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How to Make Money in Commercial Real Estate

When it comes to investing wealth, real estate has proven itself time and time again to be a reliable way to make money. With $32.6 trillion up for grabs globally, many are turning to commercial real estate to bolster their investment portfolios. If you want to try your hand in commercial real estate, here are a few ways to enter the market.

Become a Broker

One of the ways to make money in commercial real estate is to become a broker and help developers and investors find the perfect properties to suit their needs. While this bears some similarity to residential realtors, it is significantly more involved.

In residential real estate, clients are looking for one thing: a place to live. A commercial real estate broker’s clients will be looking for unique elements that suit their business or investment needs, including:

  • Parking
  • Proximity to public transportation
  • Highway access for commuters
  • Storage space
  • Foot traffic (for retail spaces)
  • Space to grow
  • And more

Once you find the right property, commercial mortgage brokers will also need to help developers or investors identify and secure funding for their projects by working with different financial entities. Like residential real estate loans, commercial real estate loans come in many shapes and sizes. You’ll need to learn about all the different ways to secure funding and help clients navigate the commercial real estate financing process.

It might sound like a lot to juggle, but if you can do it, you can easily make over $100,000 per year—with some brokers reaching seven figures annually! Of course, commercial real estate brokers work on commission, so don’t expect to make much in your first few years as you build your reputation.

Invest in Commercial Real Estate

If the commission life isn’t for you, commercial real estate investment is another great way to earn money. Two of the most popular ways to invest in commercial real estate are::

  1. Buy a property, make improvements, and sell for a profit 
  2. Buy a property and rent it to tenants 

Real estate investing has the potential to generate a strong stream of income if you’re able to capitalize on market trends. Of course, there’s also plenty of risk involved, so make sure you do your research before applying for a loan and purchasing your first commercial property.

Work as a Commercial Real Estate Developer

Becoming a commercial real estate developer might take the most time and capital, but it has the potential to generate the most return on your investment.

Commercial real estate development is like starting from the ground up—quite literally. A developer buys a plot of land, builds a commercial property, and either sells it or rents it to tenants for income. Because you’re not buying an existing property, you can make it into whatever you need it to be to suit local business trends. Plus, brand-new buildings can typically be rented out for more money!

Since you are starting from scratch, commercial real estate development takes a bit more effort (and capital) to get started. Luckily, there are plenty of financial institutions that offer loan programs for each phase of the development process:

  • Construction loans
  • Land development loans
  • Bridge loans
  • Rehab or redevelopment loans

On average, commercial real estate developers earn around $80,000 annually, but that number can increase drastically depending on the real estate market and the choices you make. Many successful commercial real estate developers earn annual salaries in the millions of dollars.

Start Your Commercial Real Estate Journey

Are you ready to start your exciting journey in the commercial real estate market? No matter which path you take, it’s important to have enough capital to fund your business.

At Broadmark Realty Capital, we specialize in construction loans designed to suit the needs of commercial real estate investors and developers. With flexible loan terms and ample experience, we can get you the funds you need quickly, so you can capitalize on the next opportunity. Contact us and get your next commercial real estate project off the ground in no time.

Five Ways for Builders to Reduce Waste

Five Ways for Builders to Reduce Waste

Can you guess the volume of construction waste generated annually by construction projects worldwide? What about the U.S. alone?  According to a report from Construction and Demolition Recycling in 2018, the world’s yearly volume of solid waste will nearly double to 2.2 billion tons by the end of 2025. Construction waste makes up more than half of overall waste generated annually. This includes materials such as wood, shingles, asphalt, concrete, and metal.

construction waste from a building

Additionally, construction continues to be costly. In August, construction input prices increased by 0.6 percent from July according to an Associated Builders and Contractors analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index. Nonresidential construction input prices were up 0.3 percent for September.

Much of this waste can be recycled or reused; however, sometimes after a long day of labor, sustainability, and care for the environment can be overlooked. That said, sustainable building practices are growing in popularity and builders are finding competitive advantages in saving on material costs or cutting costs associated with waste. Below are five strategies to reduce waste on your job site.

