry in southwest Florida. Though almost every real estate expert agrees that 2022 won’t be as crazy as 2021 in terms of real estate demand and cost, the market will continue to be strong. It’s unlikely that the current generation will ever see another year like 2021, so it’s unfair to compare 2022 to a once-in-a-lifetime event.

Even though real estate sales in 2022 are going down compared to 2021, that isn’t a problem. There is certainly not a demand issue in residential real estate in the southwestern part of Florida. Many people are drawn to the area and the exclusivity it provides because not everyone can afford it. That’s because real estate is getting more expensive in the area.

Even though the cost of real estate precludes some from buying homes in this area, there are still plenty of people who can afford the increased cost of housing. They continue to flock to the southwestern part of Florida to snatch up the limited available real estate in the area.

Predicting the Future of Real Estate

It’s impossible to predict the future, especially in real estate. But it is possible to look at historic trends and take advice from respected analysts in the real estate and development sectors when making real estate investment decisions. LSI Companies offers a lot of helpful market information in its digital book titled Market Trends of Southwest Florida Digital Data Book 2022. You can download the book for free to find helpful statistics and numbers such as the costs of lumber, the number of residential permits by county, and new home construction numbers.

The more you know about the current state of the real estate market in southwest Florida, the easier it is to make wise investment decisions. As the old saying goes, “knowledge is power.”

Contact Us for Your Hard Money Loan Needs

Hard money loans are popular in the real estate industry because they are so quick and easy to obtain. Since speed is an essential factor in taking advantage of excellent real estate deals, being able to get quick funding is important.

Here at HML Solutions, we offer reliable and fast private lending. We can offer bridge and hard money loans based on your unique needs. Contact us today to request your free consultation.

Using Bridge Loans for Mergers and Acquisitions in South Florida

The key to successfully negotiating bridge loan financing with HML Solutions or any other lender involves understanding the terms, structure and timing associated with a bridge loan commitment. Bridge loans are commonly used to finance mergers and acquisitions, but it’s important to analyze the economics of the overall transaction before committing to the bridge loan.

Private equity sponsors or corporations trying to win an acquisition bid may need to get a bridge loan as one of the final steps in the process. But bridge loans can be notoriously complex and could culminate in a variety of potential outcomes. For these reasons, the borrower should be very careful about negotiating with the bridge loan lenders to ensure the terms of the loan are ideal for the situation. When it comes to mergers and acquisitions, the bridge loan terms and costs should factor into the borrower’s acquisition projections.

Understanding Bridge Loans

Unlike long-term loans, a bridge loan is not meant to be a permanent source of financing. Though it is possible for a bridge loan to convert to a long-term form of financing if it is not paid at the end of the initial term, this is not an ideal situation for a borrower to experience. When a bridge loan converts to a long-term loan (usually in the form of a term loan with a longer maturity or a bond), it comes with a higher interest rate than the original bridge loan interest rate. Usually, this higher interest rate is a combination of the rate at the end of the loan’s initial term as well as an added premium.

Before the bridge loan converts into a term loan with a longer maturity or a bond, the loan lenders may require the borrower to pay liquidated damages and file a shelf registration. The liquidated damages usually equate to a percentage of the exchange securities principal amount.

Bridge Loan Fee Structure Terms

Here are a few terms associated with bridge loan fees that borrowers should understand before applying for this type of loan. Understanding these terms helps ensure that borrowers fully understand how bridge loan fees are structured and what is expected of borrowers and lenders who enter into a bridge loan agreement.  

  • Duration Fee: This is a fee that’s added onto the bridge loan’s outstanding balance. The longer the bridge loan is outstanding, the higher the fee can potentially be.
  • Refinancing Fee: If a bridge loan is refinanced before its initial term is complete, a refinancing fee applies. This fee is payable at the time of refinancing and is often equal to the conversion or rollover fee.
  • Commitment Fee: A commitment fee is payable when the bridge lender commits to the bridge loan (whether or not the loan is actually funded).
  • Deal-Away Fee: If you decide to use another source of financing at the last minute (on the closing date), a deal-away fee is applied. This fee is payable to the bridge lenders and is designed to compensate them for any fees they would have received if they had funded the bridge loan.
  • Funding Fee: When bridge lenders fund a bridge loan, the borrower pays a funding fee. This fee is payable on the closing date of the bridge loan. Some lenders may refund part of the funding fee if the bridge loan is refinanced prior to reaching maturity. However, this depends on individual bridge lenders and the time that has passed between the loan’s funding and its repayment. Usually, lenders are willing to refund a larger amount if the bridge loan is refinanced shortly after it is funded. For example, lenders may refund up to 75% of the funding fee if the bridge loan is refinanced within 30 days of its initial funding. If the loan is refinanced within 60 days of the original funding date, the lender may refund 50% of the funding fee. If the loan is refinanced within 90 days of the original funding date, the lender may be willing to refund up to 25% of the funding fee. The outside time frames involving funding fee rebates could potentially be as long as 270 days.
  • Bond Underwriting Fee: A bond underwriting fee is applied when the lender underwrites a bond to replace the bridge loan. Usually, the documentation for a bond offering is kept separate from the original bridge loan commitment.
  • Conversion/Rollover Fee: A conversion/rollover fee is designed to compensate the bridge lenders if the bridge loan converts automatically into long-term financing at the end of its initial term due to the borrower not refinancing the loan beforehand. The conversion/rollover fee is usually equal to the underwriting fee that would be paid to the lenders if the bridge loan had been refinanced before the end of the initial term. The conversion/rollover fee may qualify for a rebate, depending on how soon the loan is repaid after it rolls over into a long-term bond.

