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Add Bridge Loan Agreement signatory

hi again I'm Sal Buscemi's CEO of danger media and co-founder and managing director at danger partners here in New York City let me ask you a question we're a little more than halfway through this series we begin our fourth video of our 9 part 5-minute fundamentals mini-series on commercial deal structuring secrets are you starting to look at the world a little differently now do you no longer feel constrained by having to qualify at a bank and get a loan in order to participate in commercial real estate deals I hope I'm empowering you just like I have for hundreds of others in this video we're going to talk about how to get equity when providing a simple bridge loan there's a few tricks to it or as I like to call it gamesmanship now that you're able to size up most commercial deals like a seasoned pro you now know how to engineer the transaction to your benefit and this is one of those strategies that the industry pros use day in and day out so enough talk let's get right to the whiteboard welcome back now we're on to our fourth strategy here on commercial deal structuring secrets this is the way the pros do it a little to no money into the deals themselves and how you can participate as an intermediary with little to no cash or credit so let's move on we're going to break it down a little slower here number four we're talking about simple bridge loan with passive equity bridge loans are all over the place you got to think of bridge loans as a form of hard money lending for commercial real estate and a lot of the smaller balance players who make loans between two and thirty million dollars make bridge loans and those bridge loans was something that we talked about during the webinar that you'll soon find out are short-term loans higher interest rates but the capital providers were the institutional lenders don't really care about credit they care about experience and the basis of which you're getting in at the asset remember the first video we were talking about here had to talk about how we were looking behind the numbers to see if this is really a good deal or not and we wanted to get in and what we call a good strong basis meaning put it in an example of a residential home if it's a hundred and forty thousand dollar home and you're buying it for 80 thousand dollars that's a strong basis because you have a lot of equity in that property from the get-go so let's get on here suggested uses this is perfect for people who have found something interesting to buy they don't have all the capital they need and mostly you're going to see this as it relates to value-added properties rehab properties that need or done these are properties don't don't qualify for conventional bank loans or from life companies so you want to keep it in mind these are short-term loans that are great for fixer-upper commercial properties the second thing that I haven't written on the board here could be used and one of our student intermediaries is doing is that he's actually doing the same strategy we're talking about here with loans that are coming due and borrowers who need new capital like they need oxygen you can negotiate equity but what we call hope certificates passive equity stakes into these deals and I can tell you there's no greater feeling in the world than knowing that you have passive equity stakes and a lot of commercial deals without having to deal with tenants repairs toilets and everything else that you can think of which is the stereotypical landlord that you think of when you think of hard times dealing with tenants and toilets how its structured this is important for term sheet is issued or you know that your capital provider or institutional investor is going to provide you with a term sheet you want to make sure you have a conversation with the borrower now that borrowers conversation is going to go like this hey I believe in you I think you have a great product here I think you know exactly what you're doing and you're gonna be able to reposition this prop this property beautifully however I also know that your kind of cash constrained aren't you how about if I took equity in lieu of my fees is that something that would sound appealing to you that would probably take a lot of burden and a lot of stress off of your balance sheet what do you think believe it or not nine times out of ten they will say yes we will do that and then at that point that's when you're dancing you're always going to start with ten you'll probably wind up with five but still five is better than nothing and remember once this asset is repositioned you have equity in an asset that is worth much more than what it was actually acquired for two you want to make sure that your capital partner places you under the term sheet as part of an equity holder and this is done as I talked about this on the term sheet and you're going to be integrated into the term sheet as far as being a part owner 10% 5% in the SPE or the special-purpose entity number three you collect fees passive equity interests and new holding company now sometimes there's other fees success' fees whatever you can negotiate I wouldn't really get too greedy here I'd rather take the equity and shut up and run especially if the operator or sponsors very qualified it just happens to be down-on-his-luck you're gonna find that there's gonna be a lot more opportunities where if you help people and you release the burden of having to be greedy and having them give you fees there's gonna be a lot more opportunity for you to wheel and deal and create more wealth here the income streams here off of this one is a passive equity stake remember you forgave your upfront fees you're taking equity but you're only doing that if the sponsor is qualifying he knows what he's doing and that's something that you have to ask yourself with your gut do they have a transactional resume do they have a deal sheet have they done this before or is this their first deal where you're becoming simply the research and development department for their experience that's something you don't want to get into it's moderately aggressive it happens more in down markets and in up markets so when capital is plentiful and it's out there you're gonna see that a lot of these deals are not going to be you're not going to get a lot of equity deals like this as part of your as part of your incentives so you have to you know pickers have to be choosers the best asset class to work on these my favorite condo conversions we have an intermediate intern in Tony who talks about this on the webinar he talks himself on video about how he was able to do this with one of his deals and they're great for income producing properties for value added especially kind of difficult to do for stabilized stabilized usually goes towards life companies and other types of lenders land and free and clear properties remember with land they have to be fully entitled and platted not anything that's raw or zoned or you know we got to make sure that you have as it relates to the land that you can actually start building vertically on top of it so I hope you're getting a lot out of this the strategy might not have been that advanced however on the webinar there's a lot more advanced strategies and I want to make sure that you guys are getting the most value out of this so let me know tell me what you're thinking about this and while you're doing that we're going to move on in the next strategy which I can't wait to share with you