Selectivity Of Commercial Lenders
“Finding A Commercial Lender That Can Help You Acquire A Property”
One of the real challenges with trying to purchase a commercial property is locating a lender that is interested at funding your deal at a given point in time.
This can be very challenging due to the wide variety of commercial properties in existence, the business status of any particular property, and the portfolio and interest of any given lender.
Let’s look at a couple of examples to further explain my point.
Properties that generate the most lender interest are going to be revenue producing properties that are generating substantially more cash flow than what would be required to service debt.
All commercial lenders are interested in cash flow, so on the surface, any bank or institutional lender could be interested in the deal.
But all lenders are also driven by the composition of their portfolio at any point in time. This can lead to situations where a deal completed by a bank last month could not be completed the following month if a similar deal was presented.
Unfortunately, the lender doesn’t necessarily tell you there is a pretty good chance of not being able to squeeze your deal into their portfolio and put you through the application process, potentially wasting time and money and putting your deal at risk.
One way to avoid running out of time is to get a slightly higher cost bridge loan to get the deal done and provide you with enough time to hunt the market for a preferred long term deal. Because cash flow is strong, this should not be hard to do and the added cost incurred is likely going to be small as compared to missing out on a good opportunity all together.
Now, lets look at the other extreme…properties that are not generating enough cash flow today to service debt.
These may be great buying opportunities in that the current owner does not have the means or ability to get the cash flow where it should be and has to sell out due to lack of capital to move forward, but what’s the right lender to take this deal to?
When we’re talking about less than optimal property acquisition, lenders tend to be much more selective in terms of the deals they want to take on. And once again, you can waste more time and money going through the application process for funders that do not have a high level of interest.
The ability to assess what a lender can or can’t finance and what they are currently interested in is very difficult to assess from the outside looking in.
Without following the market and being in regular contact with an active network its almost impossible to guess who to turn to.
This is where it can be very helpful dealing with a commercial mortgage broker who stays in tuned with the market and has a good sense as to where the most relevant sources are for any given deal at any particular point in time.
Being able to zero in on highly interest lenders quickly is going to be important for just about any application along with understanding roughly how your deal will be priced in order to make sure that any potential financing option you may be considering can align with your own cost of capital assumptions.
Click Here To Speak Directly With Commercial Mortgage Broker Joe Walsh
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel