Borrowing Is an Option for Home Owners Associations

Borrowingisanoption

By Bob Gourley

Arriving just in time for your aging common interest community is a fairly new option for condominium, cooperative, and timeshare boards – an option sure to smooth those riotous owners’ meetings. It is another arrow in your quiver to solve those nagging maintenance problems that just seem to come out of the woodwork (or are caused by it).

Whoops, we need a special assessment on top of the monthly assessment increase you just approved three months ago! So who could know that a sinkhole would form in the parking lot?

The option that more and more condominiums are discovering is the bank loan. This option is arriving on the condominium scene all across the country as more and more properties are facing the problems of aging. Many condominiums  were built in the mid- to late- 1970s, making them 20+ years old. It is well past time for things to go bad. Or, framing the problem in terms of technology improvements and desires for aesthetic changes, there is a need for upgrades.

Another group of complexes that have a lot of work to do are those built in the mid- ‘80s. Unfortunately, it is not unusual for this group to suffer from poor workmanship or low-quality materials. These weaknesses are now resulting in premature problems.

Typically, condominium associations have been left to their own resources to support the cost of the repairs that are needed. The results have not been particularly favorable. The cost impact of these projects makes residents shudder. Often, the projects compound on top of themselves with the result being maintenance imprudently deferred.

One way out of this dilemma is planning properly for failing components and financing the current project(s) with a loan from HOALendingSolutions to smooth the impact on unit owners. By utilizing a loan, the cost of the project is spread over several years instead of a few months and most owners will appreciate this approach.

There is a third group of associations that can benefit from financing through HOALendingSolutions.  These are complexes that are subject to land leases. These associations can purchase the lease and pay off the obligation long before the lease would ever mature in order to potentially save a large sum of money! Perhaps there is a need to purchase adjacent land as a buffer from undesirable development or to acquire a parcel that has been accessible only by easement. Of course, facility additions like building a clubhouse, pool, tennis court, etc., also make sense to finance.

Now, how do you find a bank that can provide the financing?  Financing for condominium associations is relatively new. Changes in state statutes across the country have made this industry a viable and safe place for bank financing. However, most banks have little experience with this industry. The first chore is to find a financial partner that is comfortable and skilled with financing a condominium association. HOALendingSolutions is the logical choice to provide your financing as lending to HOAs, condominiums, cooperatives, timeshares and other common interest communities is our only business. Contact us today and put our team of lending experts to work for you.

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Will Our Community Association or Timeshare Qualify for a Loan?

By Bob Gourley

Many traditional banks are ill-equipped to even accept a loan application from a community association, timeshare, homeowner’s association, or any other commonly owned interest group. While there are a variety of reasons this is true, the reality is that lending to a well-qualified community association, timeshare, homeowner’s association, or any other commonly owned interest group is a sound business practice that our firm has embraced for quite some time.

Qualifying for a community association, timeshare, homeowner’s association, or any other commonly owned interest group loan is really not so different from the way in which a business qualifies for a business loan. The community association, timeshare, homeowner’s association, or any other commonly owned interest group needs to show an ability to repay the loan and demonstrate that it has the credentials to seek the loan on behalf of its members. Other factors, such as creditworthiness, length of time incorporated, size and value of property, etc. go into the final determination but, for the most part, there is a lending solution for every community association, timeshare, homeowner’s association, or any other commonly owned interest group.

Are you ready to secure your community association, timeshare, homeowner’s association, or any other commonly owned interest group loan? Simply fill out our contact form and one of our experts will be in touch to discuss your community’s qualifications.

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Is Condominium Association Financing Right For You?

By Bob Gourley

In recent years, many Condominium and Homeowner Associations have turned to financial institutions for loans to fulfill their duties to protect, enhance, and maintain their association’s common assets. The challenges faced by these associations is that many traditional banking institutions are not currently equipped to sell and service this specialized loan or line of credit request. Further, some Condominium and Homeowner Associations have found that their governing documents may prevent them from obtaining the simple financing they need.

