Are Commercial Loans the Next Subprime Mess??????

No, the commercial world isn't coming to an end, but credit is tight these days - but not for everyone. A recent Federal Reserve poll of its member federally chartered banks showed that 80% of the banks responded that they have tighted lending standards on Commercial Loans!!!
Also, some big name property owners are experiencing problems refinancing debt obligations as they come due. Lastly, the commercial debt obligation securtiziation market has been shut down since December.

But there's hope. The problems are at the top of the property food chain, meaning that big isn't necessariliy good right now. This means that there is still a great number of options for the smaller real estate player to obtain financing for their projects. Remember, good deals get done!!

So here are some tips to remember when looking at properties as it relates to financing:

1. Bring a lender a property that cash flows today! If the property has good cash flow and can be verified, the better your chances your deal can get approved.
2. Be selective of your property type. Lenders are looking to protect their capital (i.e. reduce risk) so don't go walking into your lender's office with a gas station sitting on top of a super-fund site!!! Low vacancy apartment buildings, mixed use properites, and retail properties are better bets these days.
3. Leases, Leases, Leases. Look for properites with favorable lease terms. Those include, but not limited to, annual rent increases, triple net leases, and long term structures.

These three tips should increase your ability to get your property financed.

Oh, by the way. If you're wondering what the next big mess will be: Watch the Credit Swap Market and the Leverage Loan Market.