  1. Reduce Packaging

Work with manufacturers to minimize packaging around products such as plastic, cardboard, and paper to reduce waste that will end up in your dumpster. Approximately 10-12 percent of a construction project’s waste comes from cardboard.

How to Reduce

  • Purchase materials in bulk instead of individual packages.
  • Use returnable containers and packaging materials.
  • Reuse non-returnable containers. You can hold materials in tubs, barrels, and buckets.
  • Donate non-returnable containers to community organizations if you aren’t using them.

 

  1. Reuse and Recycle

Place recycling bins on the job site, or at the end of the day, sort materials into a reuse pile instead of throwing everything into the dumpster. This not only helps the environment but will help lower transportation and landfill costs.

Recyclable materials:

  • Asphalt
  • Brick
  • Concrete
  • Carpeting
  • Cardboard
  • Drywall
  • Gravel
  • Metal
  • Paper
  • Plastic
  • Roofing
  • Wood
  • Sinks
  • Countertops
  • Baths

You can recycle these materials at a construction and demolition (C&D) recycling facility if one is available in your market, and rates are typically competitive with landfill tipping fees. Lastly, try to sell unused materials back to the supplier.

  1. Deconstruction Instead of Demolition

Deconstruction is the process of selectively disassembling a building piece by piece to preserve materials and eliminate waste. The salvaged materials can be reused and transformed into valuable resources that can be sold to be used on future construction projects. Additionally, donated materials can be used as tax write-offs.

The demolition process is similar to that of deconstruction in its removal of high-value, reusable materials. However, the main difference is there is a lower chance of preserving materials through demolition because the process is focused on speed.

  1. Proper Material Storage

Make sure that your products are stored away from the sun and water. Covering your materials will help prevent having to buy new supplies as a result of tossing rotten ones due to degradation from the elements. Secondly, properly storing your materials will avoid theft and the costs associated with replacement.

  1. Plan Your Materials Ahead of Construction

Planning and proper organization means fewer mistakes and fewer materials being wasted on the job site. You can reduce labor and product costs by properly measuring and ordering the right sizes of materials – this prevents cutting or altering larger-sized products. If you have scraps from cutting materials down, try to reuse them. For example, small pieces of wood can be shredded down into mulch if they’re not stained or painted. A plan that includes the following would help reduce waste disposal:

  • Account for potential waste
  • Supply the job site with recycling, compost, and waste bins
  • Calculate the exact amount of materials and order only what is needed
  • Identify recyclable materials
  • Educate workers on sorting waste as it’s produced

The price of dumping materials is becoming more significant to builders as the costs of materials continue to increase. The less you throw away, and the more you reuse, the less money you spend on construction waste disposal. Consider these five ways to save money and the environment by reducing construction waste on your next build.

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation, or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one of our lending experts today.

Single-family homes in high demand due to COVID-19

Following the Great Recession, the single-family rental (SFR) market experienced solid growth. In fact, the SFR market expanded by more than 3.8 million households between 2006 and 2016. Now, with COVID-19 a part of everyday life, this trend has continued as Americans rethink the kinds of lifestyles they want. With social distancing and stay at home orders in place, densely populated areas are losing their appeal to many, creating an uptick in interest for single-family homes.

Single-family homes are in demand

Demand for single-family homes was already a rising trend prior to the onset of the global pandemic. Experts are now predicting that the impact of COVID-19 could make homeownership more difficult for those who have suffered job losses, reduced salaries or potential decreases in credit scores. This means we may see an increase in demand for rental homes.

Whether renting or buying, data suggests that nearly one-third of Americans are considering a move to less populated cities, and in some regions, they’ve already relocated.

Real Estate Market Differences

Despite COVID-19, real estate investors continue to find profitable deals across the US. For 2020, experts have marked states such as Texas, North Carolina, Florida, Georgia, Tennessee and Arizona at the top of the list. Additional secondary markets have picked up steam, while expensive fees and high land costs have slowed others.

