Commercial development and single family construction came to a screeching halt back in 2008. Along with it, disappeared the financing, including commercial construction loans and commercial land loans. But after a long sleep, it’s all starting to wake up from the dead.
According to National Real Estate Investor, there’s been an increase in rezoning applications and new construction for apartments, hotels, senior housing, to name just a few property types.
But what is the biggest complaint of commercial real estate developers? There are no commercial construction loans or commercial land loans available. Banks are only lending on the best projects, and the investment banks only want $20 MM and up projects. And many of the bridge loan lenders offering this type of financing are offering financing terms that are simply unacceptable to most.
So where do developers of new commercial construction go for their loans? Mostly private money sources, including bridge loan lenders and hard money lenders. For the next few years, developers will have no choice but to finance their projects, in part or whole, using private money and bridge financing. There is a range of pricing available for private money loans. The commercial construction loan program that our firm offers for example, is more reasonably priced as compared with programs offered by other private money lending groups. There are loan programs out there with interest rates as high as 18%. These high rates are reserved for the highest risk projects with the lowest borrower equity.
But non-bank financing is still expensive for commercial land loans. Will the large banks start lending again on commercial construction projects this year? This question is hard to answer but I do agree that this area of lending is beginning to open up, particularly in the private money arena. Bridge loan lenders are eager to make commercial construction loans in 2013. But I do believe land loans of all types will remain difficult to obtain until after 2015, even for the most qualified borrowers. What are your thoughts on this topic? Please share your comments below.
Source: National Real Estate Investor – Link to article: http://nreionline.com/construction/signs-life-development-and-construction-finally-picking
Corey Curwick Dutton, MBA. Real Estate Lender for Private Money Utah. Corey Ann Curwick is a private money consultant for Private Money Utah, a real estate lender based in Salt Lake City, Utah. Corey is from Austin, Texas and is an MBA Graduate of the prestigious Thunderbird School of International Management. An authority in the private money lending industry, Corey provides educational resources for investors who use hard money loans in their real estate investing activities. Before she joined Private Money Utah, Corey was the President of an investment education company in Utah called Bray-Conn Investments LLC. In this role, Corey organized classes, which taught investors how to invest in five asset classes. In her free time, Corey enjoys skiing, snowboarding, and mountain biking in the beautiful Utah outdoors.