Commerical loans and the Sub Prime Crisis
Perhaps you may have missed it, but the recent sub prime loans crisis is still having an effect on a large part of the financial system, making obtaining loans for investment property rather difficult to come by. No matter the spin being pumped out by the media, there are still problems to overcome before it will be possible to easily obtain investment property loans.
The level of lending going on is still dismally low, and the financial institutions are applying strict lending criteria, which is making life difficult for those wishing to borrow to invest in real estate. There are still opportunities for those with cash in hand, but they will have to come up with substantial deposits in order to qualify for a loan. Since the jumbo loans evaporated, even the luxury homes sector is feeling the pinch.
Does one wish to get involved in non-residential or residential property investment is the first question the beginning investor needs to ask before taking on a loan. There are substantially different requirements, repayment schedules and laws involved. It is possible to do both at the same time, but sensibly, this is not an option for any but the most experienced investor.
As the name clearly suggests, a residential investment real estate loan is only available for real estate that is residential in nature. Leases for residential property tend to run for shorter periods commercial leases. Typical lease periods for residential are between 6-12 months, whereas it is unusual to see a non-residential lease for less than 5 years, and they are sometimes longer – as much as twenty five years.
Loans intended for properties that will have a industrial use; such as warehouses, retail shops, and industrial real estate tend to be of a longer duration than residential loans. Despite the pundits claiming that the world’s economy is now coming out of recession, it is currently difficult to source any type of investment property loan. As such, it may be worthwhile hiring the services of an independent advisor and/or a brokerage service before approaching lenders. Also, do not concentrate your efforts solely with banking system – the banks are still as unhealthy as the day Lehman brothers went belly-up and are in no position to lend to anyone other than their preferred customer list.
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