On the other hand, COVID-19 has created labor shortages in some markets, which means that some investors can’t get approval for property inspections while others have had job sites shut down. This all can mean delays in construction.

Why renters prefer single-family homes

Investors should consider what amenities will be in high demand, given the way COVID-19 has altered how people approach living and working. Outdoor living spaces, for instance, will be more appealing and having a home office will be a top priority for many.

Additional amenities that will likely attract long-term renters even after the pandemic is no longer an issue are:

Privacy – There are no other tenants right above, below or beside single-family inhabitants. Renters prefer this privacy. They don’t want the sound of their neighbors blaring music or TV coming through the walls, or of kids running and jumping in the unit above them. 

More space than a townhome, condo or apartment – Tenants have a lot of stuff! A single-family home provides more storage, with larger closets, basements, attics, and garages. Single-family homes could also provide space for a home office, washer and dryer, shed, and/or an outdoor living space.

Feels like home versus a rental – As mentioned before renters tend to feel more permanently set up in a single-family home where their pets and children can play in a backyard. In addition, it allows families with children to have school stability. Moving a child in and out of schools is hard for both kids and parents – and is preventable if they stay in one place.


Renters are paying their rents amidst COVID

Real estate investors across the country were expecting a period of increases in unpaid rents due to COVID-19. Surprisingly, this has not yet been the case. In May, Multi-Housing News reported that 87.7 percent of renters paid full or partial rent. For comparison, 89.8 percent of renters paid their rent during the same time period last year. Multi-Housing News goes on to say that as of July 5, 2020, 77.4 percent of renters made payments, and as of July 13, that number was up to nearly 88 percent.

The data doesn’t show any difference in payment trends between property types – it is largely the same between apartment, condos, townhomes, and single-family rentals. 

Advantages of investing in single-family homes over condos, townhomes, and duplexes

Appreciation – Single-family homes tend to appreciate faster than multi-unit properties. A single-family home is valued on supply and demand, while other rental properties are valued on rents and market condition.

Monthly cost savings – The monthly cost of owning a single-family home versus owning a multi-unit investment property can be significantly less. They’re typically easier to finance, carry lower interest rates, and don’t carry the burden of monthly condo fees. In addition, HOA fees are less common and lower on single-family homes, depending on your local market.

Liquidity – Historically, there’s a higher interest in living in a single-family home rather than apartments or multi-unit properties. Most of the market for live-in homes is due to people seeking to escape a shared wall with another person.This can make it easier for investors to collect income from their investments, potentially resulting in higher profits and more liquidity. 

Easier to manage due to longer leases – Turnover costs time and money. Updating, cleaning, repainting, and attracting new tenants can be expensive and exhausting. Tenants looking for a single-family home are more likely to sign longer leases. They tend to become more emotionally attached due to the ability to add their own touches to the property – planting flowers, adding their own patio furniture, watching their kids and/or pets play in the yard, etc. This reduces costs caused by vacancies. 

Even with the uncertainty of the market during the pandemic, investors have continued to flock towards single-family homes. They’ve noticed that owning a large pool of rental homes is allowing them to weather the crisis far better than initially feared. Many investors assume single-family homes will become more desirable to live in, but also more expensive to buy. 

Housing trends are likely to change or fluctuate as the U.S. recovers from COVID-19. While some variations may be subtle, staying acutely aware will help real estate investors make informed decisions.

 

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

Multifamily Guide: How to attract Generation Z renters

Each generation has its own quirks. Gen Z is no different and appears to be more practical than others. While we’ve seen that some generations are happy to rent forever, Generation Z sees it as a stepping stone. In fact, 97 percent of them want to buy a home someday. Now, most of them won’t leave their parents’ home and immediately buy a house. This means you still have a chance to reach them. With this in mind, let’s cover how multifamily operators can reach Gen Z where they are spending most of their time – online.