To determine if Condominium and Homeowner Association Financing is right for you, you must first make sure that you have removed the barriers to successful loan negotiations with your lender. Our Condominium and Homeowner Association lending professionals are ready to talk with you about your Condominium and Homeowner Association Financing needs. Simply fill out our contact form and one of our experts will be in touch to discuss your community’s eligibility.

Finally, talking to the right professional makes all the difference in the world. Our professionals handle nothing but Condominium and Homeowner Association loans and lending solutions. You can rest assured that your inquiry will be treated politely and professionally by a knowledgeable expert who will efficiently assist you in turning your loan request into the needed capital for your association project.

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Should You Refinance Your HOA Loan?

By Bob Gourley

Refinancing a community association loan or HOA loan may make sense if the prevailing interest rate is significantly less than the current interest rate of the community association loan or HOA loan. Community associations will still face the standard closing costs associated with any loan, but, depending on the length of the loan and the amount of interest saved over the life of the community association loan, the saving could be significant enough to actually lower the monthly common fees associated with loan payback.

Contact HOALendingSolutions today to inquire as to whether or not refinancing your community association loan or HOA loan makes fiscal sense. There is no obligation to refinance but an expert opinion could save your community thousands of dollars over the life of your community association loan. Email us at info@hoalendingsolutions.com to learn more.

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How Does Your Timeshare Association Qualify For a Loan?

By Bob Gourley

At HOALendingSolutions.com, we endeavor to make the timeshare loan process as simple as possible. Our greatest focus will be on determining if your timeshare complex is managed well. We also will be looking for stability and consistent cash flow, and whether or not the loan could be repaid without straining the capacity of the association through its owners.

Our application process requires submitting project information, details about the association (including a financial history), and a plan on how the loan will be repaid. You also will need to provide current year budgets with year-to-date actual results. Data on the aging of assessments is critical, the balance of unsold inventory and the velocity of inventory turnover.

A budget proposal reflecting the routine needs of the community for operating costs and regular maintenance with the added level of proposed debt service is necessary.  Pay close attention to the collection record of your assessments. If these charges show an inappropriate number of delinquent intervals or frequent charge-offs, this is a red flag. The delinquency level that we are looking for is only of the interval or club owner paying the association’s assessments and other charges, not in the mortgages of owners to their creditor. The inventory of unsold intervals is of interest because it may suggest the level of marketability of the resort and therefore the stability of the cash flow. A professional life cycle analysis of common elements has hopefully been prepared and its recommendations implemented. Insurance coverage is also an important matter. The bank will be looking at your policy to determine if there is prudent coverage of risks, especially in storm-prone areas.

The structure of the timeshare loan is important. Keep in mind that your project costs will most likely increase. Keep the term of the loan as short as possible—most loans are typically between seven and ten years. Most importantly, it is likely that you will have to increase the budget to support the debt servicing need. Recognize that the complex is continuing to age and other extensive projects will always need to be addressed. The association board would be wise to have paid off this debt before the next large project appears—otherwise, the new assessment cost will compound on top of what you’ve already financed. This situation is not just straining, it will cause high assessments that depress your property values.

Contact HOALendingSolutions.com today. Our terms and conditions are somewhat flexible, based on each situation. Our skilled lenders can structure a productive package for your association in conjunction with the rest of your professional team. The process may seem complicated, but it’s a good option for your association for necessary upgrades and future growth.

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Loans Are a Great Option for Home Owners Associations

Loansareagreatoption

By Bob Gourley

How does your association qualify for a loan?  You will find that banks take a variety of approaches to financing as each has different policies and skills.  A bank’s greatest focus will be on determining if the condominium complex is managed well.  And then, can the loan be repaid without straining the capacity of the association and its unit owners?  Banks are looking for stability and consistent cash flow in the associations that they will finance.

