Copy
Successful funding
Essencap successfully provide a cash-out refinancing on a $2.5 million mixed property in Bushwick, Brooklyn, NY

The subject improvements consist of a semi-attached, one and part three-story, plus cellar, mixed-use building containing four (4) apartments and three (3) commercial units. The building is situated on a rectangular, corner, parcel of land containing 2,000± square feet of land area, zoned R6 General. The subject improvements contain 4,480± square feet of above-grade gross building area which includes the common areas; was originally constructed circa 1906 and at the time of inspection were in average condition.

The subject property is located in the Bushwick section of the Borough of Brooklyn, within the City of New York in the area designated as Brooklyn Community District #4. This district has a total land area of 2.0± square miles and is bounded on the southwest by Broadway, on the northwest by Flushing Avenue, on the southeast by Vermont and Highland Avenues, and on the northeast by the Queens County line.

Bushwick is a community located in Brooklyn currently showing signs of ongoing gentrification, which is typically a process by which middle-class, or affluent people take up residence in a traditionally working-class area of a city, changing the character of the area. It is well served by neighborhood shopping, schools, and various houses of worship. Its residents are housed in a variety of multi-family dwellings as well as low and mid-rise apartment buildings; most of which have been adequately maintained and many are of new construction. Local employment is supported by commercial and light industrial areas pocketed within the community as well as commutation into Manhattan.
Read More

Cash-out on commercial property

Due to COVID's uncertainty, an increasing number of lenders do not allow commercial property cash-out refinancing. We have noticed a risk reduction trend since the beginning of COVID. Since the beginning of the year, lenders have reduced the ratio on loan to value. Then many banks do not allow cash-out refinancing, focusing on purchases transactions. Unlike the residential market, the commercial investment market has been less active.

Our banking system and banks have a very healthy balance sheet. However, it is the lending institution's choice of how they manage their lending practice. Besides the reduction of loan ratio, not cashing out, we also have learned several lenders would only lend to existing customers. Meaning if the borrower does not have an existing loan or bank account, the lenders will automatically reject the lending request, does not matter if this is a purchase or cash out request.

We have multiple relationships with the lenders. Cash-out refinancing is not a challenge for us. Many investors are looking for opportunities to invest in the commercial real estate market. These investors are shoring up with cash. And as they see fit, the cash will be invested in the real estate market.

Lastly, for the first time investor, it used to be a requirement that we completely ignore. We have seen an increasing number of lenders going back to this rule. The general rule is the borrower should have at least one similar property with three to five years of experience managing a similar property. In our pipeline and already close properties, we are assisting our client with the below asset. There are most active properties transacting in the market.

  • Apartment building
  • Office building
  • Strip mall
  • Mixed-use property
  • Single-tenant property
  • Warehouse
  • Restaurant

We don't believe there is any interest rate upside risk next year. We do encourage investors to consider moving ahead with any cashout refinancing request immediately. Although the commercial real estate market is softening, the market is generally healthy and stable. Banks have offered 3 months forbearance if the commercial real estate experiences difficulty and requires assistance. The market has yet experienced a high degree of distress. Between the forbearance and the US government CARE act on PPP, EIDL, the commercial real estate market is sustainable. The market is anticipating any other round of government stimulus package. We believe there is no correction until the end of the next stimulus package. However at some point in time in the near future, once the stimulus is exhausted, and the forbearance requires has finished, there might be some minor commercial real estate market correction. Since no one can anticipate the future, but our readers would agree there has to be a correction in the commercial real estate market. And the bank lenders will continue to tighten their lending practice. We believe cash-out refinancing request should take place immediately.

Difficult asset class and high loan to value

Due to COVID's we have seen changes in the real estate market place. Two particular groups stand out are restaurant operators and e-commerce companies. 

In our COVID economy, there is no surprise the restaurant sector is suffering. And most lenders are restricting in lending into this sector. We have a number of casual and fast food dining business consumers who are looking to purchase restaurant real estate. Fortunately, we have several out of state banks are looking into lend to this sector. Our restaurant owners are mostly renter, currently renting their space. Given the soft commercial real estate market, our consumer is looking to acquire the real estate. This will help them in the long run equity build-out, stronger brand building, become their own landlord. 

Also need to mention several of our e-commerce consumers, seeing the fastest growing and strongest demand from the marketplace. As a society, we are driving our purchase behavior over the internet. The COVID's situation has increased this behavior. And many of our e-commerce has run out of warehouse space. Many of our e-commerce are looking for the ideal location to improve storage and logistics. As a renter, by improving the space for storage and logistics does not benefit the business owner in the long run. E-commerce business has heavy inventory, most often the cash is tightening up in inventory. The business model does not allow the business to retain a large deposit into the purchase of the real estate as a down payment. Essencap is active in the SBA 504 program, we can lend up to 90% loan to the value of the real estate purchase. Our rate is average about mid to low 3% for 20 to 25 years hybrid fixed rate. 


 

Read More
Facebook
Website
LinkedIn
Twitter
Copyright © 2018 Essencap Funding LLC, All rights reserved.

Our mailing address is:
wecare@essencap.com

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.

 






This email was sent to <<Email Address>>
why did I get this?    unsubscribe from this list    update subscription preferences
Essencap Funding LLC · 45 Middle Neck Rd Ste 220 · Great Neck, NY 11023-2124 · USA

Email Marketing Powered by Mailchimp