Social media marketing

Gen Z is more reluctant to use traditional social media channels such as Facebook. Instead, try reaching out to them via a partnership with influencers and creating a strong presence on channels like Instagram, Snapchat, YouTube, and TikTok. Influencer marketing is a useful way to spread the word to younger renters. Consider setting up a referral program to your residents in exchange for promoting your community.

Online video content

It’s official. Gen Z spends the least amount of time watching TV. They spend most of their time watching online videos, so consider sharing video tours of your property. To help keep their attention, be sure the content is concise, engaging, digestible, and shareable.

Mobile-friendly website

Generation Z spends an average of 26 hours per week on their mobile phones and uses laptops rather than desktops. They also grew up with Google and Siri in their back pockets, so they expect fast and easy interactions. Forget about emailing or calling, they want to ask a question and have an immediate answer. Multifamily websites are no exception, property managers will want to make sure that their website is optimized for mobile and accessible on the go, from any device.

You might ask yourself; how do I fill this need of instant gratification? Try adding chatbots. Chatbots are programmed to interact with users. They get to know a user by asking a series of questions and are then able to provide the user with answers. For example, a chatbot could ask a user where they want to live, how much they want to spend, and what amenities they want. Then based on those preferences, respond with information. Chatbots could also help with managing maintenance requests. A renter can interact with the chatbot making them aware of a broken A/C unit and schedule the maintenance. Allow Gen Z renters and other potential renters to interact in the way they want.

How to appeal to Gen Z renters

Keep it simple, mobile, and digital. Make everything accessible online– basic communication, rental applications, community news, virtual tours – all these can and should be managed online.

Create a highly rated online reputation

Be authentic. This generation is keeping up with what you’re posting to social media and what is said about your community online. Stay consistent and realistic with all your posts and responses to online reviews. If you receive a bad review, it’s not the end of the world, just be sure to respond immediately. For Gen Z, seeing the negative reviews might provide balance and will allow you to show how you deal with conflict in your community.

Pricing

As natural researchers, Gen Zers know where to look for the best deal and answers. Property managers must keep units priced appropriately to capture this group. If you have your apartments listed above market value, they won’t be attracted to your community.

Gen Z is a largely untapped market waiting to be recognized. If your real estate business is proactively seeking to tap into this market and improve resident engagement, implementing the technologies and content strategies that appeal to this generation should be a large part of your strategy. If companies manage to incorporate lively video posts and conversation-starting events into their marketing routines, they will increase their odds of winning over this generation.

 

Related article:  The growing impact of Gen Z on the Multifamily Housing Industry

 

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

Keeping Employees Safe: How to Successfully Re-Open Your Job Sites

As states begin the slow, careful process of reopening, many of you might be wondering what your construction site will look like or what additional steps you can take to ensure your employees remain healthy. We’ve put together a list of ways you can help ensure your site is reopened safely.

Start by creating and posting a COVID-19 exposure control, mitigation, and recovery plan at each job site.

Next, designate a COVID-19 supervisor at every job site. They should be responsible for monitoring the health of employees and enforcing the job site safety plan.

a COVID-19 supervisor

Safety Training

Conduct a training on your job sites on the first day of returning to work, and weekly thereafter, to explain the new procedures and protective measures that are in place for all workers. Maintain social distancing during these training sessions. In addition, post the safety requirements in highly visible areas at each of your job sites.

Social Distancing

Ensure employees are able to maintain at least six feet of separation. Mandate that workers take breaks and lunch in shifts, minimizing the possibility of large group gatherings. Identify and control “high-risk areas,” such as those where workers typically congregate, to ensure they are practicing proper social distancing.

Minimize interactions between those picking up or delivering equipment and/or materials. Try to restrict the number of job site visitors and screen those that do come prior to their arrivals.

Personal Protective Equipment (PPE), Sanitation and Cleanliness

Provide employees with personal protective equipment such as gloves, goggles, face masks, and face shields.

