The Commercial Lenders are like a Roller Coaster Ride these days.
You know ... slow clackety clack up to the top and then a gut wrenching drop into the loopty loop. Makes you want to Screaaaammmmm.
As Lenders choose to speed up or slow down ... you are directly affected as a Commercial Property Investor.
One month they seem to want to lend you money, the next it seems like a game to figure out the most bizarre way to deny your loan.
Lender as Problem #1
The biggest problem in any Commercial Real Estate Purchase right now is obtaining financing. It doesn't really matter if you have the Cash Cow of the Century under contract ... the Lenders are going to put you through the ringer.
Here's How I Know...
I am participating in the close of three purchases at the moment, totaling nearly 1500 units of Texas Apartments. We have been in negotiations with lenders and private equity groups for nearly three months straight on this group of acquisitions and the swings in their attitudes have been impressive.
One month they are moving forward and the next they are making impressively weird requests.
It's all because of just one thing... F-E-A-R
The lending markets are running scared because BILLIONS have been lost in the repackaging of SubPrime Loans.
The Banks and Wall Street Firms don't trust each other because good loans have been bundled with bad ones and no one can really get a bead on whether the debt they are holding is quality or crap.
They don't trust the borrowers, they don't trust anyone...
let's face it, they are having trouble sleeping at night.
Many firms have simply stopped lending completely in certain niches or markets. They don't trust ANY loan to perform. And its not limited to the USA.
Even overseas firms are losing billions.
I have said before that I wish I could quit writing about this stuff ...
unfortunately this "Credit Crunch" - as the press likes to call it - looks like it will be here for a while.
Buyer Be Prepared
If you are under contract on a property or will be soon, please make sure your financing is as lined up as you can make it.
- Write multiple extensions of the financing period into your contracts so that when you need them ... and you will .... they are there for you.
- Make sure your investors or other equity sources are lined up and rock solid
- Be ready for all sorts of strange last minute demands from the lender I have even seen a recent deal held up until the equity partner bought a new $2M life insurance policy with the lender as beneficiary.... go figure.
Remember "Plan B" here as well ...
Bottom Fisher's BonanzaAnother thing that has started just in the last 4-6 weeks is signs of bottom fishing.
- Larger firms are buying the assets of publicly traded builders at 40-60 cents on the dollar.
- Nearly finished subdivisions are being sold to private investors 5 - 10 houses at a time for $150K less than the asking price twelve months ago.
- Everyone and their uncle is learning how to do short sales and forclosure buys on the residential side
You may just want to hold on to your cash here as well as the real estate market sorts itself out and you begin to be able to spot the true bargains.
Bolster Your Credit Crunch Knowledge Base.
No matter what, you can't know too much about what is going on in these credit markets. Here are some very valuable resources for your further education.
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John Mauldin has a million subscribers to his newsletter for good reason - it's the best information on markets you will find.
Here is another post on "Minsky" and why you need to know his theories on these turbulent times
- A "MUST READ".The US Credit Crunch of 2007
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Here is a post about a swiss bank that is taking a $10B hit from this lending snafu.
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And here is how the Press is Spinning the Crunch
Last but not least..
You will want to take a minute to check out all the quality FR_EE information at our at our Commercial Property Education site Investortours.com .
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