Commercial investment sales are down from the historic highs of last year due, in part, to tightening of conventional commercial lending. Alternative lenders are stepping in to fill the gap.
While all commercial properties are seeing price gains, the investment sales volume is down. July’s volume totaled around $36 billion which is down from the historic highs of 2015 and 2016 when sales came in at approximately $52 billion and $47 billion respectively. Even though deals have gone down, the prices continue to rise. For instance, multifamily properties, though showing a slight decline this month, have prices up 9.6 percent from last year. According to JLL, large transactions over $250 million are down 27.7 percent year-over-year. Their Q2 2017 Investment Outlook showed investment sales growth in all sectors was down except for industrial which showed a 20.7 percent growth. Office, multifamily and retail was all down in the double digits. So why the slowdown?
Several factors seem to be contributing to fewer handshakes between real estate investors and commercial property owners. One of these is an increasing conservative approach in traditional Texas Commercial Lending underwriting and the resulting increase in time to funding and barriers to entry. Other factors include our present political climate. Retail is down due to tenancy risk though outlets with strong anchors are still performing well. Multifamily numbers are affected by the slowdown in high-rise transactions as newer generations are searching for walking-friendly neighborhoods with a strong sense of community. Joint ventures, recaps and entry-level investments are on the rise while conventional single-asset sales are showing a decline.
With banks tightening, alternative lenders are stepping in to fill in the gap. With rising costs and higher labor in the construction industry, traditional lenders are being more selective and contractors are looking to non-traditional options. One of these Texas Commercial Lending options is private hard money lenders. These non-traditional asset-based lenders have fewer requirements than their conventional counterparts. Credit scores are not as important to the lending process as is the collateral. Capital is acquired in days instead of weeks.
Who Uses Private Hard Money Lenders
Real estate investors often use this type of Texas Commercial Lending due to its rapid funding. Immediate capital may be required to obtain a property just hitting the market or to start a build-out project. Others may have experienced some credit issues due to foreclosure and various life-altering events. Typically, these are ideal for fix and flippers as well as those building equity while waiting for a traditional loan to come through.
Private hard money lenders are stepping in to fill the gap that the current conventional lending institutions are creating.
At Level 4 Funding, we work with hundreds of private hard money lenders. If you are experiencing difficulty in this present lending environment, call us to find out if we have the investor to fill your needs. When the banks have said “no,” we often say “yes.” We offer construction loans up to $50,000,000 with terms up to 24 months, quick monthly draws, and APRs starting at 9.5 percent. All we require is a copy of your budget, plans and permits.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.