Post information on hygienic practices, including:

  1.   Don’t touch your face with unwashed hands or while wearing gloves
  2.   Wash hands as often as possible with soap and water for 20 seconds
  3.   Use hand sanitizer
  4.   Clean and disinfect frequently touched objects and surfaces such as workstations, phones, machines, shared tools, and doorknobs
  5. Cover your mouth with your inner arm when coughing or sneezing

If an employee reports feeling sick and leaves the job site, immediately disinfect the area(s) where that person was working.

Employee health

Start each employee shift by taking temperatures and asking if they have a fever, cough, shortness of breath, fatigue, muscle aches, or new loss of taste or smell. Use a thermometer that is no-touch. If a no-touch thermometer is not available, the thermometer used should be sanitized between each use.

Encourage employees to stay home or leave the worksite when feeling unwell or if they’ve been in close contact with someone who is confirmed to have COVID-19. If an employee has a sick family member at home, he or she should inform his or her supervisor and that employee should follow the isolation/quarantine requirements set by the State Department of Health.

Don’t force employees to come back to the job site. If they don’t feel it is safe to return to work, they should be allowed to leave and stay at home.

These are some of the best practices that have been put into place where construction projects are up and running. The challenge for the construction industry will be to ensure workers can effectively do their jobs, sometimes in close quarters, while also protecting the health of everyone else on the job site.

For more information, updates and additional recommendations, visit the CDC website.

This blog was written as useful information only; use of the content provided herein is at your own risk.

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

 

Resources:

https://abc.org/Portals/1/Documents/COVID/Phase%201%20Construction%20COVID-19%20Safety%20Requirements%20–%20Adopted.pdf?ver=2020-04-29-110843-967&timestamp=1588173670969

https://www.michigan.gov/coronavirus/0,9753,7-406-98158-528335–,00.html

https://www.cdc.gov/niosh/

 

 

The Value of Hard Money in the Real Estate Investment Industry

Private (or hard money) lenders are some of the most important funding sources for real estate project investors. Whether you’re new to real estate investing or an expert, chances are you will want to scale your business at some point. And every successful real estate investor knows that, to scale your business, you need one thing: reliable funding.

With the current condition of the market, it’s now more important than ever to make sure that you have a relationship with a hard money lender that you can rely on. Here are a few benefits to using a private lender:

Men discussing the hard money

Hard money loans are approved and funded quickly

The approval speed of hard money loans is one of their biggest advantages. In many cases, lenders can approve your loan in one to two days. They will consider the attributes of the property, the down payment amount or equity you have in the property, your experience, your exit strategy, and they will make sure you have some cash reserves to make monthly payments.

In addition to the quick approval, hard money lenders can also fund projects quickly. If needed, projects can be funded or have draws completed within three to five days.  Compare that to the 20+ days it can take a bank to fund. In today’s real estate market, how quickly you can close on a project is often more important than the cost of capital. Most investors would rather pay slightly more to be assured they will close in a week rather than risk closing in 45 days.

This fast funding is also helpful when you’re trying to close on a project in a timely manner. For example, a deal that would benefit from a 1031 exchange.

Private loans provide funding for projects that cannot be financed elsewhere

Hard money lenders often provide funding that banks may not consider. An example of this would be a short-term loan for an investor that wants to purchase a property, quickly rehab it, then sell or rent the units. In most cases, you only need a 12-18-month loan, which most banks don’t offer. Banks prefer long-term loans and are happy to make their interest over a long period of time.

In addition, hard money loans are ideal for properties that have numerous issues that prevent them qualifying with a bank. These issues could be related to the foundation, electrical work or plumbing, for example. Banks are highly regulated, risk-averse lenders and are unable to consider loan scenarios that are outside their criteria.

A hard money lender would be able to fund a loan for a property that has these issues. They employ their own lending guidelines and some even have in-house underwriters, enabling them to adjust the loan conditions to meet your funding needs.

writing pros of private lending

Increased capital, bigger projects

Many hard money lenders will have a maximum loan amount as well as a maximum Loan-to-Cost (LTC) ratio, dictating the amount of financing you receive for your commercial real estate project. Hard money lenders that have a high LTC percentage can provide increased capital upfront, providing you with more flexibility and the option to fund the project on your own rather than bringing in a partner.

