“The Ins and Outs of Warehouse Mortgage Financing Programs”

Warehouse financing is another type of commercial mortgage application.

The process for financing a warehouse has changed recently with more lender requirements in existence today than just a few years ago.  The lending rules have changed so much that an existing warehouse property that has carried a commercial mortgage for many years, may no longer be able to secure a comparable new mortgage under any conditions.

This is largely due to feature requirements and environmental requirements of commercial mortgage lenders.

As an example, to get the lowest potential interest rates for a new warehouse project, the building may need to have 18 foot doors, dock height receiving bays, and 25 foot ceilings.  These feature based requirements are driven by what is required by the resale market.  Without these features in place, the security value of the property is not only lower, but the time for resale is likely going to be higher.  With these market dynamics in mind, many commercial property lenders have adopted these types of requirements to strengthen their security positions.

This is not to say that a commercial mortgage would not be available if a warehouse was constructed without certain features, but it could eliminate lower rate lenders from the picture and cause the property owner to seek higher risk, higher rate financing alternatives.

For existing warehouses that don’t include certain features, a mortgage refinancing of any sort may be out of the question with many commercial lenders unless the owner invests in upgrades that will bring the building into compliance with the lenders requirements.

Another mortgage requirement that has expanded in recent years is successful completion of an environmental audit.  Once again, existing structures with a mortgage in place may not be able to qualify for a similar mortgage today due to the changes in environmental standards.

This can become a financing barrier for the purchase and sale of existing facilities where the property is unable to pass an audit conducted by qualified third party environmental consultant.  The resulting remediation work that can be required to pass the audit may be substantial and time consuming, leaving the owner unable to sell the property before completion.

Environmental audits will focus on the use of the property over time by its tenants.  Activities that can create environmental issues will create greater scrutiny  in the audit process.

The result of these and other lender requirements has made the process for getting a commercial mortgage for a warehouse property considerably more challenging.  Like most commercial financing applications, the services of a commercial mortgage broker can prove to be invaluable in locating and securing the property financing required.

If you’re seeking warehouse financing, I would recommend that you give me a call so that we can work through your requirements together and determine the best approach for securing a commercial property mortgage.

Click Here To Speak Directly With Commercial Mortgage Broker Joe Walsh

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