The “Brave New World” of Commercial Lending

Commercial Real Estate Agent with Dutra-Cerro-Graden

Today, investors large and small are looking to purchase real estate at discounted rates (especially compared to the last decade). As people and businesses continue to struggle while defaulting and leaving their properties, investors are presented with buying opportunities that will be looked back upon with either regret or as a stroke of genius.

Because banks have an increased ownership of real property (also known as Real Estate Owned, or REO), due to foreclosures, their lending guidelineshave become somewhat subjective and lack uniformity. In today’s uncertain environment, investors seeking financing for income producing properties can expect to pay at least 20% of the purchase price towards a down payment. Banks are often requiring down payments of 30% to 40%. Typically, banks will require a larger down payment when the borrower has unfavorable credit scores, unverifiable sources of income or high debt. Increasing the down payment requirement is advantageous for banks because it hedges their loan from market fluctuations and reduces the likelihood of foreclosing in the future.

Engaging in the lending process early is a smart strategy for investors seeking financing. Investors can gain a clearer understanding of their purchasing power after meeting with a lender. Investors that know their price point are better equipped when searching for properties because they know how much building they can buy, how much cash they need to have for a down payment, and provides their real estate broker with realistic search parameters.

Despite banks changing guidelines and increased REO inventory, investors are still able to obtain favorable financing for income properties. Whether you are a seasoned investor or new to the arena,working with knowledgable lending and brokerage professionals will provide you with reliable information upon which you can base your investment decisions.

Comments (1)

Elite Home Sales Team
Elite Home Sales Team OC - Corona del Mar, CA
A Tenacious and Skilled Real Estate Team

That is good news I have only heard bad new on commercial lending

Mar 09, 2010 04:34 PM