Commerical loans and the Financial 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 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.
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 mega loans vanished, even the luxury homes area of the market is feeling the pinch.
Does one wish to get involved in industrial or residential real estate investment is the first question the first time 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.
Residential loans are obviously available only against houses that are built for residential purposes. Generally, leases usually run for shorter periods than commercial property leases – less than 12 months is normal and they are renewed yearly. non-residential leases tend to be longer – with perhaps as long as 25 years and almost never less than 5 – a recession notwithstanding.
Warehouses, retail premises, and other non-residential property that is not to be used for residential use invariably have longer leases than their residential counterparts. Mostly because of the costs involved in setting these up and in some European countries, the fact that the real estate firms control the law making process to such an extent that they can have the laws written to suit themselves. It is certainly worth investigating using a professional advisor before committing. And the on-going lack of health in the banks means it may well be necessary to look outside traditional sources for a loan.