Can Your Lender Think Outside the Box?
In our recent post entitled Get the Right Financing by dealing with the Right Lender, we talked about the obvious reasons why choosing the right lender is important. Lending experience, flexible loan terms and conditions, and competitive rate are all important. You also want to deal with a lender with whom you can build a relationship.
Deal with a Lender that can bring solutions to the table.
Can Your Lender Think Outside the Box? What do we mean by that? Perhaps your investment is the acquisition of a six-plex apartment building. You need a loan for 60% of purchase price. Frankly, your local bank can likely do that with their eyes closed. But what if your situation is unique? What if you need a lender who can look past the present situation, and see the inherent value in what you are proposing to do with the property? Can they bring a solution to the table?
Lets consider some examples:
You need to refinance
You may need to refinance maturing debt, but also fund improvements or tenant fit-ups. Consider the benefit of dealing with a lender who can offer a Line of Credit facility secured by the same charge as the primary mortgage. A revolving Line of Credit will allow you to fund those balcony repairs or tenant fit-ups you’ve been planning, with the ability to pay that portion of the loan off, or reduce it substantially, once cash flow increases. It may not be in your best interest to pay for these fit-ups over the 25 year amortization of the loan.
You need acquisition financing
Perhaps you wish to fund the acquisition of an asset, but rental income is poor at present, as building upgrades are required to attract a high quality tenancy. Consider a short term private mortgage. Rates are often higher, but funding is quick. You may be able to have an interest only repayment program, or even have interest capitalize to the loan balance. Remember, time is money too. Get the renovation program underway, and you’ll have your exit strategy in place sooner. Then you can acquire conventional, and more attractively priced financing.
You’ve got several assets, and wish to acquire more
You have several assets, and they are individually financed. You also wish to position yourself to take advantage of new acquisition opportunities. Consider refinancing all of your assets with a Lender open to securing all of the assets with a blanket mortgage set to a particularly loan-to-value basis, with a Line of Credit availability. Use the Line of Credit to quickly acquire a new asset, and finance it conventionally by adding it to the blanket charge already established.
Aligning yourself with a lender who can think outside the box, will greatly assist you in creating value within your real estate investment portfolio. Don’t focus solely on rate, but rather, whether the lender understands your vision. Do they bring a solution to the table, with an innovative loan structure?