Mezzanine Loans for Real Estate Investors: The Ultimate Guide

    Are you a real estate investor looking for flexible, fast capital to take your business to the next level? If so, you may want to consider mezzanine loans.

    Mezzanine loans are a type of cash-flow-based financing that sits between senior debt (such as mortgages) and equity. This means that they are subordinate to senior debt, but senior to equity. This also means that they typically have higher interest rates than senior debt, but lower interest rates than equity.

    Mezzanine loans can be a good option for real estate investors who need capital for a variety of purposes, such as:

    • Purchasing another property
    • Funding a renovation
    • Paying off high-interest debt
    • Taking advantage of a buying opportunity

    What are the benefits of mezzanine loans?

    There are several benefits to using mezzanine loans, including:

    • Fast closing times: Mezzanine loans can often close in as little as 7-14 days, which can be helpful for investors who need capital quickly.
    • Flexible terms: Mezzanine loans can be structured to meet the specific needs of the borrower.
    • No personal guarantees or liens: Mezzanine lenders typically do not require personal guarantees or liens from the borrower.

    What are the risks of mezzanine loans?

    Mezzanine loans are not without risk. Some of the risks to consider include

    • Higher interest rates: Mezzanine loans typically have higher interest rates than senior debt.
    • Subordination: Mezzanine loans are subordinate to senior debt, which means that the lender will be repaid after the senior lender in the event of a default.
    • Potential for dilution: If the borrower is unable to repay the loan, the mezzanine lender may convert their debt to equity, which could dilute the ownership of the existing equity holders.

    How to qualify for a mezzanine loan

    To qualify for a mezzanine loan, you will typically need to have a strong track record as a real estate investor. You will also need to have a good credit score and a solid business plan.

    This new lender is a leading mezzanine lender that specializes in providing financing to real estate investors. They offer a variety of mezzanine loan products, including:

    • New purchase loans: Loans to help you purchase new investment properties.
    • Refinance loans: Loans to help you refinance your existing investment properties.
    • Renovation loans: Loans to help you renovate your investment properties.

    Their mezzanine loans have many features that make them attractive to real estate investors, including:

    • Competitive interest rates: They offer some of the most competitive interest rates in the mezzanine loan market.
    • Fast closing times: they can close loans in as little as 7-14 days.
    • Flexible terms: they can structure loans to meet the specific needs of the borrower.
    • No personal guarantees or liens: they do not require personal guarantees or liens from the borrower.

    If you are a real estate investor looking for flexible, fast capital to take your business to the next level, a mezzanine loan may be a good option for you.

    In addition to the information in the blog post, here are some additional things to keep in mind:

    • Mezzanine loans are not regulated by the same rules as traditional bank loans. This means that there is more risk involved in mezzanine lending.
    • It is important to carefully consider the risks and benefits of mezzanine loans before taking out a loan.
    • If you are considering a mezzanine loan, it is important to shop around and compare rates from different lenders.

    What are they not looking for?

    No properties that need rehab. These are for properties that are stabilized. However, you can use your funds towards anything you'd like.

    • Newbies
    • Non-cash-flowing assets
    • Non-US businesses
    • Operators with no business entity.

    Who is the ideal customer?

    Professional real estate investor that has: a separate (not commingled) business bank account, properties held in an entity (we can help with QC deed if needed), preferably 2-3 years of experience or more.

    Owns cashflow generating real estate (not office) that has equity, usually lacks liquidity, and has a net income (after any debt service) of a minimum of $1,500-$2,000 monthly, this lender loves anything with a bed, meaning people can sleep there.

    • Short term lease
    • long term lease
    • Midterm lease
    • Multi-family apartments
    • Self Storage
    • Hotels and Motels
    • Student housing
    • Corporate housing
    • Senior housing
    • Displaced insurance families
    • Visiting Nurses/Physicians
    • Industrial / Retail on a case-by-case basis
    • Multi-tract home builders that have development agreements, for example if you have a contract with Lennar to build homes and you receive a set amount over a set amount of time, not dependent on performance or milestones.
    mezzanine loans

    What's needed to Apply?

    • Trailing 12-24 months of P&L – broken down with debt service, they will evaluate your cash flow using Plaid, via your bank account deposits. Then they provide a quote that is 20x multiple of your net income.
    • Negative balance days and excessive NSFs are red flags!
    • You'll need any mortgage statements or deeds and leases.
    • High ROI properties
    • Under 75% portfolio-level LTV
    • U.S. based
    • Schedule of Real Estate Owned

    Loan Highlights

    • Can fund in 7 days, 1st advance with subsequent fundings in 48 hours.
    • No pre-payment penalties, have a buy-back schedule given at closing, showing what it takes to buy back your cashflow, after the 3-month lockout period.
    • If you plan to repay the loan before 5 years, let them know in advance.
    • Landlords and Lein lords can use their cash flow for immediate use.
    • No liens or personal guaranty, They use amendments to your corporate docs to become a low tier equity partner.
    • If you generate $10,000 net monthly x 22 = $220,000, 5-year term, you pay my points, no lender points or closing costs, and the rate
    • Max loan amounts are $1M per entity, if needed you could stack fundings by using multiple entities. They've funded $15M.
    • All the lender cares about is cashflow!
    • Credit is not a factor, or minimum credit score
    • Minimum loan is $75,000.
    • They will cross collateralize assets to get you a higher loan if desired
    • Lenders hold a membership interest in your entity
    • You make equal monthly payments
    • The membership interest is bought completely as pay the loan off
    • Acts like a silent 2nd mortgage
    • Use however you want

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