When should you get started?  Get started right now.  Most associations are in their budget planning period in October and November.  Decide which projects you would like to start in the spring and plug those projects into the budget now being developed.  It will take an amazing amount of time for you to interview contractors, obtain the appropriate unit owner approvals and go through the countless hours of debate.  Compared to these steps, processing a bank loan application is quick and simple.

However, the first thing that you may wish to do is contact your association’s legal counsel to determine if there are any legal obstacles.  Associations might need to updated their declarations since may not have a legal capability to borrow or assign their common charge assessments as loan collateral.  Also, each set of declarations includes unique steps that empower the Board to enter into a financing agreement and encumber association assets.  You need to understand the process that is required from the very beginning in order to avoid surprises or delays later on.

The application process requires submitting information on the project, the association’s financial history, details about the association and a plan on how the loan will be repaid.  Banks are accustomed to receiving high-quality financial information.  Offering only tax returns may be insufficient and additional supporting material may be required.  CPA-prepared review class or audited financial statements will strengthen your application.  Make available current year budgets with year-to-date actual results.

A budget proposal reflecting the normal needs of the community and support for the proposed debt service is necessary.  Pay close attention to the collection record of your monthly assessments.  If these charges show an inappropriate number of delinquent units or frequent charge-offs, this is a red flag.  The existing cash flow may not be stable and an increase in common charges to support the debt may not be practical.  The ratio of non-occupant owners may be a critical factor in a bank’s perception of the association’s credit worthiness.  These owners may have an entirely different set of motivations and commitment to the community.  Unless all other issues of prudently managing the complex are in very good order, a high ratio can make it difficult to obtain financing.

The bank may also wish to look at the minutes of recent Board meetings.  The minutes can indicate broad support for the project or general upheaval in the community.  The bank is, once again, looking for a complex that is stable and working towards its collective best interest.  The tenure of each of the Board members may also indicate stability in the association’s leadership.  A professional life cycle analysis of common elements has hopefully been prepared and its recommendations implemented.  If not, some form of plan for routine capital maintenance should exist.  If there is not forward thinking on dealing with the aging community, a bank will be very concerned about what future cash strains the unit owners may come under.  Insurance coverage is also an important matter.  The bank will be looking at your policy to determine if there is prudent coverage of risks.  Rapidly increasing insurance premiums are a signal that the complex may not be well maintained and frequent or large claims are resulting.

Managing an association is complex and requires sophisticated skills.  The association should have a licensed and professionally certified manager who keeps current his or her education through Community Association Institute continuing education courses.

The structure of the loan is important.  Keep in mind that if you borrow money the cost of your project has gone up.  Keep the term of the loan as short as possible. Loans typically are not available for longer than seven years.  Exceptions do exist, but just because a bank may be willing to go the longer term, avoid considering it.  Be careful of what you ask for, you just may get it!  The added interest will make the project more expensive than the pain of a slightly higher monthly payment on a shorter term.  Most importantly, it is likely that you have raised your common charges to support the debt servicing need.  Recognize that your complex is continuing to age and other extensive projects will always need to be addressed.  You want that debt payment gone before the next large project shows up.  Otherwise, the assessment cost of the new project is going to compound on top of the project you had financed.  Not only is this dilemma straining, but you could find the high assessments depressing your property values.

If you can negotiate the process, financing for associations is available.  The terms and conditions are somewhat flexible as each association is unique.  A skilled lender can structure a productive tool for your association in conjunction with the rest of your professional team.  The process can seem confusing.  But you can get it done and your association will be better for the upgrades that you have comfortably facilitated.

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New Funding Resource for Timeshare Renovations & Upgrades

Newfundingoption

By Bob Gourley

The competition for consumer disposable dollars in today’s economy is tough. People of all economic levels are being dramatically affected by declining real estate values along with increasing food and energy costs. The vacation product you are presenting to the market, therefore, needs to have excellent value, making it a cost-effective, satisfying choice for the timeshare owner. Keeping the resort looking fresh and new is of key importance.

