State of the Real estate lending market - January 2020
Updated: Jan 9
The New Year will likely bring a new degree of caution on the part of conservative bank lenders. From the research I read over the holidays, the average loan to appraised value may be reduced in many cases by 5%. So rather than a bank approving a loan at 75% or 70% loan to value, we may see more approvals at a lower 70% to 65% loan to value.
Additionally, there will be more interest on non owner occupied properties with a varied lease base. For instance, an industrial property with a few tenants, or an office/warehouse property with 3 or more tenants, may be more attractive to a conservative lender compared to a property 100% occupied by the borrowers company. The reason...... banks may be concerned about a possible default on the loan if the owner occupied tenant has an operational slow down.
There will still be private lenders doing deals at 75% loan to value, and even 80% loan to value on property acquisitions with strong financials. Of course, select SBA loans will see a maximum 90% loan to value with a strong borrower.
My takeaway for 2020, expect banks to approve only the strongest deals, with hybrid lenders (between a bank and a bridge lender), private lenders and bridge lenders to take an even bigger role in providing needed capital for the commercial real estate market.