To avoid potentially paying overlapping fees, it’s important to pay close attention when negotiating fees related to bridge loans. There are some fees that could overlap in cases of inadequate fee negotiation or failure to pay attention to fee terms. Some potential overlaps include the refinancing fee, which could overlap with the deal-away fee. Similarly, the bond underwriting fee could overlap with the refinancing fee in certain situations. Astute borrowers should be aware of this and negotiate during initial bridge loan discussions to cut back on potential instances of fee overlap.

Long-Term Financing Terms

Experienced sponsors who know how to negotiate commitment letters with at least one lender understand how “market flex” works in fee letters. “Market flex” provisions specify that committing lenders can “flex” particular credit facility terms. When underwriters request the ability to vary long-term financing terms to allow for the placement of long-term debt securities or the long-term credit facility’s syndication, the broad discretion requested can be referred to as flex rights. The scope of a sponsor’s flex rights depends on a variety of factors in capital markets, including leverage, sponsor relationship and issuer credit profile.

Terms that may be subject to flex rights include:

  • Price
  • Financial covenants
  • Senior debt
  • Second lien tranches
  • Financial covenant calculations
  • Maturities

Flex rights are important to understand, as they can impact terms significantly in some situations. Flex provisions apply to bridge loan commitments as well as other loan types.

Securities Demand Provisions

One of the most controversial provisions associated with bridge loan negotiation is called the securities demand provision. This provision allows the lender to require the borrower to refinance the loan by issuing long-term debt securities into capital markets. The investment bank controls the long-term financing timing once the securities demand conditions are satisfied. The borrower does not control when the long-term financing is taken to market.

When it comes to negotiating securities demand provisions, a borrower should be aware of the following negotiation points.

  • Sale Process Requirements: This refers to requests from the borrower to the lender to obtain the best securities offering price (or at least make a sincere attempt).
  • Timing: It may be possible for the borrower to limit the ability of the bridge lender to make a securities demand until after funding of the bridge loan. This provides some bridge funding flexibility in the event that the long-term debt price is higher at the time of closing. It can be difficult to obtain “holiday” periods like these from bridge lenders, though.
  • Number and Size of Demands: Borrowers may attempt to limit the minimum size, frequency and number of each demand. If done successfully, this can limit the costs associated with multiple securities demands.

It may not always be possible to negotiate securities demands to match all the desires of the borrower. But it is worth the effort to see if some of the securities demands can be changed to favor the borrower a little more. If lenders are not willing to negotiate terms to a borrower’s satisfaction, it’s important for the borrower to understand that the lender is also taking a risk by making a bridge loan commitment. The terms should ideally be reasonable for both parties involved in the transaction.

In the case of security demand failure, bridge lenders and borrowers must negotiate potential remedies. Typically, lenders will request the ability to utilize the following options if the securities demand fails:

  • Default under the bridge loan for the duration of the failure
  • Increase in the interest rate associated with the bridge loan
  • Conversion/rollover fee payment
  • Modification of the terms associated with the bridge loan (to include defeasance)

Borrowers may also seek to acquire provisions permitting them to refuse any securities demand that could cause adverse tax consequences to the borrower.

Conclusion

A bridge loan can be very helpful for anyone who needs quick cash for mergers and acquisitions. However, before a borrower signs closing documents on such a loan, he or she should make sure the best economic terms have been sought. The more borrowers understand about securities demands, legal terms and flex key economic terms associated with bridge loans, the easier it will be for them to make financial projections and negotiate limits to minimize financial risk.