The story about the current state of commercial real estate financing is different depending on who you ask and what role they might play in the market. But as a borrower, you deserve to know exactly what you are getting into before you take the plunge on a new property investment.
There are a number of factors that play into the overall health of the commercial real estate market and property growth for investors. However, there are also differing views of the state of the market, depending on what each player stands to gain. For example, there are very few times when you would hear a seller saying that it is a bad time to purchase their property. Just because they say that, however, does not mean that it is going to be good for a potential buyer.
There are a number of overall factors, however, that shed light on the condition of the market and the state of commercial real estate financing. One of these factors is entirely beyond the control and scope of any domestic real estate professional and that is the global economy. Whether we want to admit it or not, things that happen international do have an impact on the domestic market. Globally, there has been a downward trend in real estate growth. This is the end result of a period of time that has included currency disruption, increased nationalism and decreased exports. On top of this, the current political climate, in both the United States and abroad, has fed into a general feeling of uncertainty in the real estate market. Foreign investors looking to expand their influence in the United States have become more hesitant.
However, this does provide opportunities for domestic investors who wish to take advantage of less competition in the commercial real estate financing market. With foreign interest declining, there is going to a larger potential of secondary properties that will have fewer bidders.
Another factor that is impacting the commercial real estate financing market is that lenders are beginning to restrict and limit lending. Whether it be from a traditional lender or otherwise, access to funding is becoming much slimmer. This has the potential to negatively affect many borrowers who have limited assets for security or who have had credit problems in the past. As funding becomes limited, the requirements for commercial loans become much more restrictive. The lasting effect of this is that many borrowers will not qualify for funding.
How can I take advantage of these market factors to implement commercial real estate financing for profit?
The best thing that a possible investor can do when there is a good degree of chaos in the market is to pay attention. Do research in the geographical area where you wish to invest and determine the volatility of the market. Another thing that would be an excellent stepping stone would be to get your financial house in order. If lenders are becoming more restrictive, your credit score and financial stability will become exponentially more important. Making sure that you can offer the best possible client to a lender is well within your control.