Mastering SBA Loans: Insights from Kamyar Rezaie on Commercial Real Estate Lending
In the latest episode of "How to Invest in Commercial Real Estate," we had the pleasure of speaking with Kamyar Rezaie, a seasoned expert in the commercial lending field and founder of Wembley's Inc. This episode delves deep into the intricacies of SBA loans, the current state of the commercial real estate market, and creative strategies for navigating the challenging landscape of 2024.
A Journey from Residential to Commercial Real Estate
Kamyar Rezaie's journey into the world of commercial real estate is both inspiring and informative. Starting in the residential real estate sector in 2004, Kamyar's path took a significant turn during the 2008 financial crisis. Witnessing the impact of the housing crash firsthand, he transitioned to helping high-net-worth individuals save their homes. This critical experience laid the foundation for his expertise in commercial real estate lending.
Kamyar's transition into commercial real estate was driven by his growing network of clients who were heavily involved in the commercial sector. By 2010-2011, Kamyar had fully immersed himself in commercial real estate lending, focusing on helping his clients refinance and stabilize their commercial properties during uncertain times.
Understanding SBA Loans
One of the key highlights of the episode was Kamyar's detailed explanation of SBA (Small Business Administration) loans and their benefits for commercial real estate investors. SBA loans, particularly the SBA 504 and SBA 7(a) loan programs, offer unique advantages for business owners looking to purchase commercial properties.
SBA 504 Loans: These loans allow business owners to buy commercial real estate with as little as 10% down. The SBA 504 loan is split into two parts: a traditional bank loan for 50% of the total project cost and an SBA-backed loan for up to 40%. This structure minimizes the down payment requirement and provides favorable terms for the borrower.
SBA 7(a) Loans: This program offers more flexibility and can be used for various business purposes, including real estate acquisition. It allows for longer repayment terms and lower down payments compared to conventional loans, making it an attractive option for many business owners.
Navigating the Qualification Process
Kamyar provided valuable insights into the qualification process for SBA loans. He emphasized that the qualification criteria are more flexible than those for conventional commercial loans. For example, some banks allow qualification based on one of the last three years' tax returns, while others may require two of the last three years. This flexibility can be crucial for businesses that have experienced fluctuations in income.
Additionally, Kamyar explained that SBA loans require the business to occupy at least 51% of the property, allowing the remaining 49% to be leased out. This occupancy requirement ensures that the property is primarily used for the business's operations, which can lead to more favorable loan terms.
The Current State of the Commercial Real Estate Market
The discussion also covered the current state of the commercial real estate market, particularly in Southern California. Kamyar noted that the market is currently seeing a trend toward owner-occupied properties, with less focus on investment properties. High-interest rates and economic uncertainty have made it challenging for smaller investors to enter the market.
Kamyar highlighted that many commercial property loans are coming due, especially those with five to ten-year terms. With interest rates significantly higher than they were during the initial loan periods, many property owners may face difficulties refinancing their loans. This situation could lead to an increase in distressed properties and foreclosure pressures in the coming months.
Creative Strategies for Commercial Real Estate Lending
In response to the challenging market conditions, Kamyar shared some creative strategies that can help investors navigate the landscape. One notable approach involves the use of projection-based SBA 7(a) loans. These loans allow businesses to qualify based on future income projections rather than historical tax returns. While the interest rates for these loans are typically higher, they can provide a viable option for growing businesses that may not yet have strong historical financials.
Kamyar also emphasized the importance of understanding the terms and conditions of commercial loans, particularly regarding balloon payments and variable interest rates. Investors need to be aware of the potential risks and plan accordingly to avoid unexpected financial challenges when their loans come due.
Forecasting Interest Rates for 2024
The episode concluded with a discussion on the future of interest rates. Kamyar shared his insights, noting that while there was hope for interest rate reductions earlier in the year, persistent inflation and economic uncertainties have kept rates high. He suggested that while it's difficult to predict exact movements, there is a possibility that rates may not decrease significantly in the near future.
Historically, interest rates tend to rise quickly and fall slowly, a trend that Kamyar believes will continue. He advised investors to prepare for a prolonged period of higher rates and to focus on strategies that can help mitigate the impact of these conditions on their investments.
Conclusion
This episode of "How to Invest in Commercial Real Estate" with Kamyar Rezaie provided a wealth of knowledge for both seasoned investors and those new to the field. Kamyar's expertise in SBA loans, coupled with his insights into the current market and creative lending strategies, offers valuable guidance for navigating the complexities of commercial real estate in 2024.
For those interested in exploring SBA loans or seeking expert advice on commercial real estate lending, Kamyar Rezaie and Wembley's Inc. are excellent resources. As the market continues to evolve, staying informed and adaptable will be key to achieving success in the commercial real estate sector.
Watch the full episode [ https://youtu.be/CKPqgI7ghus ] to gain deeper insights and practical tips from Kamyar Rezaie. Stay tuned for more expert interviews and strategies on "How to Invest in Commercial Real Estate."
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Contact Information: Kamyar Rezaie Email: krezaie@wembleysinc.com Phone: 818-703-9337 Website: www.wembleysinc.com
