Page 185 - Trump University Commercial Real Estate 101

Use a Money Multiplier

Conventional

These are the garden variety of loans that are not insured by the federal
government. The loan might be conforming , meaning that the property
and borrower meet all the standards of Fannie Mae and Freddie Mac.
There are also plenty of loans done on a non - conforming basis. A jumbo
loan of more than about $750,000 is one example.

Government

The government has many different loan programs to service a variety
of needs. These loans usually have the benefit of low - interest rates,

longer loan terms, and low up - front costs. The drawback is that there
are usually some operating restrictions tied to the property that is
awarded one of these loans. The most common is a rent restriction
which states that rents can be no higher than a certain percentage
of the market. The ceiling is usually below whatever the market
rents are.

Construction

Whenever your property will need repairs greater than three percent
of the purchase price, you will probably take out a construction loan.
These are short - term loans, usually between one and three years.
They are frequently done on an interest - only basis. Some lenders
will conveniently roll the loan and make it a conventional loan once
construction is completed. If that feature is not available, you may

have to refinance out of the construction loan and into a conven-
tional one.

Mezzanine

This is the loan to use when a project needs fi nancing that ’ s greater

than 80 percent of property value. Mezzanine financing will not get
you to 100 percent of property value, but you might reach 90 percent.

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