Communication with Lenders
It's hard to believe that we are living with Covid for almost a full year now. The impacts on health, society, and businesses have been immense. Some businesses & industries have thrived, while others have struggled or closed. Real Estate is certainly feeling the effects too, with winners & losers. Suburban Office is in high demand, and Industrial is continuing on the tear it was already on. Meanwhile, Retail and Hospitality will need to wait for widespread vaccination before a marked improvement will be felt.
Real Estate is predominantly a leveraged asset. Loans are provided for the acquisition of properties based on their market value and cash-flow, and for construction loans of development projects, based on their future value and projected cash-flow. The pandemic has had a massive impact on landlord rent collections for certain asset classes and/or within certain specific geographies, such as urban vs. suburban.
For landlords experiencing rent collection issues and diminished cash-flow, my advice is to talk with your lender straight away. Many borrowers fear that disclosing their current issues will put their loan in default, a watch list, or start the foreclosure process. The bottom line is, your bank does not want to take over your property or make your situation worse. The bank will do everything in their power to assist you through this situation, after all it was likely not brought about by any negligence or mismanagement on your part.
Bank regulators, such as the FDIC, have encouraged banks to work with borrowers with “problem loans”, and have been supportive of them taking measures such as loan extensions for maturing loans, and interest-only periods or deferment of full payment, for loans severely impacted by diminished cash-flow. You need to be very open with your lender, and detail how you are going about collections, and planning for tackling vacancies.
There are some relief programs available to tenants which can assist with their rent payment. For commercial properties with operating business tenants, they can access the PPP or EIDL loan programs. Residential tenants may access the automatic Federal stimulus, or State Unemployment, and some local cities/municipalities may have some rent assistance programs. Landlords need to be proactive in identifying what supportive programs are available to their local tenants, and help in any way they can to get them access to these funds.
Open communication with your lender is a must. They will view you as being proactive, and they will not think less of you.
New Real Estate Loans
Even with the uncertainty of the past year, there is plenty of capital available for new real estate loans, for either acquisition, refinance, or construction. Interest rates are incredibly low, and lenders are still well capitalized. However, underwriting standards have tightened up which may mean a lower loan amount. The loan process timeline has increased due to multiple reasons. There is a high demand on loan officers time dealing with new loans, problem loans, PPP forgiveness, and PPP Round 2. The low interest rates have increased the number of properties in refinance, causing a backlog with appraisers and legal consul.
Please contact me if you are in need of real estate financing for an acquisition, refinance, or development project. I’m happy to run through your options and run the numbers.
Call or email me if you would like assistance making your next real estate transaction as profitable as possible.
https://www.mulcahycapital.com
+1-617-861-2042
Mulcahy Capital for Hassle-Free Real Estate Loans.
We provide busy real estate developers, frustrated with financing, better loans in less time, so they make more money.