Buying commercial real estate

Published on August 14th, 2015 | by Day Trader

A Day in the Life of A Commercial Mortgage Banker

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Have you considered commercial real estate investing? If so, with current commercial mortgage rates, you’ve probably needed to find a good commercial real estate mortgage broker. Commercial real estate lending is a hot topic these days, and it is projected to continue to be so. If you do so happen to find a good commercial real estate mortgage broker, chances are they would fill you in on the current commercial mortgage banking scene, if you are already not familiar with it.
But there you have it, a good one will be thorough.

So what is the scene?
It is estimated that around $1.4 trillion worth of commercial mortgages will be maturing between 2014 and 2017, and of those, commercial mortgage-backed security loans — or CMBS loans — account for approximately 25% of that total, which is about 11,000 loans.

Back up, what exactly is a CMBS loan?
I think it’s safe to say that you need to find a good commercial real estate mortgage broker, if you’re still learning the basics. And that’s alright, everybody has to start somewhere! Commercial mortgage-backed securities are backed by a commercial mortgage instead of residential real estate. These securities often go hand-in-hand with mezzanine financing, which is a mix of debt and equity financing. This type of financing endows the lender rights to switch to an ownership or equity interest in the business if the loan in question is not fully paid back on time.
It is usually used to fund the expansion of companies as opposed to the start-up of a brand new one. The market for CMBS has continued to grow over the years, with a total increase of $762.4 billion from the 1990 market.

Perks of commercial real estate financing
Oh, the things you can do with commercial real estate! Commercial real estate is a solid investment, and many businesses rent out space in order to profit on the properties. While an individual looking at residential mortgages will encounter multiple restrictions, there is more freedom in regards to the amount of the loan for businesses considering CMBS. There is very rarely a cap on the size of the loan, and there is a high loan-to-value ratio for lenders. There are drawbacks, of course, including how difficult it can sometimes be to negotiate the loan, and how written-in-stone things become once all is signed. Re-negotiating is almost guaranteed to be off the table. These aspects are certainly worth thinking about when looking at commercial mortgage banking.

All things considered, it seems to be a good time to get involved with commercial mortgage-backed security loans. Now that you’ve started sorting out the basics, why not give it a try?


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