With the rapidly increasing costs of construction, a loan for a project that you finance now (versus piece meal over an extended period) could help mitigate those cost increases and will improve the curb appeal now. HOALendingSolutions.com has loan funds available for refurbishments/upgrades and new facilities (a clubhouse, pool, tennis court, etc.). Often associations want to purchase adjacent land to prevent unwanted development or to acquire a parcel that has been accessible only by easement. We can help.

Non-Real Estate based bank loans for timeshare associations have increased in popularity in recent years, as resorts built in the mid- to late-80s and 90s are starting to age significantly. The concept has been available to the residential community association industry for more than 20 years. The loan only uses the association’s cash flow as the basis for the loan along with an assignment of assessment rights as collateral. Many timeshare associations haven’t accumulated reserves based on a properly done and frequently updated reserve study, so they typically require a special assessment. Given the current economic climate, special assessments are falling ever further out of favor with interval owners. Associations that are subject to land leases or for amenities can also benefit from loan financing with the buyout of the lease. It is a particularly active transaction in Hawaii. These associations can purchase the lease and pay off the obligation long before the lease would ever mature.

Taking Action

Financing for timeshare associations is relatively new and must abide by laws each state sets out in a Common Interest Ownership Act or other industry specific regulations. The first thing that you may wish to do is contact the association’s counsel to determine if there are any legal obstacles. Associations may need to update their declarations if they don’t have a legal capability to borrow or assign their common charge assessments as loan collateral. Each set of declarations includes unique steps that empower the Board to enter into a financing agreement and encumber the assessment rights. It’s important to understand the details of the process and what will be required, so you avoid any surprises or delays in later stages.

Talk to HOALendingSolutions.com today. Many banks have little experience with financing for timeshare resort associations. Our application process is simple and straightforward. Apply now and start your renovation or upgrade project tomorrow.

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Lending to Condominium Associations

By Bob Gourley

Lending to a condominium association is not unlike lending to a municipality. No loan losses from condominium associations have been recorded by those banks with the most lending experience, most notably in Florida and California. There are special considerations when lending to a condominium association, several of which are discussed in this article.

Common Interest Realty Associations (routinely referred to as CIRAs) are legal entities formed from the organization of real estate property owners, generally as non-profit stock corporations. They proliferated in the 1960’s when condominiums became the most common form. This concept evolved into other forms of CIRA structures, including cooperatives, home owner associations (HOAs), and time shares. HOALendingSolutions.com services all of these types of CIRAs.

Items that can be funded are diverse. The unifying issue is that the funding be project-specific. Typical funding projects are such items as roof replacement, conversion to vinyl siding, driveway resurfacing, and central mechanical system upgrades. Associations have sought funding for expanding recreational facilities and purchasing adjacent land as a buffer for easement controls.

Whatever your financing needs are, you can be certain that HOALendingSolutions.com has experience with in your area of need. Contact us today to put our team of HOA lending experts to work for you.

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Does Your Business Specialize in Lending to Condominium Associations?

By Bob Gourley

That’s a question we get a lot. Believe it or not, lending to Condominium Associations and other common interest communities is our ONLY business. In the United States alone, Condominium Associations and other commonly owned properties make up more than 20% of the value of all residential real estate. There is more than 40 billion dollars spent annually on operating revenue. And the numbers are actually increasing. We think that is a market worth selling and servicing to.

The largest challenge facing this evolving industry is the lack of dedicated and specialized financial service professionals to service the growing demand for lending to Condominium Associations and other common interest communities. That is where we come in. We have seen the future of Condominium Associations like yours and we know that you will need lending solutions that are as unique as your community. Simply fill out our contact form and one of our experts will be in touch to discuss your Condominium Association’s Lending needs.

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