Underwriting Loans For Income Producing Properties Faces Increased Scrutiny
With commercial real estate values and rent rolls on the decline in many markets, investors looking to refinance — or buy new properties — now face a much tougher environment than they have in years.
Lenders have tightened down hard on underwriting standards. They want to see everything from years of income tax returns to details on investors’ personal debts. And they often won’t lend more than 60 to 70 percent of a property’s value – if they lend at all. But smart investors are beginning to check out a financing source they rarely, if ever, considered in the past: Small Business Administration loans.
Compared with bank loans, SBA financing often offers higher loan-to value ratios or LTVs, plus lower rate structures. And they’re not just for acquisitions. They can be used for refinancings as well. “A whole lot more (income property owners) are eligible than they might think,” says Kevin Stone, CEO of New York City-based Kevin Stone International, commercial real estate mortgage brokers.
