| I'm not going to sugarcoat this; I'm going to give it to | | | | estate management. |
| you straight. It is extremely difficult to get approved for | | | | Large Down-Payment or Cash Position |
| an institutionally (bank) funded commercial mortgage | | | | Virtually no commercial mortgage loans are being |
| loan now-a-days. In this environment, most investors | | | | written at above 75 % LTV (loan-to-value) and seller |
| and most deals are being turned away by the banks, | | | | financed 2nd mortgages have been almost entirely |
| the insurance companies and the Wall Street brokers. | | | | prohibited. |
| Traditional funding sources have virtually stopped | | | | Cash Flowing Property |
| funding any commercial loans that they can't sell to the | | | | The collateral property must generate sufficient |
| Government or to the bond market. Big financial | | | | net-operating-income to cover its own mortgage |
| institutions are worried about their own survival, not | | | | payment, separate and apart from the borrower. No |
| about making loans. | | | | land loans, no underperforming assets, no rehab or |
| An investor or commercial property owner's best bet | | | | development loans. Stabilized income producing |
| for a conventional loan is through community or | | | | buildings with good tenants and long leases are the |
| regional banks that have a commitment to their local | | | | only property type banks are considering right now. |
| economies. These smaller, centralized institutions | | | | Good Location |
| avoided most of the derivatives and the collateralized | | | | Lenders are understandably avoiding economically |
| debt obligations that have disrupted the big national | | | | depressed regions of the country. It is exceedingly |
| players. Many are still financially sound and have | | | | difficult to find capital for deals in Michigan, Las Vegas, |
| enough liquidity to make small to mid-sized commercial | | | | Florida or most of California. Properties will need to be |
| mortgage loans. | | | | in good locations in relatively strong areas. |
| But even the community banks have tightened their | | | | Good Condition |
| standards in response to this economy. | | | | Buildings will need to be well maintained and in good |
| Here is a quick list of stipulations that most | | | | condition. Real estate with a-lot of deferred |
| conventional lenders require before they will approve | | | | maintenance due will have to be repaired or upgraded |
| and close a commercial mortgage in today's market. | | | | before a conventional lender will consider lending |
| Strong Sponsor / Borrower | | | | against them. |
| The net-worth of the principle deal sponsors must be | | | | These parameters will disqualify the large majority of |
| equal or grater than the requested loan amount. | | | | conventional loan requests today. Now and for the |
| Further, the borrower must have liquidity (cash on | | | | foreseeable future, only the top tier will find institutional |
| hand), above-and-beyond any down payment, equal to | | | | funding available to them. Loan requests that don't |
| about 9 months mortgage payments. They need a | | | | meet the new standards will be forced to seek |
| tri-merged credit score above 639 and will be required | | | | privately funded loans or wait until the credit markets |
| to demonstrate a track record of successful real | | | | improve. |