Commerical loans and the Financial Crisis
Perhaps you may have missed it, but the recent financial crisis is still having an effect on a large part of the financial system, making obtaining loans for investment real estate 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.
With even the luxury home market feeling the pinch since the so-called “jumbo loans,” disappeared, any investment in real estate is tempered by the need for substantial deposits and strict borrowing requirements. A minimum of twenty five% is required before any bank would consider making a loan for investment purposes and the only investors taking the plunge are already well funded.
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 property loan is only available for property that is residential in nature. Leases for residential property tend to run for shorter periods industrial leases. Typical lease periods for residential are between 6-12 months, whereas it is unusual to see a commercial lease for less than 5 years, and they are sometimes longer - as much as twenty five years.
The industrial real estate area of the market tends to attract longer leases than residential property because of the increased complexity and legal costs involved. An agreement between 2 business entities is necessarily more complex than between private individuals. Regardless - the ongoing credit crisis has made it all but impossible to arrange financing in this market and the banks are only lending to their preferred clientele. Consider approaching non-traditional sources for funding instead.
