Alternative lending may help commercial real estate investors

On Behalf of | Jun 6, 2019 | Commercial Real Estate

Some banking institutions in New York are not quick to lend money to investors, as they lack confidence in the economy. Alternative lenders are therefore rising up to offer capital to investors who are interested in buying commercial real estate. Up to now, record quantities of capital have been raised for this purpose.

Banks continue to be hesitant to lend money to commercial real estate investors, despite the fact that the recent financial crisis happened over a decade ago. Traditional lenders are particularly insecure when it comes to providing capital for new construction. The good news for investors is that more developers are taking on lending roles, so they may still be able to access capital even if banks deny them loans.

Reputable alternative lenders offer the benefit of having highly experienced staff members who are veterans in commercial real estate. They also have a solid understanding of what makes purchasing this type of real estate complex. Furthermore, they usually offer more favorable terms than banks do. As an example, banks may stick with loan-to-value (LTV) ratios of no more than 60%, but alternative lenders may be comfortable with going as high as 80% for their LTV ratios.

Of course, obtaining financing for commercial real estate property is only part of the equation of investing in real estate. The other part is understanding the legal part of the deal and responding accordingly. Fortunately, an attorney in New York can provide investors with the guidance they need to navigate their deals’ legal aspects, ensuring that their rights are safeguarded before they sign on the dotted line.