Real Estate Investment News
This is a real estate investment news update to keep everyone informed during the pandemic. Commercial Mortgage Lending has slowed down and with some loan types has halted altogether. Fix and Flip as well as Fix and Hold loans are back as of September, 2020. But, they look a bit different than they did prior to the pandemic. Before the pandemic, 1-4 unit properties were easily financed at 90% financing of the purchase and the rehab. Even more, rates were interest only in the 7s. Presently, these loans are financing at 85% LTV maximum with rates in the 8s. This is still a good program for people looking to fix and flip and will hopefully get better over the upcoming weeks.
As well, Residential investment property loans are still available. These properties will need to be from 1 to 4 units and are done as a residential mortgage. Furthermore, these types of loans can not be done as a LLC. None of the units can be owner occupied. None of the units in these properties can be commercial – they must all be apartments. The maximum loan to value on these types of loans will be 75%. If the purpose of the loan is to cash out, then expect for the loan to value to lessen and rates to rise.
What about Commercial Loans?
Commercial mortgage lending came back as well. Generally the properties being lent on are Apartment Buildings, Office/Retail Buildings, and Mixed Use buildings. Due to the pandemic, the max loan to value on these properties is at 75%. The max loan amount is 2MM with rates as low as the 6s for A-Paper borrowers on an adjustable rate mortgage. For a 25 year fixed loan, rates are in as low as the 7s. For borrowers with less than perfect credit (minimum of a 600 Fico), adjustable rates are as low as the 8s. Everything is dependent on a borrowers credit score and property condition.
Obviously this is a big change from where rates and terms were about 6 months ago. The other big change is that loans are taking longer to close. In the past, investor loans could close in as little as 25 days. Whereas now, loans are closing in 45 days. This is mostly due to reduced underwriting staff and difficulty getting appraisals done quickly. The good news is that loans are still getting done.
Furthermore (and this is great news), apartment loan financing is back to 80% for loans of 1MM to 7.5MM. This is a great step in the right direction. We are hoping smaller balance commercial loans will begin raising their LTVs next.
The Future of Commercial Lending
Our opinion is that once the pandemic subsides things will gradually go back to normal. The keyword here is gradually. Commercial Mortgage Lenders nationally are concerned about what the pandemic will ultimately mean for property values. This is the reason why we are all seeing a reduction in loan to value lending. Prior to the pandemic, commercial mortgage rates were in the high 4s and low 5s for A-Paper borrowers. As well, loan to values were as high as 80% on a 30 year fixed loan. Expect that things will take a little time to bounce back.
We will keep everyone posted as to when guidelines loosen up and all the commercial mortgage programs are back. In the mean time, feel free to contact us with any questions or for a free consultation. We are here to help and are more than happy to give advice. Expect more Real Estate investment News update messages weekly.
We are still closing commercial mortgages and look forward to hearing from you
Thanks,
Michael Meyer
President Spartan Commercial Mortgage Services
mike@spartancommercialmortgage.com
(860) 876-0572