In addition, increased capital allows you to slowly build your way up to bigger projects. You can start looking at multifamily and commercial deals, rather than solely looking at single-family properties. Closing more deals will also increase your personal capital and give you higher returns on bigger deals.

A note on our lending environment

We understand there is uncertainty in the markets and recognize the seriousness of the current environment. Broadmark Realty Capital’s focus is primarily on short-term, real-estate-backed senior mortgage loans, and we currently have no debt on our balance sheet. Because we do not use leverage and are not dependent on outside lenders to fund our loans or construction draws, we expect to be able to effectively navigate the liquidity and funding challenges that some of our highly levered competitors are facing in this environment.

The world has changed considerably since we founded Broadmark ten years ago following the financial crisis, and the current global public health emergency is a stark reminder that developments in financial markets are impossible to predict. However, what has remained a constant over the past decade is our commitment to always functioning responsibly on behalf of our borrowers and our investors. We remain focused on continuing to serve as a reliable source of funding for our borrowers who have come to value our flexibility and the certainty of execution that we provide.

The growing impact of Gen Z on the Multifamily Housing Industry

What Gen Z renters are looking for in their community and from property managers

 

Watch out, there’s a new generation defining the future of the multifamily industry. While millennials make up 56 percent of the rental market, Gen Z comprises 74 million people, making it equal in size to millennials and baby boomers. Even though they may be young, they have money to spend. They contribute $44 billion to the U.S. economy and it’s only a matter of time before they head into the rental market.

If you rent to college students, you might already be familiar with the preferences of Gen Z renters. If not, you may ask yourself how different are their preferences from those of the millennials? The primary difference is their relationship to technology. Gen Z relies on social media and the internet to make purchasing and lifestyle decisions more than millennials. They understand how to leverage technology to benefit them and find the information they need.

Personalization

Gen Z is used to having everything personalized just to their liking. From their playlist to their newsfeeds, their world is designed to their tastes and interests. Look further and you’ll see that this generation is the most connected to brands through which they can build experiences. For commercial real estate, this means cultivating individualized tenant experiences.

Affordability

Finances are often front and center for most generations, but even more so for Gen Z. They would rather put their money into their businesses and savings accounts than into rent. Rental prices that allow them to do this while not feeling house poor are ideal. Longer term leases, 18 to 24 months, are more attractive to this group than 12 months. They appreciate the stability and they want to know what their rent will be over a year from signing to avoid worrying about what their next step is.

Human interaction

Gen zers having a game night in apartment complex

Community. Gen Z craves community, one that helps build a creative network. Incorporate resident events and other activities such as movie night, pool parties, and game nights. If your apartment community hosts property-wide events and spaces, make sure you promote them. This will help attract Gen Z renters and help build your commercial real estate community.

Positive messaging

88 percent of Gen Zers invest in companies that share their values. Have you sponsored a charity event or local sports team? To attract these renters, use social media to share your apartment community’s involvement in the neighborhood.

Authenticity

As mentioned before, this generation craves a company they can connect with and trust. Figure out your community’s brand and core values, then start building an authentic marketing campaign around it. Share residents’ stories, educate renters and provide them the opportunity to build relationships.

Energy-efficient amenities

 

Again, this generation is passionate about environmental causes. In fact, the majority of them define success as having made the world a better place. So, investing in green amenities is worth the upfront costs. Whether you’re building new or updating older units, make more sustainable choices. For example, upgrading the windows to energy-efficient panes and installing eco-friendly appliances are good places to start.

Consumers drive the market, and the best businesses are the ones that meet and exceed those needs. Gen Z may be new, but they are making a large impact on the multifamily industry. So get social and start reeling in new residents!

