Investment Property Loans Being Affected by the Credit Crunch
Making a foray into investment properties is not quite as easy as it once was. The best way to make a million dollars has always been to “borrow a million and let other people pay it off for you,” but the credit crunch is still affecting the loan markets and finding property investment loans is still difficult.
Until such times as the credit markets loosen up – which does not seem to be happening just yet – there will be stringent requirements applied meaning anyone wishing to borrow that million dollars will have to come up with at least $300,000 of their own money and around 1.5 million in collateral. There is still a lot of ill health in the system and an undisclosed amount of bad loans that will need writing off over the next 18-24 months. The markets are not going to loosen up until such times as all of the bad loans are out of the system. Although, even then, we will need a recovery period that may be years. Read more
Must Read for Future Property Owners/Managers of Apartment Buildings
Owning/managing the property.
Now you have the property. Next step is to decide if you want to manage the property your self, or hire a property management company. If you want to manage the property your self, you should get training from your local apartment association. They have classes to help you. Also, you should read on property management. Don’t just jump in and start being a land lord and not know what you are getting your self into, and what demands/requirements are needed.
If you decide the you would like to get a property management they will take 5-10% leasing commission of annual rents. I suggest that you go to http://www.irem.org and find a property management company in your area. Once you have selected a group to call, ask them the following questions (or you can go to their web site and find answers to the questions below):
• How long have you been in business?
• What professional designations do you hold?
• What continuing education programs do you offer your employees?
• Can you call existing clients of theirs? Read more
Real Estate Loan Underwriting – Managing Increasing Loan Risk
In today’s economic environment managing risks in Real Estate lending is increasingly more difficult. Establishing the value of the realty collateralizing the loan is more akin of shooting at a moving target. The continual decline in property values is only one factor that increases the risk for lenders, another factor in these trying times in the financial soundness of the borrower. The financial stability of individuals is under continual pressure for borrowers due to the economic crisis as unemployment rates rise and credit scores drop. Like a house of cards and individual’s ability to meet his/her credit obligations can tumble overnight.
The decline in real estate prices is not only affecting lenders and borrowers but also state and local governments whose property tax base is quickly loosing value. All across the country local and state governments are looking for ways to crimp their budgetary shortfalls. Departments are being asked to look for ways of increasing their revenue sources. Of particular interest to risk managers is the step-up of code enforcement activities seen in most major municipalities. Read more
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