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

What is Geotechnical Engineering

Geotechnical engineering, also known as geotechnics, soil testing, or soil analysis, is the evaluation of the earth’s components before starting a construction project. Most examinations include surface and subsurface exploration, soil sampling, and laboratory analysis.

Significance with large construction projects

The characteristics and quality of your soil play a vital role in how a building is constructed. It’s best to have a professional analyze the soil before any construction begins to determine if it’s suitable for your project. They will test the soil for strength, organic material, contamination, and density, among other things in order to:

  •      Identify types of soil on the property
  •      Identify whether the soil can support your desired construction project
  •      Create safety reports, which are often needed to obtain a building permit

All the information gathered by the engineer is then used to determine important factors about your construction or multifamily project. For example, if the results show sandy soil, you will likely need a different type of foundation than if you were building directly on bedrock.

Soil testing can help determine drainage issues, the placement of your septic or sewer system components, the size of the structure, and whether the soil or bedrock would support a structure in an earthquake. These investigations are important in preventing human and material damages.

When is goetech testing needed in the construction process?

Soil testing is typically required for building permits. During the construction phase, the soil engineer may need to take further soil samples to ensure the soil conditions are compatible with those observed in the initial testing – and will make recommendations as needed.

What do you do if your soil isn’t right for your construction project?

If your soil has any issues your geotechnical engineer should be able to provide you with recommendations on how to address the problem. The solution could be installing wider, deeper footings, or digging out the bad soil and replacing it with engineered soil. No matter what they recommend, you’ll want to get it in writing and share with your structural engineer and building inspector.

Pricing and how to structure construction loan terms to get this included

There are many factors that play a role in the cost of your soil test, such as the type of testing you perform and size and site of the proposed project.  The more comprehensive the analysis, the more expensive the testing will be. Talk to your lender about your options. If there is room, some lenders will incorporate the testing into your loan – allowing you to pay it off through the course of the loan.

Geotechnical engineering can be crucial to the integrity of your construction project. Make sure you have the time and budget put aside to get it done right.

 

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

What A Lender Looks For In A Bridge Loan Borrower

Bridge loans are often taken out in order to buy another property while they wait for an existing property to sell. Bridge loans obviously don’t come without a risk, but they’re an excellent way to, as the name implies, bridge the gap between the transition of two or more properties. It’s one of the best strategies to use when approaching lenders for a larger commercial loan, but the criteria to apply for one can often be strict.

In this article, we’ll be talking about what a lender looks for when a borrower approaches them to apply for a bridge loan.

Net Worth

Net worth is one of the most important metrics in determining your eligibility for a bridge loan. In most cases, your loan amount will be equal to your net worth.

Previous Experience

Lenders that offer bridge loans are always looking for experienced individuals. You will likely be asked to demonstrate your previous projects, and this will have an impact on how much money you can borrow.

Cash Reserves

You may be asked to show proof of sufficient cash reserves in order to cover for contingencies. They may also hold back a certain amount of the loan proceeds as an interest rate reserve.

Documentation

You’ll need to provide sufficient documentation in order to qualify for a bridge loan. This will include a credit report, tax returns and a resume. You’ll also be asked to provide an exit strategy, breakdown of the renovation costs on the property and an executive summary.

Short Loan Terms

Loan terms are often shorter for a bridge loan due to the conditions. Most lenders won’t offer a term longer than 3 years, so it’s important to present a short loan term when you’re applying.

High Loan Amounts

Lenders are usually more interested in larger sums of money. You’ll typically want to start at a minimum of $1,000,000.

Quality of Property

The quality of your property will play a factor in your eligibility for a bridge loan. Some lenders will also look at the DSCR (debt-service coverage ratio) of the completed property. Most lenders will require a ratio of 1.1 – 1.25.

Credit Score

While credit score doesn’t play a big part in commercial bridge loans, lenders do expect you to have a score of 650 or more. However, this isn’t so much for the bridge loan itself, but more for refinancing your bridge loan with permanent financing as an exit strategy.

 

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.